December election on cards to break Brexit deadlock

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Oct 31, 2019

Political parties are readying themselves for a general election on 12 December after prime minister Boris Johnson gained support for one on his fourth attempt.

He secured 438 votes for an early election compared to 20 against after Labour’s leader Jeremy Corbyn u-turned and decided to back the move.

The legislation is expected to pass through the House of Lords in the coming days. If successful, the pre-Christmas vote will be the first December poll since 1923.

The election follows a Brexit deadline extension to 31 January 2020, which was granted by the EU.

Brexit can happen before then if MPs manage to agree a deal.

Janus Henderson Investors multi-asset portfolio manager Oliver Blackbourn says: An election could be the much-needed unblocker for the clogged political drain that is Brexit. However, the result needs to be decisive in favour of the pro-leave Conservative Party or the anti-no-deal rainbow of opposition parties. A narrow Tory victory, requiring support from elsewhere to form a workable government, could simply leave us in the same clogged political situation. However, it is also unclear how a coalition of Labour, Liberal Democrats and the Scottish National Party would coalesce around a target Brexit outcome, let alone wider policy objectives.”

He adds: “The pound continues to be volatile, with the hard-line stance of many in the Tory party creating worries about a potential hard Brexit, beyond the newly-agreed January exit date. Despite the moves in sterling, gilt yields remain around the Bank of England’s base rate of 0.75 per cent.

“Recent commentary from Monetary Policy Committee external members has focused on the downside risks to the economy, suggesting a greater likelihood of interest rate cuts. After all, even during a Brexit transition period, continued uncertainty about the UK’s future relationship with the EU is likely to weigh on growth. Better US-China trade headlines and the first signs of a potential global manufacturing stabilisation have sent major sovereign bond yields higher recently. In this environment, gilts look a more attractive, defensive asset over the medium term, relative to other major government bonds.”

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