13th December 2019

Written by Javier Maquieira, Associate

Edited by Adam Shaw, Associate Partner

Good morning, The polls predicted that the UK’s third general election in less than five years would deliver a Conservative majority, but the scale of Boris Johnson’s victory – the biggest Tory majority since 1987 – has undoubtedly surprised even the most seasoned political pundits. Indications of what was to come came before the exit poll was released as sterling began to climb. It reached its highest level against the dollar since May 2018, rising 2.7% to $1.351. At the time of writing, the results of 648 seats have been declared, with the Conservatives winning 363 (up 47 on 2017). It was a dismal night for Labour, which took 203 seats (losing 59) in a damning indictment of Jeremy Corbyn’s leadership. Meanwhile, the Liberal Democrats will be disappointed to have returned just 11 MPs, with leader Jo Swinson losing her East Dunbartonshire seat to the SNP. Swinson has announced her immediate resignation – the party rules dictate that the leader must be an MP – while Corbyn has said he will not lead Labour into another general election and will step down after a “process of reflection”. There will surely be pressure for him to go sooner. The other story of the night is the SNP’s comprehensive victory in Scotland. The party took 48 seats (up 13) in a development that will intensify the clamour for a second independence referendum, but save Ruth Davidson from a dip in Loch Ness. The result means that Johnson will be able to deliver his Brexit withdrawal deal and the UK will leave the European Union. However, there is the serious prospect that in doing so he will be the prime minister who loses the union. In addition to the SNP landslide, there are now more nationalist than unionist MPs representing Northern Ireland. It also offers Johnson a choice: does he continue to pander to the right-wing of his party or use his new political capital to govern as the centrist, one-nation conservative he has always claimed to be? It's been a long election campaign but now that it's over, what does it all really mean? At Charlotte Street Partners, we have been analysing the results since the early hours to define the implications for the economy, businesses and society as a whole. Our analysis note is available to our Daily Briefing subscribers. To receive a copy, please email info@charlottestpartners.co.uk.

News

European Union leaders are meeting for a second day in Brussels to try and reach an agreement on carbon neutrality by 2050. Although most EU member states back the plan, Poland, Hungary, and the Czech Republic have so far refused to sign up, which could undermine the bloc’s credibility on the climate emergency. Ahead of the EU leaders’ arrival at the summit venue yesterday, Greenpeace activists scaled the building and set off distress flares and alarms as they unfurled a banner warning of the climate crisis. The US House of Representatives Judiciary Committee is set to approve impeachment charges against President Trump today after the vote was postponed by chairman Jerry Nadler following two days of acrimonious debate. Although the Democratic-run House will probably support Trump’s impeachment in a vote next week, it is unlikely that the Senate, controlled by Republicans, will remove the president from office.

Six bodies have been recovered from White Island in New Zealand after Monday’s volcanic eruption. A high-risk operation has begun on the island as the mission to bring back two other bodies continues. New Zealand authorities, amidst growing pressure from families of the victims to recover their bodies as soon as possible, had previously refused to go due to safety reasons, with the risk of a further eruption over the next 24 hours being around 50-60% according to experts.

Business and economy

President Trump tweeted yesterday that a trade deal between the US and China is “getting very close”, sending the main US stock indices up by about one per cent. Both governments are negotiating to avoid the next round of tariffs on Chinese goods. The proposed deal would see increased Chinese purchases of US agricultural products and a roll back of existing duties. The new president of the European Central Bank (ECB), Christine Lagarde, said during her first policy meeting that she would keep interest rates at historic lows, with the aim of re-starting quantitative easing to cut the cost of borrowing and stimulate growth. Lagarde added that a wide-ranging review of the central bank’s strategy could give lawmakers new tools to boost growth and set the inflation level back to the target of two per cent. Sainsbury’s is fielding takeover interest in its mortgage book, valued at £1.9bn, which it put up for sale in September. Lloyds Banking Group is reported to be one of the large lenders to have made a bid ahead of a deadline earlier this week. Other banks like Royal Bank of Scotland and Santander have expressed an interest in similar sale processes in the past but are not believed to have tabled proposals.

Columns of note

Jane Li sheds light on the other side of the coin when it comes to the war on disinformation in Quartz. Beijing’s line on six months of protests in Hong Kong is that US officials are “openly colluding” with the rebel movement and demonstrators are “destroying” the city. But now they’re coming from another source too: a documentary released by Moscow-backed English-language news channel Russia Today. The video, Hong Kong Unmasked, has gained a surge in praise over recent days on Chinese social media platform Weibo for offering the “true” version of events. Users applauded the network for its international reach. And, with China now looking to imitate Russia’s propaganda strategy, the two countries are “more aligned that at any point” since the mid-1950s. Sam Knight argues that Hugh Grant is “living his best British election” in the New Yorker. Against a backdrop of low energy and unconvincing protagonists, Grant’s campaigning has garnered some much-needed attention. The actor professes to have no party affiliation and stopping Brexit is his defining political identity. (£)

Markets

What happened yesterday?

With the UK election at the forefront of investors’ minds, London stocks closed in positive territory on the back of expectations that Boris Johnson would secure a working majority in parliament. The FTSE 100 was up 0.79% at 7,273.47, while the pound was 0.49% weaker both against the dollar at $1.3132 and down 0.35% versus the euro at €1.1815. In corporate news, Standard Chartered (+3.88%) ended the day up in London, while JD Sports Fashion (+1.88%) recovered from heavy losses. British Airways and Iberia parent IAG (+1.9%) rallied after Deutsche Bank named it one of the most preferred picks in the sector for 2020. Marks & Spencer Group (+1.01%), Balfour Beatty (4.34%) and Serco Group (+0.27%) also made gains. On the downside, infrastructure investor John Laing Group saw losses (-13.57%) after projecting a full-year net asset value “marginally” below expectations. Associated British Foods (-0.48%), Marston’s (-0.48%), and Cineworld (-2.08%) were all lower as the three stocks went ex-dividend. On the other side of the pond, markets reached record closes amid reports of a US-China trade deal. The Dow Jones Industrial Average was up 0.79% at 28,132.05, the S&P 500 gained 0.86% to reach 3,168.57, and the Nasdaq Composite added 0.73% to hit 8,717.32.

What's happening today?

Finals Hollywood Bowl AGMs Amur Minerals Meikles Up Global

Trading Announcements Balfour Beatty SThree

Intl. Economic Announcements

(13:30) Import and Export Price Indices (US) (13:30) Retail Sales (US) (15:00) Business Inventories (US)

Did you know?

“Jingle bells” were attached to the harnesses of horse-drawn sleighs as a form of warning device to help avoid collisions at blind intersections.

Parliamentary highlights

TODAY House of Commons The House will next sit on Monday 16 December 2019. House of Lords The House will next sit on Monday 16 December 2019. Scottish Parliament No business scheduled.