Brexit deadline looms large
Joshua Mahony, Senior Market Analyst at IG, discusses Brexit fears.
With precious little time left to strike a deal, Brexit negotiations are looking unlikely to yield anything positive. Banks have been in the firing line, with the prospect of further economic weakness overshadowing the fact that they appear to be well prepared.
Sterling weakness has done little to boost the FTSE 100 this morning, with vaccine optimism fading in favour of a more pessimistic tone as Brexit talks approach their conclusion.
Hopes that the US would implement a stimulus package before year-end have been dashed once again, with Nancy Pelosi stating that talks would likely continue into Christmas.
While the ongoing battle again Covid remains on the right track, the inability to strike a deal on either side of the Atlantic could soon undermine hopes that stocks will stage a welcome Santa rally after a difficult year.
Brexit fears are continuing to drive sterling underperformance, with hopes of a deal ahead of Sundays deadline fading with each passing day.
Wednesdays Brexit dinner appeared to provide little more than clarity that both sides remain as far apart as ever, with a growing consensus that a no-deal Brexit now appears to be the most likely eventuality.
Sceptics will see the current impasse as a way to fame any eventual deal as a success on both sides, yet we have just three weeks to both finalise and sign off a deal that needs to pass through all 27 EU nations.
From a market standpoint, the value-led recovery seen over the past month is coming into question, with the FTSE 250 outperformance likely to reverse if a no-deal Brexit comes back to hurt domestically-focused firms.
From an FX perspective, the fact that sterling is higher than the 2016 low point highlights that markets are increasingly becoming accustomed to the idea of a no-deal exit which had previously been touted by Boris Johnson as “a million-to-one” outcome.
The prospect of a no-deal Brexit is doing little to bolster optimism for the UK banks, with the likes of Lloyds, NatWest, and Barclays leading the FTSE losses in early trade.
The latest BoE financial stability report highlighted that banks are in a very healthy position as they head into what could be a very turbulent few months.
However, with the government having staved off a wave of insolvencies and administrations through the pandemic, the next question is just how they can avoid any short-term economic suffering that could come with a disorderly exit from the EU.
Short-term positions in small, early stage ASX companies,
with high potential and near term price catalysts.
Focusing on resource exploration, early-stage tech, and biotech.
Exceptional opportunities across a broad range of
early-stage growth sectors with strong management.
Seeking 1,000% plus returns across medium to long-term holds.
Longer-term positions in a variety of sectors.
Seeking strong management where traction is established and have entered into a growth phase.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.