Europe midday: Stocks retreat as May outlines Brexit plan; pound bounces briefly

European stocks retreated as UK Prime Minister Theresa May outlined the government’s plans for Brexit in an eagerly-awaited speech.

At 1206, the benchmark Stoxx Europe 600 index was down 0.6%, while Germany’s DAX was off 1% and France’s CA 40 was 0.8% weaker. In the UK, the FTSE 100 was 0.4% lower.

In currency markets, the pound briefly popped higher during May’s speech, trading up 2% versus the dollar to $1.2274 versus $1.2185 just before she started speaking.

On Monday, the pound fell to its lowest level since the October ‘flash crash’ after a Sunday Times report suggested May was set to reveal plans for a ‘hard’ Brexit.

In her speech on Tuesday, May said she did not want partial membership of the EU.

“We seek a new and equal partnership – between an independent, self-governing, global Britain and our friends and allies in the EU.

“Not partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out. We do not seek to adopt a model already enjoyed by other countries. We do not seek to hold on to bits of membership as we leave.”

In addition, she confirmed that MPs and peers will get to vote on the final Brexit deal before it comes into place and said the government will seek the greatest possible access to the single market, but not membership of it

In corporate news, aerospace and defence group Rolls-Royce advanced after agreeing to pay £671m to settle bribery and corruption cases with UK and US authorities.

British American Tobacco edged higher after confirming it was acquiring the remaining 57.8% of Reynolds American it does not already own in an agreed cash-and-shares offer worth $49.4bn.

German online retailer Zalando slumped despite reporting a rise in revenue and earnings for the fourth quarter.

Beiersdorf nudged up after better-than-expected 2016 sales figures.

Standard Chartered rallied on the back of an upgrade to ‘buy’ by Bank of America Merrill Lynch.

French retailer Casino was weaker despite saying 2016 trading profit came in a touch ahead of its €500m target.

French train maker Alstom declined as it reported a 3.1% increase in sales for the months through to December, which marked a slowdown from the previous six months.

Mining giant Rio Tinto was in the red after saying it experienced a “strong” operational performance in 2016 with increases in iron ore, bauxite and aluminium production in the fourth quarter.

On the macroeconomic front, the latest survey from the ZEW Center for European Economic Research in Mannheim showed German economic sentiment improved less than expected in January.

The index of economic sentiment increased to 16.6 from 13.8 the month before, but this was below analysts’ expectations for a reading of 18.3.

However, the current situation index rose to 77.3 in January from 63.5, beating expectations for a reading of 65.0.