Johnson's Westminster bombshell weighs on Irish shares and sinks Irish Government yields
Irish shares and Government bond yields fell today as a political manoeuvre by UK prime minister Boris Johnson was seen as boosting the chances of a crash-out Brexit at Halloween and an early British election.
The yield on 10-year Irish bonds fell further into negative territory at minus 0.12%, which is close to its all-time low, while the equivalent 10-year British gilt fell to 0.45%.
Irish and British property and building shares were hit hard, as sterling fell back to 90.74p against the euro.
Glenveagh Properties fell 2.5% in Dublin trade, bringing the losses for the housebuilder to 42% in the past year.
Building products company Kingspan shed 3%, while in London, shares in housebuilders Barratt Developments and Persimmon fell by around 3%.
Experts said that Mr Johnson’s move to suspend the UK parliament in September was an attempt to stymie political opposition in Westminster against his hardline threat to crash the UK out of the EU at the end of October.
The political move makes a hard Brexit and an early UK election more likely, said Dermot O’Leary, chief economist at Goodbody.
“Yes, there is clearly a greater chance of a hard Brexit — at more than 50%,” he said.
“Next week will be crucial”, with a potential confidence vote and a UK general election looking more likely, Mr O’Leary said.
Aidan Flynn, general manager of the hauliers group, the Freight Transport Association Ireland, said: “It is an unmitigated disaster which only highlights the need to ramp up no-deal planning”.
And Neil McDonnell, head of business group Isme, said it continued to advise its members to examine closely their supply chain and their customers.
The turmoil that Brexit will cause in regulations and standards in goods and services may be the surprise that hits Irish firms, he said.
John Whelan, managing partner at The Linkage-Partnership which advises Irish and international companies on Brexit and the US-China trade wars, also said that the chances of an early British election had risen.
Paradoxically, that may relieve some of the uncertainty facing Irish business, he said.
UCC economist Declan Jordan said Mr Johnson was overplaying his hand by trying to head off political opponents to his attempt to reopen negotiations with the EU.
Justin Doyle at the treasury desk at Investec Ireland said the manoeuvre to suspend the UK parliament appears to be “an extremely provocative-aggressive move”.
“Swirling uncertainty again grabs hold as the many and varied permutations of political brinkmanship are now sure to play out in the days-weeks ahead.
“As has been the norm with UK political uncertainty in recent times, sterling is more often than not the first asset class to react and today was no different,” he said.
Chief UK economist, at consultancy Capital Economics Paul Dales said the decision increased the risks for the UK economy and sterling by boosting the chances of a no-deal on October 31.
“Overall, we expect next week will be very hectic as parliament may try to make the most of one of its last opportunities to prevent a no-deal Brexit by trying to bring down the government,” he said.
