Among the biggest losers in yesterday’s UK general election must be French champagne makers for, twist the outcome as one may, nobody really has much to celebrate.
Well, no one other than maybe the 10 Democratic Unionists who now in effect hold the balance of power. The Conservatives, having swept all before them in recent local council elections have come seriously unstuck with Theresa May having thrown away their working majority in the House of Commons.
Jeremy Corbyn, the left-wing firebrand leader of the Labour party, which was so recently being touted as a spent force, has come storming through the pack but in the final count he has still done no better than to lead his party to its third successive election defeat. The Liberal Democrats did better than they did in the 2015 election but the haul of 12 seats out of 650 for the party that purports to represent the 48% of voters who wished to remain in the Brexit referendum 12 months ago isn’t exactly a sparkling result either. As for the SNP, well, it was the biggest loser on the night with 21 of its 56 seats gone. UKIP, which polled 4m votes in 2015, disappeared from the map.
And then there is May and the Tories who have effectively lost what looked like an unlosable election. Sure they remain the largest party and, in the weird way that British elections work, have landed their highest ever share of the total vote at 42.4%. May might feel tempted to call Hillary Clinton to ask her advice on how to cope with just having fouled up a slam-dunk. The reply she would probably get is not to underestimate the streams of resistance against what is perceived to be the old establishment.
Jeremy Corbyn would baulk at being tossed into the same pot as Donald Trump and of being branded a populist but that is what he is. If promising free tuition fees to students - for that they turned out in droves - huge spending increases on public services and an end to austerity in general is not prime and fully paid-up populism, what is? Although it did not win him an election it did succeed in losing one for May.
POUNDING
As the first exit poll was released at the stroke of 10pm the pound took a 2% nosedive against the dollar and it equally tumbled – how could it not – against the euro. It has not shown any sign of wishing to recover from the drop that took it from US$1.2950 to US$1.27, although it is still a long way from its January low of close to US$1.20. The feared collapse in the stock market didn’t happen – and why should it, given that the main index is heavily populated with dollar earners that will benefit from a weaker pound. Meanwhile 10-year Gilts are trading 3bp wider this morning at 1.03% and the long Gilt, at 1.69% is around 3.5bp cheaper than it was at close of business last night. The Gilt curve has steepened from front to back but once again not to any great extent and nothing more than it might have done in the course of an ordinary day’s trading.
Let’s face it, the Conservatives still, mathematically at least, won the election although the uncertainty that this indecisive night has brought is in stark contrast to the situation in France where Young Macron is looking to sweep the elections for the Assemblée Nationale.
What does it all mean for the pending Brexit negotiations, the ostensible reason for May to have gone to the people? Firstly, there is a good chance that it will not be May who will be leading the British side. Corbyn, having lost the election, is being hailed a winner, but May, having won it, of a fashion, is the big loser. Many will now be asking whether the Brexit process can be or at least ought to be halted and reviewed on the basis that the government of the day asked the electorate for a clear mandate to negotiate but then failed to secure it.
More to the point, what will keep May in 10 Downing Street, for the while at least, will be the Scottish conservatives who are instinctive remainers as well as the Democratic Unionists who may be Brexit-orientated but who represent Northern Ireland, which voted pretty solidly to remain.
The Brexit mess has just got a whole lot messier and with the Tories and the DUP only commanding a joint majority of two seats there might be yet another election threatening before long.
That said, as an instinctive proponent of a softer form of Brexit, I am happy to see the rise of DUP in Northern Ireland and the collapse of the SNP in Scotland, which in both cases indicates a less fractious union at home but one that will need to be less dogmatic and more pragmatic.
IN OTHER NEWS
Meanwhile the rest of the world was not asleep. The Comey testimony in front of the Senate intelligence committee was pretty damning for the president and his credibility but it did not, as some had speculated, deliver a smoking gun in terms of judicial interference and US markets closed imperceptibly higher on the back of that observation. The VIX duly traded lower to close at 10.16. The noose of regional isolation closed a bit tighter on Qatar but again oil didn’t care and it traded lower again, albeit only by a few odd cents. In early trade it is a tad firmer at US$45.70 per barrel at the time of writing.
The ECB duly met and left rates and policies unchanged while again trimming expectations for inflation through 2019. While that was largely expected, the euro fell as St Mario, in his post-match briefing, observed that the eurozone still isn’t generating enough inflation, overshadowing improving prospects in economic activity that had previously led to an upgrade in the bank’s growth assessment.
The change in the assessment of risks for the economy sets the scene for the ECB to start a discussion about the timing for the removal of the stimulus, but that is apparently a debate for another day.
Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful weekend. An indecisive election outcome, the British and Irish Lions struggling badly on their tour of New Zealand and a garden badly beaten up by a week of rain and fierce wind. When faced with the possibility of a hung parliament a couple of elections ago, I wrote to The Times wondering that if parliament were to be hung, where the hanging would be taking place and how one might be able gain access as a spectator. Maybe I should dig it out again and resend it. Not a happy time so I shall be packing my bags and catching a flight to mainland Europe on Monday for a few days out. If I can find a way of mastering the miracles of modern technology, I shall be reporting from the field.