As the new British prime minister showed the EU a tough stance of no-deal Brexit, the pound fell to a 28-month low against the dollar.
htmlOn the 229th, British Prime Minister Johnson said that the "Brexit Agreement is dead" and warned that the UK will leave the EU without a deal on October 31 unless the EU renegotiates. At the same time, the new cabinet has been shouting to the outside world that the government is operating under the "assumption" of "no-deal Brexit", and the goal is to "use all methods" to ensure that the UK "Brexit" by the end of October. Faced with Johnson's tough stance, EU leaders did not "buy" and still refused to renegotiate on the "Brexit" agreement.market bets on uncertainty about the progress of Brexit , with the pound falling to its lowest point in 28 months against the US dollar, and the yield on the 10-year treasury bond also fell to a new low since August 2016, at 0.45%. The UK stock market rose 1.82% in response to expectations of currency depreciation and currency interest rate cuts.
At present, various market analysis generally focuses on the impact of Brexit on the UK itself. However, it is probably a greater impact within the EU and the euro. Because in the current distribution of sovereign bonds assets in the global distribution, except for the "Five Hawkeye Nations" (UK, the United States, Canada, Australia, and New Zealand ), they are all in a negative return situation to varying degrees. Negative return assets within the EU are rising rapidly, while the scale of refinancing is shrinking significantly, and the prospects are not good.
In particular, the EU locomotive - Germany's manufacturing PMI has been below the 50-float line for seven consecutive months. The German economy has further "stalled" and the further spread of negative income assets has made it more difficult to implement the next euro zone fiscal policy, and the imbalance and vulnerability within the euro zone will be further intensified. At this juncture, the hard Brexit of the UK on October 31 will undoubtedly become the "head blow" of the euro zone. The accelerated differences and divisions within the euro zone may cause the value of the euro to further weaken compared with the US dollar.
"Brexit Agreement is Dead", the new prime minister's number one task
On July 24, Johnson, 55, officially took office as British Prime Minister. After taking office, he continued his tough attitude towards the "Brexit" issue during the campaign.
In his first speech after taking office as prime minister, Johnson said that the UK will definitely complete the "Brexit" before the deadline on October 31 this year, and called on the public to see the opportunities brought by "Brexit" to the UK. He said he believed that the UK could reach a new and better "Brexit" agreement with the EU, but the UK would also prepare for a "no-deal Brexit."
On the afternoon of July 24, the new British Prime Minister Johnson quickly "smelled" more than half of the members of the former Prime Minister Theresa May's cabinet within a few hours after taking office. In the new cabinet he formed, all the key six key positions were held by "Brexit" hardliners, so that the new cabinet was called the "wartime cabinet" by the media, and its goal was to "use all methods" to ensure that the UK "Brexit" by the end of October.
Subsequently, Johnson and several key cabinet ministers "divided their troops into two groups". Through visits to Scotland and speaking in major media, they won support for "hard Brexit", and quickly launched an offensive to Brussels to show their toughness. However, 27 EU member states publicly and privately stated that the Brexit agreement, including the safeguards, is not used to bargain, and the confrontation is strong.
As Johnson stressed that the UK must "Brexit" by October 31, there is no "but" or "if". Now that the deadline is only more than 90 days left, the British Parliament has entered the summer recess period and will not be restarted until September 3. This made Johnson reaching a new "Brexit" agreement with the EU before the end of October and being approved by the British Parliament a "impossible task", and "no-deal Brexit" became a real risk.
On July 28, British Cabinet Office Secretary Goff posted a post in the " Sunday Times " that the government is operating under the "assumption" of "no agreement Brexit". Goff believes that because the EU still disagrees to remove the "backup arrangement" from the "Brexit" agreement, this "assumption" is likely to become a reality.
On July 29, Chancellor Javid said in an interview with the Sunday Telegraph that the British government will allocate budgets to promote British companies and the public, ensuring that all parties are prepared for a "no-deal Brexit." Home Secretary Patel told Daily Mail that she would stop the EU's right to enter the UK in civil liberties, while ensuring the introduction of scientific research and high-skilled talents needed by the UK. In addition, British Foreign Secretary Raab told the BBC on Monday that the UK is accelerating preparations for a "no-deal Brexit."
Obviously, for the current British cabinet, the goal is very clear, that is, to use all means to leave the EU. In fact, judging from Johnson's political career, Brexit has always been a must-have option, and he has always been very skeptical about the EU. In 2016, he opposed the then Prime Minister David Cameron and played a leading role in the referendum in support of "Brexit".
Johnson once served as Foreign Minister in Theresa May's cabinet, but he resigned because May's "Brexit" agreement with the EU was just "Brexit in the name", so he resigned. During his campaign for Conservative Party leader, he insisted that Britain should prepare for Brussels for a "no-deal Brexit" and shouted the slogan "No matter what, try your best." It was this firm position that helped Johnson ascend to the throne of prime minister.
pound fell to its lowest level in 28 months, and the UK stock market rose 1.82%
As Johnson government strengthened the remarks on Brexit, and EU leaders did not "buy" Johnson's tough stance and still refused to renegotiate the "Brexit" agreement.
faces this uncertainty and market panic has risen. On the evening of the 29th, the pound fell to its lowest point in 28 months against the US dollar, with the pound falling 1.1% to US$1.2242 and 1.1004 euros. On the morning of the 30th, the pound continued to decline against the US dollar, with the decline widening to 0.4% to 1.21623.
At the same time, the yield on the UK 10-year Treasury bond also fell to a new low since August 2016, at 0.45%. Earlier, on July 3, the UK's 10-year Treasury bond yield fell to 0.69%, lower than the central bank's benchmark interest rate of 0.75%.
Judging from the UK bond yield curve, the yields for each period have been continuously declining in the past year. The tension in hard Brexit situation has exacerbated the risks of domestic economic growth in the UK, causing traders to bet on the Bank of England to continue to lower interest rates in the currency market.
compared with the sluggish bond market and exchange rate, the UK stock market performed well. On July 29, local time, the FTSE 100 index in London, England rose 137.55 points, an increase of 1.82%.
Hard Brexit will hit the EU hard, and the euro faces a major test. There is no doubt that many investors are worried about the UK's no-deal Brexit, which pushes the UK economy into a recession, disrupts financial markets, and weakens London's position as an international financial center. However, from a larger perspective, the economic impact of no-deal Brexit on the eurozone and Germany is even more intense.
Because, compared with UK assets, euro zone assets have completely collapsed. Judging from the global distribution of negative rate of return assets, the euro zone has the fastest rise and the deterioration is the most obvious. Except for the five countries of the "Hawkeye Alliance" (UK, the United States, Canada, Australia, and New Zealand), they are basically in a negative interest rate situation. The most prominent one is Swiss . Sovereign bonds of almost all maturities have fallen into negative interest rates, and even 50-year sovereign debts have fallen into negative interest rates, which is shocking.
According to the latest statistics, in the first half of 2019, the European refinancing market was only 36.5 billion euros, a year-on-year decrease of 28%. At the same time, European corporate bonds are entering an era of larger negative interest rates. The latest statistics show that the scale of assets with a credit yield below zero in Europe has reached 825 billion euros, and nearly 40% of the euro zone's high-rated bonds have negative returns.
contributed the most to negative asset returns in the euro zone, and the United Kingdom is Germany's largest automobile exporter.Due to the sluggish automobile consumption in major automobile consumption countries such as China, the United Kingdom, and the United States, Germany's export orders are declining at an accelerated decline, and Germany, the world's largest trade surplus, is facing greater difficulties. The performance reports of some manufacturing companies recently released by
also reflect the severe reality faced by German manufacturing. For example, Daimler's net profit in the first half of the year fell by 78% year-on-year, and its Mercedes-Benz-branded passenger cars global sales and profits both fell; chemical giant BASF's operating profit in the first half of the year shrank by 45% year-on-year, while lowering its annual sales and profit expectations.
. The latest data from market research firm IHS Markit showed that Germany's manufacturing PMI fell to an 84-month low in July, and was below the 50-float line for the seventh consecutive month. As manufacturing worsens further, the risk of recession in the eurozone's largest economy increases.
Obviously, the German economy has further "stalled" and the further spread of negative income assets has made it more difficult to implement the next euro zone fiscal policy, and the imbalance and vulnerability within the euro zone will be further intensified. At this juncture, the hard Brexit on October 31 will undoubtedly become the "head-slap" of the euro zone, accelerating differences and divisions within the euro zone, and may further weaken the value of the euro compared to the dollar.
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