The stock market has been moving up in the last trading days. Markets have been calmed by two situations:
– No-Deal Brexit less likely
– Trump and China back at the negotiation table
No-Deal Brexit less likely
Boris Johnson has experienced a very difficult week. Before this week the odds for a No-Deal Brexit were going up quite a bit and reached somewhere around 40%. This week Johnson lost a couple of very important votes in the British Parliament and he lost his parliamentary majority.
On Wednesday Johnson lost a vote. Parliament (including some own party rebels) voted that the UK cannot leave the EU without a deal. Johnson panicked and rebels were eliminated from his party and he lost the majority in the Parliament.
To save himself, Johnson saw one possibility and that was to call new elections which would be held October 15th. Also here he got defeated by the parliament. Johnson aims to try it again but the opposition already told him they would block it.
Moreover, today also the House of Lords has voted for a law against a No-Deal Brexit possibility.
Boris Johnson finds himself in a difficult position now. He has been saying that the UK will leave on the 31st of October, with or without a deal. Parliament blocked a No-Deal Brexit, so Johnson needs to make a deal with the EU and get it through parliament before the end of October. That will not be easy, thinking back of Therese May’s adventure. Johnson will probably be forced to ask for an extension from the EU. This would probably mean a Borexit, as Boris Johnson promised not to extend the Brexit soap.
Trump and China back to the negotiation table
For what it is worth: Trump and China are back on speaking terms and decided to meet in early October to negotiate again about the trade war. The markets have been reacting positive to this news. But remember, one negative tweet from the Donald and it is all different. To be continued.
What now?
The Brexit story could continue and might give a bit of more relief to the market. The worst case scenario of a No-Deal seems to become less and less likely. For the trade war we might have to wait till October before big news comes out. On the other hand, with the stock markets going higher in the last days, Trump has some ‘room’ for angry China tweets again.
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