Breakthrough hopes

Markets buoyed by talk of “pathway” to a Brexit deal

Leo Varadkar: pathway

Global stock markets and the pound are set to experience a short-term boost following signs of a breakthrough in the Brexit negotiations.

Analysts believe there could be “light at the end of a very dark tunnel” after two hours of talks between Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar after which they agreed that there was a “pathway to a possible deal”.

A joint statement issued after the meeting said the prime minister and Taoiseach (Irish prime minister) had a “detailed and constructive discussion”.

It said: “Both continue to believe that a deal is in everybody’s interest. They agreed that they could see a pathway to a possible deal.”

Downing Street added: “The talks focused on “the challenges of customs and consent.

“They agreed to reflect further on their discussions and that officials would continue to engage intensively on them.”

The UK government believes it has gone some way to meet EU demands in its new proposals, by offering to keep Northern Ireland in the single market.

Following the discussions, Mr Varadkar will consult with the Taskforce 50, and the UK Brexit Secretary Stephen Barclay will meet Michel Barnier, the EU’s chief negotiator, on Friday morning.

Sterling saw its biggest rise for seven months to almost $1.23.

Any sign of Dublin meeting that offer with a similar concession could be the start of serious negotiations towards a deal with the EU, said Nigel Green, CEO of deVere Group, the world’s largest independent financial advisory organisation.

“Global stock markets would almost inevitably experience a significant shock to the downside in the event of a no-deal Brexit,” he said. “The UK would experience the worst fallout, but U.S., European and Asian equity markets would also take a considerable hit.

There is a growing sense that there’s a light in what has been a very dark tunnel

– Nigel Green deVere

“In addition, while some of the impact of a no-deal Brexit has been priced-in, the value of the British pound – which is already down 17% than before the 2016 referendum – would also likely be weighed down further.”

He continues: “This is why, following the positive tone coming from Johnson and Varadkar on the main point of contention in an orderly exit from the EU – the Irish backstop –we can expect global stock markets and the British pound to experience a short-term boost.”

Mr Green added: “There is a growing sense that there’s a light in what has been a very dark tunnel. It is now imperative that the leaders of the EU and the UK use this glimmer of hope and move forward to end the paralysis.

“They must use this new momentum and act decisively and in the spirit of compromise to get a deal secured by which the UK can leave the EU in an orderly way.

“A deal, which leads to a well-managed departure, is likely to have a rebound effect on global equity markets could rebound, whilst the pound and euro would strengthen against the dollar.”

The deVere CEO concluded: “No-deal Brexit is one of the major geopolitical headwinds affecting financial markets, but the encouraging talks between Boris Johnson and Leo Varadkar will provide some relief.

“The situation remains highly volatile and investors should remain invested and ensure their portfolios are properly diversified to take advantage of the opportunities and upsides and mitigate risks.”

Business cautious

UPDATE 11 Oct: The latest Scottish Chambers of Commerce quarterly Economic Indicator survey for Q3  shows that businesses continue to struggle due to factors caused by Brexit uncertainty in the most recent quarter. 

Confidence remains on a downward trend in most sectors compared to the same period last year. Yet businesses, particularly in the financial and business services sector, are cautiously optimistic that a positive outcome to Brexit on 31 October could start restoring confidence in the Scottish economy.

Tim Allan, chairman of the Scottish Business Advisory Group and president of Scottish Chambers of Commerce, said: “Our research shows that overall business performance has declined in the last year as companies take on board extra uncertainties caused by the tortuous progress of the Brexit process.

“The challenges businesses face are laid bare… As the UK faces yet another deadline in the Brexit process, construction and manufacturing have reported severe challenges in terms of future orders, exports and investment.

“Meanwhile companies in sectors including retail and tourism face continued challenges in recruiting people with the right skills as the number of available workers from Europe continues to decline.

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