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Markets wary after UK court rejects Johnson parliamentary suspension

Markets wary after UK court rejects Johnson parliamentary suspension
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LONDON (Reuters) – Markets reacted with caution after Britain’s Supreme Court ruled that Prime Minister Boris Johnson acted unlawfully when he suspended parliament a few weeks before Britain was scheduled to leave the European Union.

The pound briefly gained, then gave up those gains. Gilt yields rose, dragging safe-haven German bond yields <DE10YT=RR> higher. The blue-chip FTSE 100 <.FTSE> hit its low for the day, although a JPMorgan index tracking UK stocks <.JPDEUKDM> that make their revenue at home hit their day highs on the news.

Following are market reactions:


“This is a win for the pro-remain side and suggests it will be harder for the government to push a no-deal Brexit before the end of October. I am not sure how much further sterling can go. Essentially, it means the Speaker can bring back MPs and Lords immediately but what they can do with this time is unclear, they had already passed legislation which requires the PM to request an extension by Oct 19.

“It may not change that much but it’s a loss for the government.

“A general election is no longer an if but when… probably late-November, early-December.”


“I think the sterling gains will be fleeting. What this means is that Parliament will be recalled, but what they will exactly discuss is not clear and that will be up to the Speaker to set the agenda. Brexit uncertainty combined with political uncertainty is going to keep any big moves in check for the pound. What can be a potential option is the increase in chance of a no-confidence vote in Johnson, but we will have to wait and see.”


“The pound is flat as a pancake and does not know which way to turn next. Either Boris resigns or (if we believe Corbyn) then new elections are possible if the government loses a motion of no confidence, but that’s the ‘elephant’ trap that Blair talked about for Labour. The Conservatives are doing well in the polls and Boris will not shy away from new elections. I can’t see much upside for GBP if we have new elections. The question is what this would resolve regarding Brexit. If no party wins a majority, then we are stuck with the same question, how do we get the withdrawal agreement through parliament?”


“On the constitutional side, this is enormously important. It’s an extraordinary decision. Basically, the court is saying that there are no executive powers that are not subject to judicial review. It’s a court choosing really to strengthen its own power.

“From the point of view of Brexit, I think markets are right not to over-react and not to see this as a game-changer. I don’t think it changes the fundamentals of the Brexit process.”


“It’s unprecedented that the courts rule on parliamentary proceedings this way.

“I’m not sure if it’s a good or bad thing from a market perspective. It does mean that we will get more information and insight from parliament but equally opens up the prospect of more uncertainty and friction.

“The intraday spike reflects the surprise of the decision — you see it in bond markets and sterling. Ultimately, it’s [the decision] not going to have a lasting effect; we move on to the next chapter in the story.”


“It’s reinforced the strength of parliament, although we had the bill passed so maybe [that’s] why it hasn’t been a big move.”

There was “more downside than upside risk. If they (the supreme court) had found what he did was fine, it would have been a bigger market move.”


“Normally, this would call into question his (Boris Johnson’s) tenure, but he’s not a normal prime minister; the likelihood of him resigning as a result of this is not that likely.”


“It doesn’t really tell what the next move of the parliament will be. It is all pretty much up in the air. The main point is understanding whether the parliament will decide to stop a no-deal Brexit. I wouldn’t be surprised if he resigns at this point, it will be the opportunity.”


“I wasn’t surprised to see the currency hop higher but I also wasn’t surprised to see cable run out of steam ahead of $1.25.”

“There has been a bias to look for the good news over the last week … but I think the tone is going to turn again now.”

“I can easily see a scenario where once Johnson … heads into the Conservative party conference this weekend and ultimately there his main job is to rally the troops, for which is likely to be an election very soon.

“If that is the case, he is going to have to rally his base and he is going to do that around hard Brexit.

“If he explicitly goes for a hard Brexit mandate, then that will be a moment of clarity for the FX market. It will look at the polling, and the Conservatives are leading in the polls.”


“The ruling is likely to be a historic one for the British constitution, but it is unlikely to have any immediate impact on the Brexit process, particularly as party conferences mean that parliament is unlikely to reconvene straightaway.

“While this is a blow to the government’s reputation, the focus will quickly switch back to the 17 October EU summit and whether a deal can be achieved. If not, we are heading to a general election as soon as the opposition will allow one.

“The small moves in UK assets on the back of the ruling reflect the limited effect on the Brexit political process, as moves to block a no-deal exit were completed prior to the prorogation. Sterling and gilt yields were little changed within half an hour of the news, though UK equities continued their trend lower.”


“So parliament comes back earlier – but it’s questionable if that is going to justify a massively positive reaction for the pound. But we’ve only seen a relatively small reaction so far, and I don’t think we’ll get much more. Parliament will come back and then what? They already did pretty MUCH everything that they could do, and it is difficult to see what they could agree upon further, especially not before October 31.

“But of course the risk of a no-deal Brexit had reduced marginally and that justifies a marginal strengthening of the pound.”


“Lady Hale, president of the Supreme Court, stressed again that ‘these cases are not about Brexit’, however the political ramifications are certain to impact Boris Johnson government’s strategy to leave the EU.

“Sterling began to rally as soon as the decision was announced that the matter was justiciable with further traction being gained as the court ‘conclude the decision to advise her Majesty to prorogue Parliament was unlawful’. With the effect that the Speaker has declared that Parliament must convene as a matter of urgency.

“The irony of this outcome is that Parliament would have normally been in recess now for the conference season. As a result of this ruling, and the original decision to prorogue parliament, we may actually see more business days in parliament than there would have been if the government had done nothing. Markets have begun to price in a reduced chance of a no-deal exit on 31st October and this has led to a rally in UK domestic- focused equities such as housebuilders and sterling. Sterling remains the market’s release valve for Brexit uncertainty and today’s rally remains within the tight range created by the two binary secession outcomes.

“This latest twist in the Brexit narrative likely delays the decision point for Brexit but does not make it any clearer whether the UK will leave with a deal, without a deal or not at all.

“As a result, we retain our existing underweight to UK assets, and where we do have exposure it is focused on large UK multinationals that have an inbuilt currency hedge against sterling volatility.

“All scenarios remain on the table, including a general election later this year; however, today’s ruling makes it far more difficult for the government to restrict parliamentary Brexit oversight, making a no deal on 31st October less likely. A fractured parliament is now set to return with party divisions still at their peak and some 34 MPs sitting as Independent.”


(Reporting by Sujata Rao, Saikat Chatterjee, Yoruk Bahceli, Danilo Masoni, Joice Alves, Marc Jones, Josephine Mason, Karin Strohecker; writing by Larry King; editing by Kevin Liffey)

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