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Here's Why Royal Bank of Scotland Is Rising Today

By Matthew Frankel, CFP® - Oct 11, 2019 at 12:34PM

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There's one major catalyst sending the bank higher.

What happened

The stock market is having a great day on Friday, and Royal Bank of Scotland (NWG -2.34%) is doing better than most. As of noon EDT, the U.K.-based bank was up by more than 12%.

So what

A few factors could be helping propel Royal Bank of Scotland higher, but the main driving force of the rally is new developments in the Brexit saga.

UK and EU flags.

Image source: Getty Images.

Specifically, there has been little hope for a Brexit deal before the current Oct. 31 deadline, but that seems to be changing. European Council President Donald Tusk indicated on Friday that a deal could be possible.

There have been fears that a so-called hard Brexit could be coming. Prime Minister Boris Johnson has said that Brexit would occur by Oct. 31 with or without a deal, and while an extended deadline is the more likely outcome of failure to reach a deal, a no-deal Brexit could be disastrous for economic stability in the U.K.

In addition to Brexit, Friday is a strong day in the stock market in general, fueled by renewed hopes of a U.S. trade deal with China. Bank stocks are particularly strong performers, with the financial sector up by nearly 2% on the day.

Now what

To be perfectly clear, a Brexit deal is not imminent. This move is fueled by optimism that a deal could happen. If it does, there could be a lot more room to climb for Royal Bank of Scotland. If not, today's gains could end up being erased, especially if the U.K. leaves the European Union without a deal.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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