UK: Osborne stays with positive message as S&P downgrades – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the UK Chancellor Osborne spoke yesterday for the first time since the vote and in an attempt to reassure the markets stated that the UK was as strong as it could be going into the Brexit vote.

Key Quotes

“That’s not quite our take and there was certainly plenty of evidence that the economy had been slowly losing momentum. The UK PMI Composite has been trending lower throughout most of the last year while the 3mth change in employment slowed from 267k in November last year to 55k in April. Yes, the jobs market is tight but the unfavourable momentum indicated the impact of the uncertainty in the run up to the vote. 

There was no real surprise for the markets after S&P lowered the UK’s sovereign rating by two notches to AA yesterday while Fitch lowered its rating by one notch, also to AA. Both had warned as such on Friday. We see little significance for the markets from this. In a world of negative yields with very few AAA rated bonds to choose from, investors may well conclude that Gilts remain an attractive investment.”