… Boris Johnson. Although the final opinion polls had suggested that a hung parliament was still possible, the UK’s general election produced a resounding Conservative victory.
With a slew of traditional Labour seats in the north of England returning Conservative MPs, Mr Johnson will now be able to command a hefty majority in the House of Commons. Other party leaders fared less well. Jeremy Corbyn announced that he would not lead the Labour Party into the next election after it suffered its worst performance since 1935. Jo Swinson, the leader of the Liberal Democrats, lost her seat. The Scottish Nationalist Party (SNP) enjoyed a much better night, however, winning 48 of Scotland’s 59 seats. Turnout at 67.3% was higher than expected, given the December timing.
So what does all this mean? First of all, the UK will leave the European Union by the end of January. Now, however, the Conservatives face the daunting task of negotiating the trade arrangements that will follow the transition period. Mr Johnson has pledged to negotiate a deal by the end of 2020, although the size of his new majority may give him the necessary leeway to row back on this commitment.
Secondly, the dominance of the Conservatives in England (outside major cities) and the SNP in Scotland increases the tension over the question of a second Scottish independence referendum. The SNP claims a mandate for a new poll, but a referendum requires the approval of the UK Parliament. Nevertheless, Westminster may not be able to resist the demands of Holyrood indefinitely.
Sterling stuff
The tightening polls led to some volatility in sterling over the week. The pound rallied early on, before dipping sharply when late opinion polls showed a tightening race. But when Thursday’s exit poll pointed to a comfortable Conservative majority, the currency soared to its highest level against the euro since July 2016.
The prospect of greater political stability also boosted the UK stock market. Despite the negative effects of a stronger pound on those of its constituents with significant overseas earnings, the FTSE 100 was up 0.5% by Thursday’s close, and the more domestically oriented FTSE 250 rallied strongly on the result.
In contrast to the optimism in the markets, economic data was sobering. Figures released by the Office for National Statistics showed that the UK economy stalled in October. Industrial production was anaemic over the month, growing by just 0.1% rather than the 0.2% that had been expected. Manufacturing did grow by 0.2%, however. October’s growth figures brought the three-month rolling average down to zero.
Deal a-doing?
In the US, the S&P 500 was little changed over the first three days of the week, but then surged to a new record high, ending up 0.7% by Thursday’s close. Investors found fresh heart after President Trump tweeted that a “BIG” trade deal with China was “VERY close”. Rumours that 'phase one' is agreed, averting the imposition of fresh tariffs scheduled for Sunday and rolling back others, have allayed investors’ concerns, prompting a risk-on response in markets. If China signs, it will buy more American agricultural products, worth $50 billion, in 2020.
A more concrete development was the signing of the revised trade agreement between the US, Canada and Mexico. The deal still needs to be approved by the US House of Representatives and Senate, however. A more retrograde step was the blocking by the US of new appointments to the World Trade Organisation’s Appellate Body (AB). With two of the AB’s three judges now retired, it is now effectively paralysed.
Wise owl?
The FTSE World Europe ex UK index closed Thursday up 0.2% for the first four days of the week. Along with the renewed optimism about US-China trade, European investors were encouraged by comments from Christine Lagarde, the new president of the European Central Bank. Ms Lagarde said that she would not be a hawk or a dove on monetary policy, but rather an owl – “associated with a little bit of wisdom”.
European companies were prominent among the purchasers in the ongoing buying bonanza. France’s Sanofi agreed to buy Synthorx, a US cancer-focused biotech firm, for $2.5 billion – three times its market value. Meanwhile, Switzerland’s Roche extended the deadline for its $4.3 billion offer for gene-therapy specialist Spark Therapeutics.
Beyond the healthcare sector, the Dutch-based tech company Prosus upped its cash bid for Just Eat to $6.5 billion – 5% higher than the offer tabled by Takeway.com. In Asia, Germany’s Delivery Hero agreed to buy South Korea’s Woowa food-delivery app for $4 billion.
And finally …
Fancy a mince pie? A slice of stilton? Some port with it? Or just (another) glass of Prosecco?
Yes, it’s that time of year when the fare is more fattening and the calories accumulate – perhaps set against the vague promise of a January spent in penitence, abstinence and the gym.
But fear not! Researchers at the University of Loughborough have proposed a new system to keep waistlines in check. Rather than simply list the number of calories a food item contains, packaging could set out the amount of exercise required to burn those calories off.
Would this work? The idea is that it would help consumers to choose less calorific options – because a three-mile walk is easier to understand than 300 calories.
But when it’s cold and dark outside, it might be all too easy to put that walk off until tomorrow, next week or the New Year. In the meantime, pass the mince pies!