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No-deal effect?

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zico
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No-deal effect?

#357103

Postby zico » November 16th, 2020, 5:35 pm

What do people think will be the impact on stock markets of no-deal between EU and UK? I have a feeling it will be minimal because FTSE 100 companies are generally multi-nationals, and likely to be minimal whether you look at short-term or long-term. Likely that sterling would take a immediate and sizeable knock, but don't know whether this would affect any particular companies.

For this board, I'm just interested in the impacts on stock markets if a UK/EU trade deal isn't reached this month - there are plenty of other places to debate the rights and wrongs of Brexit policy.

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Re: No-deal effect?

#357110

Postby johnhemming » November 16th, 2020, 5:55 pm

I think the UK market has been held back for domestic stocks (LLOY, BARC etc) for some time because of the uncertainty.

Some specific companies will suffer, but the proposed deal is much the same as no deal for Financial Services. I think you are probably right that Sterling may suffer a hit possibly only around 5%, however.

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Re: No-deal effect?

#357125

Postby dspp » November 16th, 2020, 6:26 pm

If there is a no-deal, ....... (I say again, IF) ....

......then I would expect a relatively difficult period of UK economic re-adjustment (aka deterioration) over several years. In normal times that would be observable, but covid-19 will both mask and exacerbate that, and provides endless excuses for government (i.e taxpayer-funds) to conceal/delay realisation.

How the stock market prices that in, and when, is less obvious to me. I think it will be most felt outside of Financial Services and the Mining/Oil/Gas sector, so ordinarily that would be skewed towards everything in the FTSE 50-350 range. And ordinarily I would expect the worst stock market effect to be felt about 12-months afterwards, when room for ignoring has run out.

But these are not normal times. I remain very happy to be underweight FTSE-100 vs Rest Of World.

regards, dspp

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Re: No-deal effect?

#357127

Postby odysseus2000 » November 16th, 2020, 6:34 pm

As things now are, the impact from covid looks to be the driving force. If Brexit has no impact there are still serious issues facing many business, domestic and international.

The more people who lose their jobs or who have reduced incomes, the more danger there is for the banks who may find themselves with a lot of poorly and/or defaulting loans.

Commercial office space is now of questionable utility with all the moves to work from home which is another risk for the banks.

Legacy oil and gas is at risk from renewables, the moves to electric traction as well as the loss of sales from the move to home working with reduce transport and heating costs.

There are many more secular changes brought on by covid.

How Brexit will fit into all of this is impossible to know without some clarity on the trade deal if it gets done. Assuming the PM abides by the law and self isolates his input into the negotiations has to be reduced making trying to game what might emerge yet more impossible. There are already talks about extending the Northern Ireland settlement and it seems possible that this may spill over into extending the UK exit point etc etc.

We could also see a leader ship challenge in the government to add to the mix as many are becoming openly critical of the PM.

It is an ugly mess that might pass almost un-noticed or create some serious economic misery or lead to an economic boom.

I have no idea what will happen, but betting on a worst case rarely works in life, although one can't rule it out.

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Re: No-deal effect?

#357129

Postby Lootman » November 16th, 2020, 6:40 pm

dspp wrote: I remain very happy to be underweight FTSE-100 vs Rest Of World.

Me too, although that has been the case for me for 20/25 years now, and for various reasons.

IF there is no deal and IF there are problems, then I think the UK would be affected a fair amount, the EU a bit, and the US and Asia not much at all. I am mostly in the US and Asia anyway.

But if you or I ever wanted an attractive entry point back into the UK, it might be some time in 2021 before we are all vaccinated and when the fear in project fear is at a maximum.

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Re: No-deal effect?

#357130

Postby johnhemming » November 16th, 2020, 6:42 pm

odysseus2000 wrote:We could also see a leader ship challenge in the government to add to the mix as many are becoming openly critical of the PM.

I would not see that in the short term. If there is "no deal" the question then comes as to what deals follow that. This is all very difficult because politics and reality are in conflict. I would not think the tories would want someone else to handle this as there isn't really a good answer.

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Re: No-deal effect?

#357157

Postby odysseus2000 » November 16th, 2020, 8:08 pm

johnhemming wrote:
odysseus2000 wrote:We could also see a leader ship challenge in the government to add to the mix as many are becoming openly critical of the PM.

I would not see that in the short term. If there is "no deal" the question then comes as to what deals follow that. This is all very difficult because politics and reality are in conflict. I would not think the tories would want someone else to handle this as there isn't really a good answer.


Politics is always difficult to figure, but there seems to be building unhappiness with the current PM and if opinion polls for many of the new government MP's start seeing big swings away from them, they may decide to dump the PM early, giving a new person time to repair the damage, as they see it, of the current PM.

I currently don't hold this as a high probability, but things can swing fast and if the PM self isolation continues during these important Brexit days, that might be enough to build the numbers for a vote of no confidence in the current PM.

Should something like that happen the whole Brexit procedure could stall and we might end up with a remainer, perhaps sailing under false colours for the leadership election, who then scuppers the whole Brexit move.

Anything like this is likely to lead to high volatility in cable, pound v euro and equity markets.

Regards,

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Re: No-deal effect?

#357158

Postby Lootman » November 16th, 2020, 8:10 pm

odysseus2000 wrote:
johnhemming wrote:
odysseus2000 wrote:We could also see a leader ship challenge in the government to add to the mix as many are becoming openly critical of the PM.

I would not see that in the short term. If there is "no deal" the question then comes as to what deals follow that. This is all very difficult because politics and reality are in conflict. I would not think the tories would want someone else to handle this as there isn't really a good answer.

Politics is always difficult to figure, but there seems to be building unhappiness with the current PM and if opinion polls for many of the new government MP's start seeing big swings away from them, they may decide to dump the PM early, giving a new person time to repair the damage, as they see it, of the current PM.

It seems clearer to me. Get Brexit done, roll out one of the vaccines and in a year things will look much better.

So EITHER things look good then and BJ stays. OR they look bad and BJ takes the blame, allowing a new leader who is not tainted by that to prepare for an election still 3 years away.

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Re: No-deal effect?

#357169

Postby odysseus2000 » November 16th, 2020, 9:30 pm

Lootman wrote:
odysseus2000 wrote:
johnhemming wrote:I would not see that in the short term. If there is "no deal" the question then comes as to what deals follow that. This is all very difficult because politics and reality are in conflict. I would not think the tories would want someone else to handle this as there isn't really a good answer.

Politics is always difficult to figure, but there seems to be building unhappiness with the current PM and if opinion polls for many of the new government MP's start seeing big swings away from them, they may decide to dump the PM early, giving a new person time to repair the damage, as they see it, of the current PM.

It seems clearer to me. Get Brexit done, roll out one of the vaccines and in a year things will look much better.

So EITHER things look good then and BJ stays. OR they look bad and BJ takes the blame, allowing a new leader who is not tainted by that to prepare for an election still 3 years away.


Sure if Brexit happens then this could be the trajectory, but I am beginning to wonder if Brexit will get done. There is already discussion of a Northern Ireland extension and with Boris self isolating some new kind of UK wide extension might be cobbled together.

What we saw from Mrs. May makes me unclear as to what might happen and all the statements of "over ready" etc carry little weight given what we have already seen.

If there is some extension in the time limit for Brexit, it may lead to rallies in UK equities.

Regards,

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Re: No-deal effect?

#357171

Postby johnhemming » November 16th, 2020, 9:46 pm

There is no sense kicking the can down the road. It needs some resolution.

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Re: No-deal effect?

#357184

Postby Lootman » November 16th, 2020, 10:15 pm

ursaminortaur wrote:
johnhemming wrote:
odysseus2000 wrote:We could also see a leader ship challenge in the government to add to the mix as many are becoming openly critical of the PM.

I would not see that in the short term. If there is "no deal" the question then comes as to what deals follow that. This is all very difficult because politics and reality are in conflict. I would not think the tories would want someone else to handle this as there isn't really a good answer.

If there is no deal then I'd think the EU would be happy to let the UK stew for a while on WTO terms and would probably not re-engage until Boris was replaced as PM.

You evidently have not quite let go of this idea that the EU is the master race and we are compelled to obey their dictates.

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Re: No-deal effect?

#357195

Postby ursaminortaur » November 16th, 2020, 10:41 pm

Lootman wrote:
ursaminortaur wrote:
johnhemming wrote:I would not see that in the short term. If there is "no deal" the question then comes as to what deals follow that. This is all very difficult because politics and reality are in conflict. I would not think the tories would want someone else to handle this as there isn't really a good answer.

If there is no deal then I'd think the EU would be happy to let the UK stew for a while on WTO terms and would probably not re-engage until Boris was replaced as PM.

You evidently have not quite let go of this idea that the EU is the master race and we are compelled to obey their dictates.


Since it takes two to negotiate what would Boris do if the EU decided to let the UK stew for a while. The EU has other things on its plate and would want to see some sign that the UK position had changed in someway otherwise why commit time and effort to talks which would just be recovering the ground already covered. In order to safe guard the Single Market the EU asks on lpf and governance would be the same and, especially if the IMB had gone through breaking the WA, there would be a large amount of distrust.

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Re: No-deal effect?

#357198

Postby Lootman » November 16th, 2020, 10:45 pm

ursaminortaur wrote:
Lootman wrote:
ursaminortaur wrote:If there is no deal then I'd think the EU would be happy to let the UK stew for a while on WTO terms and would probably not re-engage until Boris was replaced as PM.

You evidently have not quite let go of this idea that the EU is the master race and we are compelled to obey their dictates.

Since it takes two to negotiate what would Boris do if the EU decided to let the UK stew for a while. The EU has other things on its plate and would want to see some sign that the UK position had changed in someway otherwise why commit time and effort to talks which would just be recovering the ground already covered. In order to safe guard the Single Market the EU asks on lpf and governance would be the same and, especially if the IMB had gone through breaking the WA, there would be a large amount of distrust.

I think that the entire point of Brexit is to escape their bullshit, rather then continue to indulge it.

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Re: No-deal effect?

#357203

Postby ursaminortaur » November 16th, 2020, 10:56 pm

Lootman wrote:
ursaminortaur wrote:
Lootman wrote:You evidently have not quite let go of this idea that the EU is the master race and we are compelled to obey their dictates.

Since it takes two to negotiate what would Boris do if the EU decided to let the UK stew for a while. The EU has other things on its plate and would want to see some sign that the UK position had changed in someway otherwise why commit time and effort to talks which would just be recovering the ground already covered. In order to safe guard the Single Market the EU asks on lpf and governance would be the same and, especially if the IMB had gone through breaking the WA, there would be a large amount of distrust.

I think that the entire point of Brexit is to escape their bullshit, rather then continue to indulge it.


Fine if you think the UK will happily continue forever trading on WTO terms with the EU - myself I think we are more likely to want to return to the negotiating table fairly quickly but, as I indicated, think the EU maybe less keen until Boris has been replaced.

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Re: No-deal effect?

#357204

Postby Lootman » November 16th, 2020, 10:58 pm

ursaminortaur wrote:
Lootman wrote:
ursaminortaur wrote:Since it takes two to negotiate what would Boris do if the EU decided to let the UK stew for a while. The EU has other things on its plate and would want to see some sign that the UK position had changed in someway otherwise why commit time and effort to talks which would just be recovering the ground already covered. In order to safe guard the Single Market the EU asks on lpf and governance would be the same and, especially if the IMB had gone through breaking the WA, there would be a large amount of distrust.

I think that the entire point of Brexit is to escape their bullshit, rather then continue to indulge it.

Fine if you think the UK will happily continue forever trading on WTO terms with the EU - myself I think we are more likely to want to return to the negotiating table fairly quickly but, as I indicated, think the EU maybe less keen until Boris has been replaced.

I do not think you get it any more than you did 53 months ago.

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Re: No-deal effect?

#357215

Postby ursaminortaur » November 16th, 2020, 11:35 pm

Lootman wrote:
ursaminortaur wrote:
Lootman wrote:I think that the entire point of Brexit is to escape their bullshit, rather then continue to indulge it.

Fine if you think the UK will happily continue forever trading on WTO terms with the EU - myself I think we are more likely to want to return to the negotiating table fairly quickly but, as I indicated, think the EU maybe less keen until Boris has been replaced.

I do not think you get it any more than you did 53 months ago.


I'm not sure that you get the fact that the fantasies from 2016 are now colliding with reality.

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Re: No-deal effect?

#357218

Postby Lootman » November 16th, 2020, 11:43 pm

ursaminortaur wrote:
Lootman wrote:
ursaminortaur wrote:Fine if you think the UK will happily continue forever trading on WTO terms with the EU - myself I think we are more likely to want to return to the negotiating table fairly quickly but, as I indicated, think the EU maybe less keen until Boris has been replaced.

I do not think you get it any more than you did 53 months ago.

I'm not sure that you get the fact that the fantasies from 2016 are now colliding with reality.

The reality is that we leave. The rest is just details.

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Re: No-deal effect?

#357222

Postby ursaminortaur » November 17th, 2020, 12:03 am

Lootman wrote:
ursaminortaur wrote:
Lootman wrote:I do not think you get it any more than you did 53 months ago.

I'm not sure that you get the fact that the fantasies from 2016 are now colliding with reality.

The reality is that we leave. The rest is just details.


The reality is that we have already left - but the details of the UK's future relationship with the EU are important to the future well-being of both the UK and its citizens (and quite possibly as far as the UK is concerned of existential import).

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Re: No-deal effect?

#357223

Postby Lootman » November 17th, 2020, 12:09 am

ursaminortaur wrote:
Lootman wrote:
ursaminortaur wrote:I'm not sure that you get the fact that the fantasies from 2016 are now colliding with reality.

The reality is that we leave. The rest is just details.

The reality is that we have already left - but the details of the UK's future relationship with the EU are important to the future well-being of both the UK and its citizens (and quite possibly as far as the UK is concerned of existential import).

And it will be figured out. The vote was one about principle and not technicalities.

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Re: No-deal effect?

#357227

Postby csearle » November 17th, 2020, 12:30 am

Moderator Message:
Couple of posts removed from this topic that strayed beyond the remit as defined by the OP. - Chris


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