September 24, 2019 / 10:57 AM / 23 days ago

Instant View: Markets wary after UK court rejects Johnson parliamentary suspension

LONDON (Reuters) - Markets reacted with caution after Britain’s Supreme Court ruled that Prime Minister Boris Johnson acted unlawfully when he suspended parliament a few weeks before Britain was scheduled to leave the European Union.

The pound briefly gained, then gave up those gains. Gilt yields rose, dragging safe-haven German bond yields DE10YT=RR higher. The blue-chip FTSE 100 .FTSE hit its low for the day, although a JPMorgan index tracking UK stocks .JPDEUKDM that make their revenue at home hit their day highs on the news.

Following are market reactions:

CHRISTOPHER GRAHAM, SENIOR ECONOMIST AT STANDARD CHARTERED IN LONDON

“This is a win for the pro-remain side and suggests it will be harder for the government to push a no-deal Brexit before the end of October. I am not sure how much further sterling can go. Essentially, it means the Speaker can bring back MPs and Lords immediately but what they can do with this time is unclear, they had already passed legislation which requires the PM to request an extension by Oct 19.

“It may not change that much but it’s a loss for the government.

“A general election is no longer an if but when... probably late-November, early-December.”

NEIL MELLOR, SENIOR FX STRATEGIST AT BNY MELLON

“I think the sterling gains will be fleeting. What this means is that Parliament will be recalled, but what they will exactly discuss is not clear and that will be up to the Speaker to set the agenda. Brexit uncertainty combined with political uncertainty is going to keep any big moves in check for the pound. What can be a potential option is the increase in chance of a no-confidence vote in Johnson, but we will have to wait and see.”

KENNETH BROUX, FX STRATEGIST AT SOCIETE GENERALE BASED IN LONDON:

“The pound is flat as a pancake and does not know which way to turn next. Either Boris resigns or (if we believe Corbyn) then new elections are possible if the government loses a motion of no confidence, but that’s the ‘elephant’ trap that Blair talked about for Labour. The Conservatives are doing well in the polls and Boris will not shy away from new elections. I can’t see much upside for GBP if we have new elections. The question is what this would resolve regarding Brexit. If no party wins a majority, then we are stuck with the same question, how do we get the withdrawal agreement through parliament?”

CONSTANTINE FRASER, ANALYST AT TS LOMBARD:

“On the constitutional side, this is enormously important. It’s an extraordinary decision. Basically, the court is saying that there are no executive powers that are not subject to judicial review. It’s a court choosing really to strengthen its own power.

“From the point of view of Brexit, I think markets are right not to over-react and not to see this as a game-changer. I don’t think it changes the fundamentals of the Brexit process.”

PETER DIXON, CHIEF UK ECONOMIST AT COMMERZBANK:

“It’s unprecedented that the courts rule on parliamentary proceedings this way.

“I’m not sure if it’s a good or bad thing from a market perspective. It does mean that we will get more information and insight from parliament but equally opens up the prospect of more uncertainty and friction.

“The intraday spike reflects the surprise of the decision, you see it in bond markets and sterling. Ultimately, it’s [the decision] not going to have a lasting effect; we move on to the next chapter in the story.”

Reporting by Sujata Rao, Saikat Chatterjee, Yoruk Bahceli, Danilo Masoni, Marc Jones; writing by Larry King; Editing by Kevin Liffey

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