Brexit vote impact: how will the Commons vote affect the markets? #IGBrexitChat
Watch IG’s Jeremy Naylor, political analyst Alexandra Kellert, economist Peter Dixon and First Property Group CEO Ben Habib discuss how the markets are likely to react following the defeat of the government’s Brexit plan.
Which markets are really affected by these political developments?
Peter Dixon: At the moment, the market movements have been surprisingly benign. Obviously, we saw a little bit of a wobble in sterling initially, but then it recovered quite sharply after the full implications of the vote came through.
The main thing we’re looking at is volatility; equity volatility because that is where the action is, that reflects a market’s level of uncertainty.
What are you looking for from Brexit?
Ben Habib: My desire is mainly for a resolution which gets us out of the EU as easily as possible. I think that the prime minister’s deal would have been fine as long as the (Irish) backstop hadn’t existed. Any deal which doesn’t subjugate us to the EU in the long term would be fine, including a no-deal outcome.
What I suspect will happen now is that parliament will assess its main thoughts in the next few weeks, and it will realise that there is no real consensus for any form of deal with the EU, or indeed any deal that the EU itself will accept. Since parliament is inherently ‘remain’ in nature, I think that we will have a second referendum – and I think the options will be a ‘no-deal Brexit’ vs ‘remain’.
Where is volatility likely to appear in the immediate future?
Peter Dixon: I think one of the problems we face is differentiating between what is Brexit-related volatility and what is general volatility. If you look across the whole spectrum since the autumn of last year, we’ve seen a significant rise in equity volatility and a significant rise in currency volatility – particularly with sterling spiking up in recent weeks.
Some of that is Brexit-related but I think that a lot of the volatility reflects the deteriorating international environment, particularly with concerns about China. When it comes to watching where the volatility will arise, I think it will primarily be in the currency markets as that is the barometer of the current market thinking with regards to Brexit.
However, I really can’t see volatility going down a huge amount over the next few weeks. Volatility tends to spike up on bad news rather than coming down with good news.
Is a no-deal Brexit now off the table?
Alexandra Kellert: No-deal is absolutely not off the table. No-deal is the legal default – if no other deal is agreed to by 29 March, a no-deal departure is what happens. There certainly isn’t a majority in parliament for no-deal, so they (Members of Parliament) will do whatever they can to stop that from happening.
However, obviously that has to be a concrete decision, it can’t simply be a case of saying ‘we don’t want this’ – there has to be a positive vote for something else.
Get more insights from the #IGBrexitChat
If you’d like to find out more about the potential ramifications of the vote on the markets, watch the full interview or choose an area that interests you:
- What is determining sterling’s price at the moment?
- What are your thoughts on the vote of no confidence that has been tabled by Jeremy Corbyn?
- Do you think it was a mistake to have triggered Article 50 when the prime minister did?
- Can the UK revoke Article 50?
- How big of a deal is Brexit to the international community?
- On a side note, what could the impact of the US government shutdown be on European economies?
- Are we able to deal with the implications of a no-deal Brexit?
- What effect will the rejection of the government’s deal have on unemployment in the UK?
- Do you see the Bank of England (BoE) having any need to raise interest rates later this year?
- Do you see the need for a second referendum to ‘clear the air’?
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