London — Boris Johnson, suffering from a scandal, announced on Thursday that he would resign as British Prime Minister after being abandoned by the minister and most of his conservative lawmakers.
Financial Market Reactions:
Johnson's imminent resignation news pushes the domestically focused FTSE250 index to a week-long high as the pound rises. It was useful. At the end it rose 0.8%. The FTSE 100 Index relaxed slightly, rising 1%.
Against the US dollar, the pound sterling rose 0.6% to $ 1.1994, up 0.6% from $ 1.1938 before the news was reported. Wednesday's March 2020 low was $ 1.1887.
Stuart Cole, Head Macro Economist, Equity Capital:
"A new government will be launched in the next few years For months, no one knows who the prime minister is and what his / her approach to fiscal policy will be-they tighten, loosen, and give away tax cuts and giveaways rather than fight inflation. Are you more interested in regaining inflation through This has made things even more complicated for BoE in the coming months. ”
GABIELE FOA, CO-PORTFOLIO MANAGER, ALGEBRISSiO:
“ This shift is in the UK A long-term positive for our assets. Rapid resolution of political impasses means less policy volatility and no additional fiscal stimulus for the coming months. In addition, Brexit's Greater chances of clarifying policies and reducing budget stress. "
LAURA FOLL, UK Equity Portfolio Manager, JANUS HENDERSON:
" Political Uncertainty The sentiment for UK stocks is already at a bad time, often due to lower UK corporate valuations than foreign peers and recent weak netflow data on UK stocks. This week's events are unlikely to mean that this overhang on UK stocks will be resolved in the very short term, but once a new leader is established, it will be on UK stocks. It may mean that some of the associated additional perceived political risks have been lifted. ”
TIM GRAF, State Street, EMEA Macro Strategy Officer:
“ Boris Johnson's resignation rarely changes the reality of the UK's macroeconomy and the toxic-mixed pound market. Rising household and domestic energy costs and slowing growth are future leaders. Possible to try It seems to be highly sexual.
"Removing short-term political uncertainty may provide better support for sterling in the coming days, but financial malaise is widespread. Given that, I think the rally is a selling opportunity. The slowdown in growth should also be an excuse to delay the Bank of England's plans to raise interest rates and put further pressure on the pound.
"But UK assets may not be so bad. Less aggressive MPCs can make gold foil more attractive as a result. And UK stocks, especially large stocks of multinational companies Should be able to continue better relative performance given that the weakness of the pound is expected to increase. "
Kit Jacks, Macrostrategist, Societe Generale:
"British Political Soap Opera opens the door to easier financial policy (Sterling Positive) and a more constructive approach to trade relations."
SAVVAS SAVOURI , Chief Economist, TOSCAFUND ASSET MANAGEMENT, London:
"As for the new system of implementing entirely new financial policies from the old, I argue that the differences are subtly different. Generous. Plans to dispose of good cars are always certain. Cash was handed over to the more generous crunkers for British brands, driving the surge in British car manufacturing and supporting the upsizing agenda, more generally. , I repeat what I have maintained stubbornly but confidently. The British economy continues to oppose its denials, providing a strong workforce and real estate market performance. "
Colin Asher, Senior Economist, Mizuho, London:
"It's hard to see Sterling go much lower than here. When he said he was going, there was a bit of pop, First, most of it is already priced as a result of recent events. Second, this battle is not about policy, but about personality and integrity.
"The market assumption is that the policy will change significantly. There is no. I don't think new people will get a big tax cut. It can be messed up, and even before this week, people were hoping for more financial relief in the fall when the bill goes up. Fiscal policy will probably be loose, but expectations for policy changes are relatively modest in this environment, as the fight is not about policy.
Philip Shaw, Chief Economist, Investec, London:
"When you see this kind of political turmoil, it's normal for currencies to fall.
"We are considering three possibilities for Sterling's reaction. First, this is the final stage of an uncertain period, who will stay at number 10 and who will stay at number 10. Second, there may be a series of less conflicting negotiations with the EU on the Northern Ireland Protocol. It reduces the risk of trade conflicts between the EU and the UK. This is a plus for the British pound.
"Third, it can be argued that the Scottish Independence Movement will be knocked out a bit because Boris Johnson is no longer the Prime Minister. It was granted next fall." (Report by the London Market Team, Edited by Saikat Chatterjee, edited by Catherine Evans and Angus MacSwan)