Some stories to whet your appetite as you prepare for today’s events
Boris Johnson’s opponents dismiss his debut Queen’s Speech as a “stunt”, which could be voted down for the first time in 95 years, writes Sebastian Payne. Many in Westminster view it as pointless and the 22 pieces of legislation set out in the speech have little hope of making it into law. Mr Johnson lost his working majority last month when 21 moderate MPs were kicked out of the Tory party for supporting parliamentary efforts to stop a no-deal Brexit.
Meanwhile in Brussels, officials are baffled:
Michel Barnier, EU chief Brexit negotiator, told diplomats on Sunday evening that British plans to keep Northern Ireland in the UK’s customs territory while avoiding a hard border on the island of Ireland were fiendishly complex and not yet properly worked out.
Chris Giles reports on how hard it will be:
The Brexit deal that Boris Johnson is seeking to strike with Brussels this week would push the UK towards a hard Brexit and lead it missing out on up to 7 per cent of growth, according to estimates from UK in a Changing Europe.
Back to reality…
As UK stocks and sterling give back some of Thursday and Friday’s impressive gains, the key phrase floating around the City of London this morning is “reality check.”
The weekend’s headlines showed just how tough it will be to agree a Brexit deal within the remaining days before October 31, let alone pass that deal through the deadlocked British parliament.
Strategists at Société Générale and ING both flag the “reality check for sterling,” which rose as much as 2 per cent against the US dollar to briefly break above $1.27 during Friday afternoon’s frenzy of optimism.
Here is some more from an interesting note from ING:
With the EU summit starting this Thursday, we still see a high bar for the talks to progress successfully (albeit admittedly the probability of a deal has risen). Large GBP gains have in part been caused by meaningful short speculative positioning, exaggerating the effect of the news flow. With the market possibly getting ahead of itself, the pound is now vulnerable to a sell-off should the talks break down again.
The “triumph of hope vs. reality” is how the rates strategists at Rabobank termed market optimism on both Brexit and US-China trade at the end of last week.
“Unsurprisingly, the optimism of a breakthrough re. the Irish question that helped underpin the risk-on move on Friday has evaporated over the weekend.”
UK stocks fall
Domestic stocks are giving back some of Friday’s large gains in morning trading.
• The FTSE 100 fell 0.5 per cent, despite the falling pound which typically acts as a boost to the blue-ribbon index.
• The FTSE 250, considered to be the best gauge for the domestic economy, fell 1 per cent.
• It rose 4 per cent amid Friday’s burst of Brexit enthusiasm.
• Banks including Lloyds and RBS fell around 3 per cent, following the double digit gains from the end of last week. British lenders are considered particularly exposed to the dangers of a no-deal Brexit.
Today’s line-up for the Queen’s Speech
The Queen’s Speech is a piece of political theatre laced with pomp and ceremony. The Queen in the imperial state crown in the House of Lords reads a speech from her government in front of both houses that outlines its plans for the parliamentary year.
Below is a guide to today’s events from the House of Commons’ Table Office.
11:25: The House of Commons is due to meet for the Queen’s Speech.
MPs may follow the Speaker and party leaders to hear the speech delivered in the House of Lords.
The Commons will be suspended until 2.30pm.
2:30pm: The Speaker makes a brief statement about the duties and responsibilities of MPs, a practice at the start of each session that was agreed by the House in 2004.
The Outlawries Bill will receive its first reading, a formal proceeding whereby the “House asserts its right to deliberate on matters of its own choosing before those proposed by the government in the Queen’s Speech”. No bill is produced nor is there any debate.
When the debate on the Queen’s Speech is opened, two government backbench MPs propose and second a motion for an address (thanking the Queen for the Speech), after which the Leader of the Opposition and the Prime Minister will speak.
Debate in the Commons could continue until 10pm.
The Speaker announces at the start of the debate which subjects are to be debated on each subsequent day. The half-hour end-of-day adjournment debate will be initiated by Dan Jarvis on the subject of 75th anniversary of the Battle of Arnhem.
The debate on the Queen’s Speech will be resumed on Tuesday and normally lasts for six sitting days. MPs will vote on the motion on the final day.
An unusually charged Queen’s Speech
This Queen’s Speech is one of the most unusual in British parliamentary history.
Boris Johnson’s government tried to prorogue parliament for five weeks at a key juncture in the Brexit process to introduce the speech, but was undone by a historic ruling by the Supreme Court in September.
The Johnson administration has long said it needs to reset the legislative agenda and introduce its priorities for government including investing in infrastructure and the health service and tackling crime.
But given Mr Johnson does not have a majority in the House of Commons it is not clear whether the speech will actually pass when MPs have the chance to vote on it in the coming days. What’s more if there is a general election in the next few months, as many expect, all the plans laid out in the Queen’s Speech will be scrubbed.
UK government bonds rally as hopes for Brexit deal ease
British sovereign bonds are rallying strongly after the EU warned over the weekend that Boris Johnson faces an uphill battle in striking a Brexit deal.
The 10-year Gilt yield slumped 8.6 basis points to 0.622 per cent, signalling a rise in the price of the bond.
Monday’s action represents a reversal of last week, when signs of a breakthrough sparked a sell-off in Gilts.
Brexit developments are crucial for Gilt traders because the outcome is expected to have a significant effect on the economy, and in turn, what path the Bank of England will take on interest rates.
“The optimism as regards the Brexit talks seem to be fading somewhat which is likely to put some bids back into the Gilt market this morning,” said Peter Schaffrik, a strategist at RBC in London.
Given how tight the timings are it appears a tall order for a deal to be agreed in time for sign-off at this week’s EU Council meeting. EU leaders meet in Brussels on Thursday and Friday of this week (October 17th and 18th). Typically, Brexit issues have been dealt with on the Thursday evening. No agenda for this week’s meeting has been published as of yet.
However, even if a deal is not agreed by the time of the EU Council, that is not the end of the matter. The real ‘hard’ deadline for the EU and UK to strike a deal is October 31st , the date of the UK’s scheduled departure. Even if it is not possible to agree a deal this week, talks can still run beyond the Council meeting, closer to October 31st. Sign-off on a deal, if there is one, may only come close to Brexit day. For example, in April, the decision to grant the UK an extension came just two days before its (then) scheduled exit date.
Sterling under pressure as Brexit doubts resurface
Sterling fell on Monday morning as fresh fears over Boris Johnson’s chances of sealing a Brexit deal weighed on the currency following last week’s breathless rally.
The pound was recently 0.6 per cent lower at $1.2570, more than a cent below its peak on Friday but still 3 per cent above its levels on Thursday morning.
The currency enjoyed its best two-day period since the financial crisis on Thursday and Friday, as a sudden burst of hope that a Brexit deal was still possible swept through markets.
But that optimism has been tempered by a weekend which produced no meaningful breakthrough and a host of fresh questions. The FT reported last night that Brussels was left baffled by the British proposals after two days of intensive negotiations.
There was “no breakthrough yet”, said one EU diplomat, while noting it was positive that talks would continue in Brussels today.
Johnson to unveil Queen’s Speech amid Brexit countdown
Good morning and welcome to the FT’s live coverage of the latest Brexit developments and the Queen’s Speech, as Westminster enters a crucial 14 days ahead of the October 31 scheduled exit date from the EU.
The Johnson government will unveil its legislative agenda as the countdown clock to Brexit ticks, with fresh fears surfacing in markets today over the chances of agreeing an exit deal in time.
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