Markets struggle to make sense of the chaos

THERESA MAY decided to call a snap election on a walking holiday on Wales. History will regard it as the most disastrous ramble since Captain Oates wandered out of the Antarctic tent in 1912. Having failed to anticipate the result, investors (like everybody else) are struggling to understand what will happen next. 

It looks as if the Conservatives can carry on in power, with the support of the Democratic Unionists in Northern Ireland. This would give them a bare majority. But Mrs May’s position has been severely weakened ahead of Brexit negotiations. Another election later this year is possible.

For the markets, two factors are offsetting each other. On the one hand, there is uncertainty and the possibility that a left-wing Corbyn government could still take power in the near future. On the other hand, this result may change calculations about a hard Brexit. The Unionists backed Brexit but they will not want a hard border with the rest of Ireland; something that may require the UK to make concessions to the EU. Azad Zangana of Schroders, a fund management group, said

As for Brexit, serious damage has been done to the UK’s negotiating position. Without a strong mandate, Europe can ignore the UK’s demands. Even the UK’s threat to pull out of negotiations will now appear hollow and lacking the support of the British…Continue reading
Source: Business and Finance