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What could it be the impact on the stock market in case of not trading on the Brexit front?
A reflection that seems to have assumed increasing importance for days, with the British government and the European Commission still busy discussing the terms of that agreement that should define the contours of trade relations between the European Union and the United Kingdom from 2021.
After a few weeks of relative optimism, negotiations between London and Brussels ended up getting bogged down. Weighing the distance on the side of fisheries, governance and competition, with France in recent days ordering the EU chief negotiator – compatriot Michel Barnier – not to give in to pressure from Downing Street.
Therefore, the latest laconic statements by British Prime Minister Boris Johnson are not surprising. When asked about the status of the negotiations, he spoke of the no-deal as “the most likely ending“Possible, however, the leader of the European Commission, Ursula von der Leyen, and Barnier himself, but the background does not change: the lack of agreement is now a concrete scenarioand markets must position themselves to cushion the blow.
No-deal Brexit: what repercussions on the markets?
Not all evils are harmed. This must have been thought out by analysts at Morgan Stanley in the last few hours. expressed some optimism about the resilience of equity markets in the event that the talks between London and Brussels fail.
The New York investment bank, in fact, sees a controlled reaction from the financial segments, thanks mainly to a positive outlook on the world economy next year which should help investors keep their nerves. Even the companies most susceptible to the negative consequences of a no-deal, analysts say, will benefit from that. process of reopening international trade widely expected in the coming months.
However, painful notes are not lacking. If the FTSE 100 index, which contains within it the 100 companies with the largest capitalization of the London Stock Exchange, is destined to remain stable even in the unexpected scenario of a no-deal, the FTSE 250 could instead lose 6-10%.
Also at risk the British banking sector, whose fall – due to probable negative interest rates set by the Bank of England – could be between 10% and 20%. In the same vein too the British insurance industry and real estate that, like all segments oriented to the domestic economy, began to lose ground already at the end of the unproductive dinner held last week, with diners Boris Johnson and Ursula von der Leyen unable to find a decisive synthesis on the Brexit front.
The EU and the UK continue to negotiate indefinitely
As mentioned, the table has not yet jumped. Backwards, negotiations continue until the bitter end, with negotiators in London and Brussels ready to use their remaining energies to prevent a disorderly exit of the United Kingdom from the European Union.
The deadline, and this is nothing new, has been further extended, to the point that there is no longer a deadline. Just as, in this joint effort, day and night, fatigue and discouragement no longer exist. Of course, December 31 remains a particularly rigid time horizon, but the impression is that negotiations will continue until the parties have reached an agreement or have given in to the impossibility of reducing distances.
The knots, on the other hand, have always been the same for several months: fishing rights in areas close to the respective coasts and the development of effective legislation aimed at defining competition between the UK and the European Union in the post-Brexit era.
Finding a synthesis on the fisheries issue does not seem like an overly complex operation, with the British obstruction largely attributable to Downing Street’s need to maintain some bargaining power. On the other hand, the chapter linked to competition is more difficult, since it prevents British companies from break into the single market without ad hoc legislation for Brussels it is a kind of biblical commandment that cannot be renounced.
