The threat of Brexiteer Boris as prime minister haunts Irish shares
Sterling slipped further and Irish shares fell sharply as fears of investors rose that the political turmoil in the UK will lead to Boris Johnson becoming leader, and Britain crashing out of the EU without a deal.
Shares in AIB and Bank of Ireland fell by 4.2% and 4.7% and Permanent TSB lost 4.5%, while housebuilders Glenveagh and Cairn Homes ended 3.2% and 3.8% lower.
Other Irish shares which rely on Britain for a significant part of their revenues were also hit.
Building products Kingspan fell 2.3% and the Iseq index of Irish shares ended 1.3% lower.
Sterling slipped to over 88 pence, adding to its rapid descent over the past few days.
In the past, currency analysts had warned that the pound could plummet to reach parity with the euro should Britain decide to crash out of the EU with no transition deal.
The chances of a no-deal or hard Brexit have risen considerably as Theresa May's grip on power weakens and Brexiteer Mr Johnson is tipped to win any contest for the Tory leadership, according to analysts.
"The UK political picture looks anything but strong and stable right now, with a lame duck prime minister seemingly holding on by her fingertips," said Joshua Mahony, senior market analyst at online broker IG.
"With May out the way, markets face the prospect of more upheaval, with sterling traders keeping an eye out for exactly who will take the reins. The bookies favourite, Boris Johnson may appeal for some, yet for markets the prospect of a bumbling Brexiteer does not look enticing.
"The chances of no-deal Brexit or a general election both rise with May’s resignation, and looking at the pound this week, markets certainly know that," Mr Mahony said.
In Dublin, director-general Carolyn Fairbairn of the main British business group CBI again warned about the "wrecking ball" damage to an all-Ireland economy under a hard Brexit.
“A sudden exit from the EU would put this future vision of an all-island economy in peril. This should not be allowed to happen," she told an audience at the opening of new premises of TCD Business School.
Elsewhere, global stocks slumped and traders took refuge in gold and bonds as the world’s two largest economies hardened their stances in the trade war.
The S&P 500 Index dropped for a second straight day, and the Dow Jones Industrial Average lost more than 400 points at one stage, after the Chinese Communist Party’s flagship newspaper published two commentaries assailing US moves to curb Chinese companies.
Stocks in industries seen as susceptible to trade disruptions -- including semiconductors, cars, and energy -- retreated. One expert predicts tensions could endure until 2035, while economists are also turning more pessimistic.
Goldman Sachs now sees higher odds of a stalemate between the two nations, and Nomura has shifted to forecasting a full-blown escalation of tariffs.
“Continued weak global economic data and the lack of a specific date for the resumption of US-China trade talks are clouding earnings visibility and weighing on risk appetite,” said Alec Young, managing director of global markets research for Ftse Russell.
“Markets are pricing in the harsh reality that trade tension is more likely to linger than quickly be resolved, as had been the consensus expectation anchoring sentiment until late April,” he said.
Additional reporting Bloomberg
