'Possibility Of A Brexit Deal Is 50:50 At Best', Says Financial Pundit
12 October 2019, 09:33
The leading markets commentator is shocked by the market movements in response to news of Brexit talks 'intensifying' and reckons the chance of reaching a deal is 50% at best.
Andrew Castle asked David Buik: "It's unusual, David, isn't it for markets to move on this sort of news because actually much of it has been priced in. But did this take the City by surprise that negotiations were 'intensifying'?"
Buik replied: "To be honest with you, I'm actually quite shocked because the possibilities of a deal at very best are 50:50 and I personally don't think it's as strong as that anyway. So to see the reaction of Sterling particularly, which went up from 1.2246 to about 1.2646 yesterday which is near enough four per cent.
"To see the kind of reaction we saw from Lloyd's Bank, up 12 per cent, Royal Bank of Scotland, up 11.5 per cent, Barclays up 6.5 per cent and some of these house builders, like Barratt's, up 11.5 per cent.
I mean that is moving valuations by billions of pounds and I'm not certain that what we're seeing out there, which is a better mood music, guarantees that kind of movement."
He continued: "If we do end up on 19th October with no deal or something that is less than conclusive, you're going to see these reactions go back just as badly."
Andrew put it to him that international investors want to know about political stability. Does the City, considering this, fear a hard Brexit or a "Marxist government" more?
Buik said that "a Marxist government is a strong comment"but a left-wing Labour administration is an "unedifying" prospect for investors.
He also explained that a hung parliament would be bad news. He said: "Hung parliament is not good news because if we actually come out of this with a coalition that may not be in the interest of business or investors, much more to the point, we have seen the level of investment savaged the last three years through indecision.
In my eyes, there is bucketloads to come in whether it's infrastructural projects, FinTech, all kinds of wonderful things this country is really good at but we need clarity and that's the big, big thing."