The FTSE 100 index traded down to the 6,990 level towards the close on Friday, only a few points higher than the 12-month low of 6,888 that was plumbed back in March.
Markets in London took fright at the political chaos surrounding the Brexit deal proposed by Prime Minister Theresa May, and there was a knock-on effect in Europe too, which wasn’t helped any by the first quarterly contraction in the German economy since 2015.
Germany has significant exposure to Brexit, and is also struggling to get to grips with the tariffs that US President Donald Trump is ratcheting up on allies and foes alike.
And although most analysts expect a German return to growth in the final quarter of the year, the recent German weakness has also been central to a slowing down of growth in the European Union as a whole, which a 1.7% for the last quarter, is the lowest it’s been for four years.
Both the dollar and gold rose in the face of these European headwinds, breaking the usual inverse relationship in a sure sign that the global investment community was unsettled.
And yet, not too much has actually changed.
No Brexit deal has been done, and it looks like Theresa May will struggle to get her proposals past parliament. In Europe, although the pace of German economic activity is disappointing, it’s long been recognised that the weakness and indecision of the central bank, which has to act in the interests of all member nations, compares unfavourably to the strength of the Fed.
Notwithstanding the World Bank and the IMF, the Fed remains the most powerful financial institution in the world, controlling the supply and the coupon on the world’s most influential currency, backed by the world’s most powerful economy.
The Europeans, with or without Britain, are always going to come off second to that kind of firepower, and the current infighting between member nations and soon-to-be ex-member nations only underlines the point. The Italians are making bolshy noises about debt. The Hungarians are upset about immigration. The Poles are threatening judicial freedom. The French are arguing that an army is needed to defend against the US. The Irish are worried about Brexit and the border with Northern Ireland. And the British are split right down the middle.
It’s hardly surprising then that investors are selling out of European stocks and buying dollars and gold at the same time. Silver has also been in favour, as have the miners of all these commodities.
After all, companies like Randgold (LON:RRS) and Antofagasta (LON:ANTO), despite their London listings, have plenty of global exposure, they book their earnings in dollars and sell into international markets. The British economy can go on its own course, and even though there will be pricing adjustments in relation to sterling, broadly speaking the value of these businesses will remain the same.
That’s why Antofagasta and Randgold are both up in a broadly down market, and why oil majors like BP and Shell are doing well too.
By contrast companies with direct exposure to the British economy, like Persimmon and the major banks, have been on the receiving end of some heavy selling. And other aspects of the British economy are under threat too.
There’s some speculation that London’s role as a major repository for bullion may be under threat, and various companies are manoeuvring to take business over to Dublin or Paris.
Property prices continue to stagnate, while consumer prices continue to push back against increasing inflationary pressures.
Still, the attractiveness as London as a destination for investment capital has always been its ability to offer diverse assets to cater for all requirements, and that diversity may turn out to be a strength when London comes to defending its own position as a global finance hub.
After all, anyone who owns pounds ought to be happy to buy Randgold or BP at these prices, secure in the expectation of foreign earnings in a stronger currency.
What the future holds for the wider Britain, post-Brexit, is a far more vexed question.