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Judgement Day

03 November 2016 by lberuti

Even though the reporting season is still in full swing, earnings have taken a back seat over the last few sessions. At the moment, macro considerations are definitely driving the price action. The US election has been front and center since Friday, and the most recent developments in the presidential race have unsettled markets and threatened to push credit indices out of the range in which they have been confined since early July. Today, in the UK, the High Court ruled that a vote must be held in Parliament before starting the two-year countdown to Brexit. It is difficult to imagine the MPs voting against the mandate of the people, as voting against Brexit would certainly trigger a significant backlash from the public. Therefore, the decision will certainly not reverse the intention of the UK to trigger article 50 and exit the EU, but it certainly represents a setback for Prime Minister Theresa May’s plan to unilaterally start the process. The perception is that the result will force a softer Brexit plan with the more pro-European Parliament shaping the negotiations, rather than the hard Brexit bias that has been coming from the ruling Conservative party over the last month. Investors swiftly factored that in and after an initial heavy open, they sent credit indices tighter across the board, back into their narrow trading range.