Chief Investment Officer
Summary: Day 1.215 since the Brexit - Will PM Johnson prevail or call an election by tonight?
What happens today: Two major votes
# Vote 1 – The WAB – Government expected to win…
# Vote 2 – ‘The Program Motion, PM” – here it is 50/50 if government will get support.
If #1+#2 pass the Commons moves to a 3rd reading where MP’s gets to attach amendments: Two such are expected: A Custom Union and 'Final Say' vote from Labour.
Saxo Bank view:
We stick by 50% chance of pass by October 31st, but there is now two other scenario’s likely: A General Election and further extension, plus of course a small but still realistic chance of hard Brexit if Downing Street insist on disrespecting Parliament.
GBPUSD- Hourly 1.3013/1.2951 – Buy/Sell Either side break – MACD turned down… Daily – clear uptrend in place..
FTSE – Range 7440 -7003 – react to break of either side….
GBP hourly:
The Guardian: The second reading will be a good test of support, but even assuming it passes, the government’s difficulties could begin in the next stage of the WAB, when MPs can table amendments. Among amendments expected are ones seeking a customs union with the EU for the whole UK and one making approval of the Brexit deal conditional on a second refer
One Conservative adviser said pro-Brexit cabinet ministers and Tory backbenchers would never be able to live with a customs union attached to the bill, so it was “not going to happen”. The aide said this scenario would probably lead to renewed push for an election, with Conservative party headquarters still preparing for a pre-Christmas poll – regardless of whether the Brexit bill passes or not.
If any of these amendments are passed, it will not only require a departure extension but will effectively wreck the bill for the government. The most likely outcome then would be for Johnson to seek an election. However, if all the amendments fail then MPs will be worked flat-out to try and pass the necessary legislation for Johnson’s deal before 31 October.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach
