UK to try again for election; US stocks remain near record peaks

Summary:

• December elections look likely for UK

• MPs to vote on new election bill

• GBP edging higher despite uncertainty

• US500 makes new ATH

• Google dips after earnings

Despite yesterday failing a third attempt to call a general election there is a growing feeling that Boris Johnson could be soon set to get his way and send Britons back to the ballot box before the year is out. The chances of a victory in Monday’s vote were always highly improbable given the two-thirds majority needed under the Fixed Term Parliament Act, but this evening there is a very real chance that a bill could pass which would call an election before Christmas - almost certainly in the week commencing Monday December 9th.

Little is straightforward here, as is seemingly always the case with Brexit, with potential amendments such as lowering the voting age to 16 seen by some as possible wrecking tactics. However, with recent reports that Labour will get behind a December election and only a simple majority (>50%) needed then it seems likely that the PM will now get his wish. One possible aspect which could scupper the election hopes is the amendments attached to the bill - with two being proposed. The first would lower the voting age to 16 while the second would grant EU citizens living in the UK the right to vote. If either of these amendments pass then we could well see the government withdraw the bill and the current stalemate will continue.

The initial market reaction to this has been quite curious with the pound actually rising in response to the news. Elections are often seen as bringing heightened uncertainty and therefore negative in the near-term for affected markets, but in this case there is a hope that it will bring an end to the present quandary we find ourselves in. The pound will likely stay fairly well supported unless a no-deal outcome becomes more than marginally possible once more and there is also the hope that a softer version of Brexit than the latest WAB could receive greater support.

The week started with a bang for US indices with the US500 and US100 both chalking up new all-time highs as the markets extended their recent run higher. The former has made another record peak this afternoon but the latter is lagging a little due to a fall in Google which is having a greater impact on the US100 due to its larger weighting in the index. 

On the earnings front, Google parent company Alphabet are the most noteworthy today with the quarterly results coming in a little worse than expected. A steady rise in online advertising sales was overshadowed by increased costs and poor performance in some of their long-held company investments:

• Revenue: $40.5B vs $40.3B exp 

• EPS: $10.12 vs $12.28 exp   

Shares have began lower by around 2% this afternoon and remain around that level on the European close but have still gained approximately 25% this year - comparable to the broader technology market.