Asian stock markets brush off UK government’s Brexit defeat

The British government’s Brexit plans are in tatters, but stock markets don’t seem to care all that much.

On Wednesday morning, Hong Kong’s Hang Seng benchmark and the Shanghai Composite were trading largely flat. Japan’s Nikkei fell about 0.7% after the yen strengthened. Dow futures were pointing slightly up for the US market open.

Just hours earlier, the UK’s parliament on Tuesday struck down the divorce deal that Prime Minister Theresa May had negotiated with the rest of the European Union by a record margin.

The defeat was expected, but the size of the loss — 432 votes to 202 — was a surprise. That has opened up significant uncertainty over the direction of Britain’s exit from the European Union. The crushing loss means parliament may now wield greater control over the process.

The pound, which had fallen below $1.27 earlier on Tuesday, erased its losses after the vote and strengthened to above $1.28.

Analysts said that markets were largely unaffected as traders had long anticipated that May’s deal would be shot down by parliament. Others pointed out that some investors were now betting that Britain’s exit from the EU would be delayed.

Britain is scheduled to leave the EU at the end of March. It’s unlikely that the deal negotiated by May can be substantially revised before that deadline.

The latest developments surrounding Brexit “culminate in another little kick of the can down the road,” said Kyle Rodda, a market analyst at broker IG Group. “Markets hate uncertainty, so this relieves that anxiety for now.”

Some supporters of Brexit want Britain to leave the bloc without a deal. Other potential outcomes include a second referendum or the collapse of May’s government and a general election.

May is set to face a no-confidence vote in the British parliament on Wednesday. If she loses the vote of no-confidence, it makes a general election more likely.

“Markets will be choppy in coming days,” said Stephanie Kelly, senior political economist at Aberdeen Standard Investments. “The wisest thing for investors to do in the short term is nothing.”

 

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