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According to analysts at Danske Bank, the market focus was yet again on Brexit yesterday as after a relatively quiet day in terms of other market-moving events, Speaker John Bercow ‘stole the show’ as he made it clear that he will (at least in principle) not allow for a third vote unless there are “substantial changes” to the current deal.

Key Quotes

“It seems unlikely that there will be a third vote in the House of Commons on May’s Brexit deal before the EU summit starts on Thursday (21 March). The big question now is whether the EU27 leaders will grant an extension when they meet on Thursday (the decision has to be unanimous but the EU council tends to work by consensus).  While we previously thought a short extension was likely, we have changed our minds and now expect a long extension  (60% likely versus 30% probability of a short extension).”

“We would be more concerned if the EU leaders were not able to reach a consensus around an extension (10% probability). This clearly increases the chance of a no deal Brexit but from a legal perspective, the extension can be granted right up until the deadline.”

“A long extension may increase the pressure on the Brexiteers to such a degree that they end up backing the deal. Some are speculating, despite Bercow’s reservations, that May may try bring the deal forward for a vote next week, if her strategy works. A long extension would mean that the high uncertainty is prolonged for a longer period, which would continue to have damaging effects on the economy.”

“Overall, it seems like we will get a long extension or May’s deal will pass soon. We still think May’s deal passing is the most likely final outcome and that a second EU referendum (after a long extension) is the second most likely final outcome.”