Why one of the world’s hottest markets won’t stay hot

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Why one of the world’s hottest markets won’t stay hot


As global markets reopened on Tuesday, few are as hot as the U.K.’s FTSE 100
UKX,
+2.15%
.
 The financial euphoria, however, could be short-lived.

With the U.K. stock market closed since Christmas, Tuesday is the first opportunity for traders at the London Stock Exchange to respond to news of last week’s Brexit deal. The FTSE 100 has shot up more than 2% on Tuesday, four times the Dow Jones Industrial Average’s
DJIA,
+0.43%

 0.5%. That should come as little surprise, considering the alternative — the damaging “no-deal” investors had seen as a real possibility until the night before Christmas.

The euphoria must now yield to sobriety. The deal struck between the U.K. and the European Union didn’t include financial services, and that means a major shift in trading will take place on Jan. 4, the first day when markets will open after the official Jan. 1 exit date.

From then on, U.K. financial services companies will be at the mercy of continental regulators, who have made it clear they want most transactions to return to Europe proper as quickly as feasible.

Some big international players have already set up hubs in Amsterdam, Frankfurt and Paris, but the immediate concern of investors, bankers and regulators is that the Jan. 4 trading session goes as smoothly as possible.



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