UK gets six more months of pain
|A long night in Brussels has ended with the UK being granted six more months to work out how – and potentially still if - it wants to leave the European Union. Although the new deadline invited a lot of bad trick or treat jokes as it falls on Halloween, there was actually little cause for laughter.
For businesses the extension will mean six more months of pain in which political uncertainty will paralyse decisions on investments or expansions. The UK economy is already under pressure from the last two years of Brexit and maintaining this limbo for six more months will give house prices, retail spending and job creation almost no chance to recover.
This morning the pound has notched up against the dollar on the immediate relief that Britain will not crash out of the EU tomorrow – though this seemed as an unlikely scenario before Theresa May headed out to Brussels yesterday – but trading is subdued because of the potential for a further slowdown in the economy and more domestic political turmoil while MPs battle it out over what kind of deal Britain actually wants.
The FTSE has inched lower with ex-dividend trading adding to the general weakness over Brexit. Insurers are leading the move lower, notably Standard Aberdeen which is trading down 5.4%.
One glimmer of light is the higher consumer inflation numbers from China, indicating that the slowdown in the domestic economy may have been stemmed for the moment. For stocks the bigger threat than Brexit this year will be the global economic slowdown with China being the main gauge of how big or fast that slowdown will happen.
Brent slips from year’s high
With Brexit in the front lines news about the deteriorating situation in Libya is getting less attention but the escalating conflict in the oil-rich North African country is pushing prices to the highest level this year. This morning oil is trading down 0.54% from yesterday’s close of trading in New York but Brent crude is trading firmly above $71.30.
Production cuts from OPEC members brought in since the beginning of this year and US sanctions on Venezuela and Iran are contributing not so much to the actual lack of supplies but to concerns that shortages might eventually materialize further down the road
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