Markets calm as no deal was never on

Brexit deal will spark a sustained rally for sterling and stocks

The column inches devoted to Brexit must run to the millions at this stage.

We have detailed analysis of the options, the potential outcomes, the votes and who is doing what.

Watching it all unfold would be very entertaining if it wasn’t so serious.

MPs have ruled out a no-deal Brexit and now Theresa May wants a third shot at passing her deal, as she feels that is the only option left for Brexiteers ahead of an extension to the deadline beyond March 29.

The simple take away is that Brexit is delayed unless Ms May can get her meaningful vote tabled and won this week. If she fails, Brexit might get delayed indefinitely — which has been my best guess from the start.

Her task is to convince the hardline Brexiteers to back her deal this time.

What is clear is the damage it is doing to the political system in the UK and what is left of the UK’s reputation in Europe. Then there is the underlying threat posed to the UK economy.

Amazingly, for now, employment and the UK economy, in general, are holding up very well.

MPs are now most likely to extend the Brexit deadline, hopefully for longer than three months.

For the British, that adds to the complication of the European elections and having no MEPs in the future.

If the UK changes its mind and votes to stay in the EU in any second referendum, the mess just gets, well, messier.

It is frankly astonishing that British politicians are no clearer in reaching a solution.

Brexit as a concept was initially mis-sold and continues to be promoted as the will of the people, a will that we are told repeatedly cannot be questioned.

It seems to me that the only logical course is to give people another chance to vote because they now have a better idea of what Brexit involves.

For the time being, the risk to the UK economy comes from delayed investment decisions.

This could become more serious as time passes.

Only last week, a friend of mine had to stall plans for a shares sale in an initial public offering because of the Brexit uncertainty.

I believe many projects in the UK have been cancelled as the environment for investing is so uncertain. The markets see this very clearly.

No deal wasn’t a realistic outcome, as the chaos and job losses would have been catastrophic. And the markets were calm.

Sterling and UK stocks are undervalued and that is a result of the remaining uncertainty. A deal of some sort will spark a sustained rally, but if this uncertainty continues for much longer the damage done to the UK may become infectious.

At that stage, financial markets will turn severely negative and that will have consequences for Ireland.

Meanwhile, the ECB has been busy giving reassurances that interest rates will not rise until 2020 at the earliest. This is in response to falling growth prospects across the EU.

It is hard to sense this here when the buses pass full at 6.45am and the roads seem to carry ever more traffic.

But a slowdown in European and global growth is very much the economic story for 2019.

China export figures slumped by a staggering 20% in February, while new jobs in the US rose much more slowly than expected.

Growth forecasts are tumbling: In the US some observers expect the Federal Reserve to perform a massive U-turn and instead of raising it may cut rates this year.

The outlook has reversed dramatically since August when everything was on an upward trend. Some observers even believe a recession is looming.

Peter Brown is a founder of Baggot Investment Partners

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