Summary:
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Lots of Brexit noise but lack of clarity
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GBP little changed from a week ago
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BP shares gain as Dudley announces date to stand down
Once again the week has been dominated by Brexit-related headlines as PM Boris Johnson has made his move and unveiled his latest plan to reach a new deal with the EU. It’s widely believed that the latest proposals won’t fly as a final solution, but it is no doubt encouraging that they have at least been received and not dismissed out of hand. The latest reports suggest the PM has a week to revise the deal and it looks like Boris will now have to turn to plan B.
The pound is mixed on the week with many traders still awaiting further clarity on the Brexit situation before committing to any long-term positions. Source: xStation
Quite what this is remains unknown but given the initial reaction amongst MPs perhaps the shrewdest move could be to try and bring his latest deal before parliament for a vote. It is far from a given that it would receive the requisite backing to pass, but it should get far closer than May’s attempts with her deal and reports that as many as 30 Labour MPs are willing to support it suggest it could just sneak through. Were it to pass, or even come close, that would back the EU into a corner, with the bloc perhaps having made a rod for its own back by previously claiming that for progress to be made the UK needs to bring a deal that could command parliamentary approval. This would then ramp up the pressure on the bloc to at least cede some ground in negotiations even if they wouldn't accept it in its current guise.
There is a possible path here to a new deal that could be both accepted by parliament and the EU, but on balance in our view the probability of this playing out remains less than 50%. The base case remains that the current impasse isn’t broken and the focus would then turn to how far the PM is willing to push the limits of legality in order to avoid a further extension to the 31st October deadline.
Another CEO steps down as Dudley resigns
If Brexit has been at the forefront of political news this week, the corporate landscape has been dominated by a series of high-profile CEOs amongst UK blue-chips announcing that they will be stepping down. The latest is Bob Dudley, the boss of BP, who is going out on his own terms after what has been a successful tenure at the helm. Similar to David Lewis at Tesco, Dudley took control at a time of crisis - in his case following the Deepwater Horizon disaster and leaves with oil major back in a position of growth. This news has been a long time coming with Dudley repeatedly saying he would retire around his 65th birthday and the market has responded mildly positively to the news that he will vacate the post in February and be replaced by Bernard Looney with the stock higher by around 0.75% at the time of writing.
Shares in BP have moved a little higher today as the news broke but the market remains not far from its lowest level in 18 months around 4.80. The stock has gained 23% since Dudley took control in 2010 - not including substantial dividend payments during that time too. Source: xStation
