Stock market outlook: Last-minute Brexit deal likely between UK and EU – Business Insider
A Brexit “endgame” may force a last-minute trade agreement between the UK and European Union, a chief strategist said on Thursday.
“There is so much at stake for the UK” that failure to agree on a deal would deliver a major blow to the recovery in the economy, Jeffrey Kleintop, Charles Schwab’s chief global investment strategist, told Business Insider.
Prime Minister Boris Johnson will most likely strike a last minute deal in mid-to-late October, giving a significant boost to UK financials and the pound, he said.
UK stocks have declined over 20% this year, sharply underperforming other European markets.
The battle over Brexit is reaching an “endgame” and this could force a last-minute compromise between the UK and the EU, which could potentially boost UK equities and the pound, Charles Schwab’s Jeffrey Kleintop said on Thursday.
“Final negotiation will be very important in terms of determining how successful the Johnson administration is on getting what they want out of Brexit,” Kleintop told Business Insider.
Explaining why he thinks a surprise compromise will be reached, Kleintop pointed to how Johnson’s government agreed to the withdrawal agreement in October last year that he and Theresa May had rejected only a few months earlier.
It was “kind of the same that was proposed all year and ultimately when it came down to the last minute, the UK gave in,” he said.
“The same thing may happen this time. There is so much at stake for the UK, particularly with regard to providing financial services and a number of other key exports, that they will find a compromised solution at the last minute. I think this was an effort by Johnson to at least appear to be pushing for the most aggressive solution he could find favoring the UK.”
The prospect of Britain leaving the EU at the end of the year without a trade deal in place has taken its toll on UK financial markets. The FTSE 100 is one of the worst-performing European stock indices this year, with a loss of 23%, compared with a 5% loss in Frankfurt’s blue-chip DAX.
With a 4% loss against the dollar this year, the pound is the worst performing G7 currency as well. Britain has suffered the highest death count in Europe from coronavirus, with around 41,000 dead.