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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/jun/12/business-optimism-plunges-political-uncertainty-markets-ftse-sterling-business-live
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| Credit rating agencies warn of UK political uncertainty as business optimism plunges - business live | Credit rating agencies warn of UK political uncertainty as business optimism plunges - business live |
| (35 minutes later) | |
| 12.41pm BST | |
| 12:41 | |
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| 12.28pm BST | |
| 12:28 | |
| Another dollop of uncertainty has just landed on our plates; Downing Street are hinting that the Queen’s Speech might not take place next Monday after all. | |
| Our political liveblogger Andrew Sparrow has just returned from the regular lobby briefing with Theresa May’s spokesman, and reports: | |
| The spokesman said that the new leader of the Commons, Andrea Leadsom, would be making a statement about the date of the Queen’s speech in due course. The spokesman would not say anymore, but he would not confirm that it will go ahead as planned on Monday next week. | |
| It may be that the government has decided to delay it until it has agreed its deal with the DUP. | |
| A delay would be most unusual - and rather irksome for Queen Elizabeth II, who is expecting to spend most of next week at the Royal Ascot races. | |
| Queen's Speech could be delayed despite already in HM's diary for 19th. No10: "There will be an update from the Leader of the House shortly" | |
| If it's pushed back to later next week, HM would have to pull out of Royal Ascot (Tue-Fri)... and that could leave her very unamused. https://t.co/Z8mMhAoBBU | |
| 12.18pm BST | |
| 12:18 | |
| Sterling has fallen against every other major currency today, according to Bloomberg, which explains: | |
| The pound fell against all its Group-of-10 peers on the prospect of an unstable coalition government heading into Brexit talks with the European Union in a week’s time. | |
| Pound falls below $1.27 on the prospect of Brexit talks being led by an unstable government https://t.co/qx8RvnUmWY pic.twitter.com/Jbd7T2jCE3 | |
| 11.57am BST | 11.57am BST |
| 11:57 | 11:57 |
| Betfair reckon there’s a one-in-three chance that Britain will hold a second general election this year. | Betfair reckon there’s a one-in-three chance that Britain will hold a second general election this year. |
| Here are the latest odds: | Here are the latest odds: |
| Year of Next General Election | Year of Next General Election |
| 2017 3.0 (2/1 or 33% chance) | 2017 3.0 (2/1 or 33% chance) |
| 2018 4.0 (3/1 or 25% chance) | 2018 4.0 (3/1 or 25% chance) |
| 2019 4.9 (4/1) | 2019 4.9 (4/1) |
| 2020 8.8 (8/1) | 2020 8.8 (8/1) |
| 2021 9.4 (17/2) | 2021 9.4 (17/2) |
| 2022 7.6 (13/2) | 2022 7.6 (13/2) |
| They’ve also provided some odds for Theresa May’s likely replacement: | They’ve also provided some odds for Theresa May’s likely replacement: |
| Next Conservative Leader | Next Conservative Leader |
| Boris Johnson 3.4 (12/5) | Boris Johnson 3.4 (12/5) |
| David Davis 4.7 (7/2) | David Davis 4.7 (7/2) |
| Amber Rudd 9.0 (8/1) | Amber Rudd 9.0 (8/1) |
| Ruth Davidson 10.0 (9/1) | Ruth Davidson 10.0 (9/1) |
| Phillip Hammond 17.5 (16/1) | Phillip Hammond 17.5 (16/1) |
| Michael Gove 23.0 (22/1) | Michael Gove 23.0 (22/1) |
| 11.46am BST | 11.46am BST |
| 11:46 | 11:46 |
| Speculation that Theresa May might change her Brexit stance is propping up sterling, says Lee Hardman, currency analyst at MUFG. | Speculation that Theresa May might change her Brexit stance is propping up sterling, says Lee Hardman, currency analyst at MUFG. |
| “The rise of softer Brexit speculation is another reason why the pound has not declined more sharply following the UK general election result”. | “The rise of softer Brexit speculation is another reason why the pound has not declined more sharply following the UK general election result”. |
| More here: | More here: |
| Sterling dips as investors digest election’s Brexit fallout https://t.co/7c3FSJItLH | Sterling dips as investors digest election’s Brexit fallout https://t.co/7c3FSJItLH |
| 11.30am BST | 11.30am BST |
| 11:30 | 11:30 |
| Britain’s unstable political situation means the pound will remain volatile for some times, says investment bank JP Morgan. | Britain’s unstable political situation means the pound will remain volatile for some times, says investment bank JP Morgan. |
| It told its clients that: | It told its clients that: |
| The UK delivered another electoral surprise this week with the Conservative party losing its majority in Parliament. This means the Conservatives would be reliant on the Northern Irish DUP with its 10 seats to establish a thin parliamentary majority. This raises questions about PM May’s ability to deliver a hard Brexit given the desire in Northern Ireland for a frictionless border with the Republic of Ireland. | The UK delivered another electoral surprise this week with the Conservative party losing its majority in Parliament. This means the Conservatives would be reliant on the Northern Irish DUP with its 10 seats to establish a thin parliamentary majority. This raises questions about PM May’s ability to deliver a hard Brexit given the desire in Northern Ireland for a frictionless border with the Republic of Ireland. |
| For sterling rates, this means markets are likely to be caught between the opposing forces of political instability associated with a Conservative minority government, and a potential softening of the Brexit stance. | For sterling rates, this means markets are likely to be caught between the opposing forces of political instability associated with a Conservative minority government, and a potential softening of the Brexit stance. |
| 11.13am BST | 11.13am BST |
| 11:13 | 11:13 |
| Moody’s gloomy report on the UK’s election has knocked the pound, says Neil Wilson of ETX Capital: | Moody’s gloomy report on the UK’s election has knocked the pound, says Neil Wilson of ETX Capital: |
| “Sentiment around the pound took a bit of a dive in morning trading in London. After treading water around $1.274 for the last few days since the election, cable eased back below the $1.27 handle after Moody’s warned that the election result is ‘credit negative’ for the UK. | “Sentiment around the pound took a bit of a dive in morning trading in London. After treading water around $1.274 for the last few days since the election, cable eased back below the $1.27 handle after Moody’s warned that the election result is ‘credit negative’ for the UK. |
| This seems to have woken traders from their slumber and the pound is on the defensive as we start the week. It wouldn’t take much bad news from the UK political scene to force cable to take another leg lower. Still there is plenty of bid to catch on the way down as the dips are being viewed as short-term buying opportunities. | This seems to have woken traders from their slumber and the pound is on the defensive as we start the week. It wouldn’t take much bad news from the UK political scene to force cable to take another leg lower. Still there is plenty of bid to catch on the way down as the dips are being viewed as short-term buying opportunities. |
| Sentiment remains pretty bearish. As Moody’s points out there is a chance of a softer Brexit but we must also think there is a heightened risk of a cliff-edge exit from the EU.” | Sentiment remains pretty bearish. As Moody’s points out there is a chance of a softer Brexit but we must also think there is a heightened risk of a cliff-edge exit from the EU.” |
| 11.02am BST | 11.02am BST |
| 11:02 | 11:02 |
| Sterling is also dropping against the euro, losing 0.6% to €1.1322. | Sterling is also dropping against the euro, losing 0.6% to €1.1322. |
| On Friday it hit an eight-month low of €1.1285 before recovering a little. | On Friday it hit an eight-month low of €1.1285 before recovering a little. |
| 10.55am BST | 10.55am BST |
| 10:55 | 10:55 |
| Update: the pound had now dropped below $1.27, towards the eight-week low struck on Friday morning as the election results came in. | Update: the pound had now dropped below $1.27, towards the eight-week low struck on Friday morning as the election results came in. |
| 10.37am BST | 10.37am BST |
| 10:37 | 10:37 |
| Pound edging lower towards $1.27 now. pic.twitter.com/CAbGTAn9Z0 | Pound edging lower towards $1.27 now. pic.twitter.com/CAbGTAn9Z0 |
| 10.36am BST | 10.36am BST |
| 10:36 | 10:36 |
| The pound is dipping back towards $1.27, down 0.2% today, as investors analyse these warnings from Moody’s and S&P and wait for developments in Westminster. | The pound is dipping back towards $1.27, down 0.2% today, as investors analyse these warnings from Moody’s and S&P and wait for developments in Westminster. |
| Joshua Mahony, market analyst at IG, says the drop in business confidence, and the slowdown in household spending, are worrying the City: | Joshua Mahony, market analyst at IG, says the drop in business confidence, and the slowdown in household spending, are worrying the City: |
| This decline in economic indicators may have been a long time coming, yet with a weakened political mandate and Brexit negotiations about to start, it is likely that we will see the UK continue to struggle. | This decline in economic indicators may have been a long time coming, yet with a weakened political mandate and Brexit negotiations about to start, it is likely that we will see the UK continue to struggle. |
| The fallout from the UK election continues and will remain key to expectations for the pound. | The fallout from the UK election continues and will remain key to expectations for the pound. |
| Updated | Updated |
| at 11.40am BST | at 11.40am BST |
| 10.17am BST | 10.17am BST |
| 10:17 | 10:17 |
| Newsflash from the Bank of England: Andy Haldane, the BoE’s chief economist, has been reappointed to the Monetary Policy Committee. | Newsflash from the Bank of England: Andy Haldane, the BoE’s chief economist, has been reappointed to the Monetary Policy Committee. |
| That means Haldane will continue to vote on UK interest rates and the Bank’s stimulus programme until 2020. | That means Haldane will continue to vote on UK interest rates and the Bank’s stimulus programme until 2020. |
| News from @bankofengland : now election is out the way (sort of) reappointment of Andy Haldane to MPC for 3 more Yrs has been confirmed | News from @bankofengland : now election is out the way (sort of) reappointment of Andy Haldane to MPC for 3 more Yrs has been confirmed |
| It’s not a big surprise, but it is worth noting as Haldane is one of the most dovish members of the committee. | It’s not a big surprise, but it is worth noting as Haldane is one of the most dovish members of the committee. |
| Prospects of more QE in the UK and negative interest-rates nudge a bit higher... #BoE https://t.co/IdAnCrSjN0 | Prospects of more QE in the UK and negative interest-rates nudge a bit higher... #BoE https://t.co/IdAnCrSjN0 |
| 10.04am BST | 10.04am BST |
| 10:04 | 10:04 |
| Speaking of Brexit delays..... | Speaking of Brexit delays..... |
| #UK #BREXIT MINISTER DAVIS SAYS BREXIT TALKS WILL BEGIN NEXT WEEK BUT MAY NOT BE ON MONDAY 19 JUNE - RTRS | #UK #BREXIT MINISTER DAVIS SAYS BREXIT TALKS WILL BEGIN NEXT WEEK BUT MAY NOT BE ON MONDAY 19 JUNE - RTRS |
| The formal Brexit talks are due to begin on 19 June, the same day as the Queen’s speech.... | The formal Brexit talks are due to begin on 19 June, the same day as the Queen’s speech.... |
| 9.35am BST | 9.35am BST |
| 09:35 | 09:35 |
| Moody's: Election result is credit negative | Moody's: Election result is credit negative |
| Rating agency Moody’s has also issued a report on the UK election, and it’s not very cheery reading. | Rating agency Moody’s has also issued a report on the UK election, and it’s not very cheery reading. |
| It is titled: | It is titled: |
| “Election result heightens uncertainty over Brexit negotiations and increases fiscal risks, a credit negative”. | “Election result heightens uncertainty over Brexit negotiations and increases fiscal risks, a credit negative”. |
| And it warns that negotiating to leave the EU will now be a more complicated process. | And it warns that negotiating to leave the EU will now be a more complicated process. |
| Moody’s fears that those talks (which are due to start next week) may be delayed, or may not focus on “substantive issues” for a while as the Conservative Party tries to agree a deal with the Democratic Unionist Party. | Moody’s fears that those talks (which are due to start next week) may be delayed, or may not focus on “substantive issues” for a while as the Conservative Party tries to agree a deal with the Democratic Unionist Party. |
| Moody’s is also worried that Britain’s national debt will keep rising for longer, as the government wrestles with a slowing economy and the public backlash against austerity. That could be bad for Britain’s credit rating, which is currently Aa1 with Moody’s, one notch below AAA. | Moody’s is also worried that Britain’s national debt will keep rising for longer, as the government wrestles with a slowing economy and the public backlash against austerity. That could be bad for Britain’s credit rating, which is currently Aa1 with Moody’s, one notch below AAA. |
| But.... Moody’s also suspects that Theresa May (or her successor) will now steer away from a hard Brexit, which would be good for Britain’s credit rating. | But.... Moody’s also suspects that Theresa May (or her successor) will now steer away from a hard Brexit, which would be good for Britain’s credit rating. |
| Here are the key points from the report | Here are the key points from the report |
| Inconclusive election outcome will complicate and probably delay Brexit negotiations, a credit negative. The negotiations with the EU were due to begin on 19 June, but we now expect a delay to the start of those negotiations or at least a period during which no substantive issues will be discussed. The time frame for the UK’s withdrawal from the EU in March 2019 remains unchanged, reducing still further the time available to achieve the transition agreement needed to avoid a ‘hard’ Brexit. | Inconclusive election outcome will complicate and probably delay Brexit negotiations, a credit negative. The negotiations with the EU were due to begin on 19 June, but we now expect a delay to the start of those negotiations or at least a period during which no substantive issues will be discussed. The time frame for the UK’s withdrawal from the EU in March 2019 remains unchanged, reducing still further the time available to achieve the transition agreement needed to avoid a ‘hard’ Brexit. |
| We expect fiscal risks to increase because consolidation will have a lower priority, a credit negative. In our view, the budget deficit will increase this year and next, as the government reacts to the economic slowdown under way. The election outcome, with significant gains for the Labour Party which had campaigned for increased public spending, will likely be seen as a “vote against austerity”. The public debt ratio will rise further and for longer than we had expected, placing the UK among the few highly rated European sovereigns whose public debt is still rising. | We expect fiscal risks to increase because consolidation will have a lower priority, a credit negative. In our view, the budget deficit will increase this year and next, as the government reacts to the economic slowdown under way. The election outcome, with significant gains for the Labour Party which had campaigned for increased public spending, will likely be seen as a “vote against austerity”. The public debt ratio will rise further and for longer than we had expected, placing the UK among the few highly rated European sovereigns whose public debt is still rising. |
| However, the election outcome also means that the government may now consider “softer” Brexit options, which could be credit positive. While we still expect Brexit to happen and the “cliff” risk of sudden exit remains, the election result suggests an electoral shift away from the “hard” Brexit that the Prime Minister had ostensibly sought. Hence, a move towards “softer” versions of Brexit – potentially with continued access of some sort to the Single Market – might now be considered. | However, the election outcome also means that the government may now consider “softer” Brexit options, which could be credit positive. While we still expect Brexit to happen and the “cliff” risk of sudden exit remains, the election result suggests an electoral shift away from the “hard” Brexit that the Prime Minister had ostensibly sought. Hence, a move towards “softer” versions of Brexit – potentially with continued access of some sort to the Single Market – might now be considered. |
| And here’s a chart showing why Moody’s is worried about Britain’s national debt: | And here’s a chart showing why Moody’s is worried about Britain’s national debt: |