Market Says NO! "No Deal"
The venerable Ken Clark, Father of the House, spoke for many inside and outside the Commons when he asked whether there was anything more ‘unhelpful, irrelevant, or irresponsible’ than a Tory leadership contest right now. Various business organisations clearly share his his vexation as they wind up their criticism of the politicians. In contrast, Figure 1 shows that not only were investors unfazed yesterday but instead seem to be recovering from a mild panic attack over the prospect of a Corbyn Government. The more domestically-oriented FTSE 250, which has been struggling recently over Brexit even more than the FTSE 100, had a much happier day yesterday in gaining 1.9%. The pound also found support after two turbulent days, albeit not quite enough to regain the $1.27 floor of recent weeks. The Brexiter wing of the Tory Party has been foiled in its coup to depose Mrs May and get one of their own on the ballot sheet for Tory Party members, who could probably have been relied upon to vote for a ‘no dealer’. As Prime Minister, the new leader could in theory have taken the UK out of the EU without consulting Parliament. Unless, of course, a No Confidence vote was passed, which would have probably happened despite DUP support, as no opposition MP would have wanted to rescue a Tory Prime Minister and at least 20 Tory MPs would seem willing to put ‘country before party’. Such a vote may yet happen but not right now as Mrs May battles on with her deal. However, the House of Commons arithmetic remains against her with 300 plus MPs (Labour, SNP, Lib Dems and at least 10 Tory rebels) favouring a Second Referendum as the route to Remain, 120 plus irredentist Brexiters (including a handful of Labour MPs) leaving around 200 (including 10-15 Labour rebels) supporting Mrs May’s deal. There is a chance, as I have previously suggested, that Mrs May in self-sacrifice will eventually propose that the UK remains in the EU, which would certainly draw fire within both Party and country away from her successor as Tory leader. A majority in Parliament may emerge for a Second Referendum but probably only for a choice between Mrs May’s deal and remaining. Overall, the chances of ‘no deal’ have reduced further but the drama (farce?) looks set to continue. Yesterday’s vote was a reminder that the governing party is deeply divided. The shadow of Brexit may now be replaced by that of Mr Corbyn, holding back the pound for a while at least and inhibiting some investors from snapping up undoubted bargains amongst UK stocks.
Alastair Winter Chief Economist
Figure 1 | FTSE 250 | Source LSE
Share the news!
Share this blog on your social media using the buttons below.
We publish several blogs a week including our regular Economic Insights, Dynamic Opportunities & Market Signals
so keep up to date with the latest news by following our social media pages.
Disclaimer: Daniel Stewart publication is a general publication providing commentary primarily on politics, economics and the market. It is not intended as an offer or solicitation to buy or sell securities. Daniel Stewart & Co plc has not independently verified all the information given in this document. Signals may contain extracts from Daniel Stewart & Co Research recommendations or other investment or market commentary. It should not be relied upon when making investment decisions and Daniel Stewart accepts no responsibility for any use that may be made of these comments or for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and investors should seek advice on the suitability for their personal circumstances of any investments or investment strategy covered. The past performance of an investment is not a guide to its future performance and the value of an investment and any income from it may fall as well as rise and is not guaranteed. Where an investment is denominated in a currency other than sterling, changes in exchange rates may have an adverse effect on the value of the investment and the income thereon. In addition, if a security is listed outside the United Kingdom (UK), the listing regime and local regulation may differ from that which pertains in the UK. This may affect the degree of protection that consumers receive. Daniel Stewart & Company is a member of the London Stock Exchange. Authorised and Regulated by the Financial Conduct Authority.
Provided by the good people at Daniel Stewart
Daniel Stewart & Co provides investment, funding, foreign exchange and fund management services to individual and corporate clients. Each week our experts comment on some of the developments from macro to micro that have caught their attention.