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U.K. approves extension of Article 50, which could delay Brexit

Pro-Brexit campaigners march along the road near the Houses of Parliament, left, in London, U.K., on Wednesday, March 13, 2019.

The U.K. government on Thursday approved a motion to extend Article 50, which could delay the U.K.'s exit from the European Union beyond March 29.

Members of Parliament voted in favor of an extension 412-202 after rejecting on Tuesday Prime Minister Theresa May's withdrawal deal and on Wednesday voting down a motion to exit the EU without a deal.

The approval of an extension gives Ms. May the power to ask EU leaders to extend Article 50.

MPs are expected to vote again next week to support Ms. May's withdrawal deal with a three month extension. Ms. May is expected to seek a longer extension from the EU if the deal is rejected. However, all 27 EU leaders will have to unanimously accept any extension.

The pound sterling fell 0.82% vs. the dollar over the day Thursday, to $1.32. The FTSE All-Share index rose 0.38% over the U.K. trading day Thursday.

Reacting to the decision to seek an extension of Article 50, Seema Shah, senior global investment strategist at Principal Global Investors, said in an emailed comment: "(Ms.) May's grasp over the Brexit process is becoming increasingly tenuous — as is her leadership position."

Ms. Shah added: "Sterling has barely budged on tonight's vote and has held its ground since Tuesday's vote result. Indeed, we may not see further convincing moves in sterling until either a withdrawal deal is approved, a leadership contest begins, or a second referendum is announced. The Brexit process continues."

Chris Rodgers, senior fund manager at Sanlam Investments said in a separate emailed comment: "Uncertainty is already costing the U.K. dearly. The risk of a no-deal Brexit has been significantly reduced, but overseas investors remain on the sidelines. The fundamentals of the U.K. do, however, remain strong, and we expect an immediate boost to U.K. equities and sterling once the Brexit outcome is made clear."

Mr. Rodgers added: "In the meantime, investors may wish to consider their exposure to domestically focused U.K. equities which in some cases may be considerably undervalued."