Somewhere in Westminster there is a ring filling up with hats, but it will be short of a bicycle helmet.
Having shared a podium with Boris Johnson following the Brexit verdict Michael Gove, current justice secretary, is now in the running to be leader.
It was quickly described as a blow to Johnson’s designs on Number 10 as, according to folks on Twitter, there would be a ‘stampede’ of support from Johnson to Gove.
Shortly after news of Gove's move, Boris Johnson unexpectedly pulled out of the leadership contest.
Johnson concluded a speech withdrawing as a potential leader saying: "Having consulted colleagues and in view of the circumstances of Parliament, I have concluded that person cannot be me."
This morning Home Secretary Theresa May launched her leadership bid and took a strong ‘Brexit means Brexit’ approach, saying: “The campaign was fought, the vote was held, turnout was high, and the public gave their verdict.
“There must be no attempts to remain inside the EU, no attempts to rejoin it through the back door, and no second referendum.”
Jeremy Hunt was suggested as a possible leadership candidate before he backed May, and the list of other would-be Prime Ministers include Liam Fox and Stephen Crabb.
Deutsche sees Brexit hit on UK bank dividends
Deutsche Bank analyst Kinner Lakhani, in a note, said Brexit will trigger lower-for-longer interest rates, which will impact European banks. Specifically the impact will be felt on their margins which, according to the analyst, remain ‘highly correlated’ to interest rates.
Lakhani predicts further monetary easing from central banks as a result of Brexit. At the same time loan growth will be lower and loan losses will trend upwards, the analyst added.
Dividend forecasts are cut for Lloyds Banking Group Plc (LON:LLOY)and Royal Bank of Scotland Plc (LON:RBS), though Lakhani ‘prefers’ the former over the latter due to “nearer term dividend support and stronger earnings power.”
Deutsche also sees risks for HSBC’s (LON:HSBA) dividend, but, among the international banks it is preferred over Standard Chartered (LON:STAN).
Nordic banks are expected, by Deutsche, to be seen as ‘safer havens’ compared to other European banks.
Focussing back on the UK, Lakhani said: “One thing is clear: political and economic uncertainty is here to stay, and we expect the coming weeks and month will see significant volatility in the share prices of UK financials and those with UK operations.”
British banking stocks were among those hit hardest after the Brexit vote, and despite something of a recovery the likes of Lloyds, RBS and Barclays are still down some 25-30%.
On Thursday, credit rating agency Fitch dealt another blow to Britain’s financial credibility by downgrading UK banks’ Government-guaranteed debt.
Fitch reduced Barclays Bank plc's, Lloyds Bank plc's, and Bradford & Bingley's (B&B) notes issued with the guarantee of the UK sovereign to 'AA' from 'AA+'.
It follows the agency’s move earlier this week to downgrade the UK’s credit rating to ‘AA’ from ‘AA+’ following the outcome of last week’s EU referendum.
FTSE 100 rebounded without a portly chorus
“The fat lady has not even entered the building”. This in a note from City broker finnCap in a note this morning sums up where the market finds itself.
Having seen the FTSE 100 rise back above levels seen last Thursday, before the Brexit verdict came to pass, many may wonder what the fuss was about. But, the nitty-gritty is still someway off and first we wait for the Tory party to pick a leader and Prime Minister.
“Uncertainty will continue until mid-September, when there will be a Conservative leadership election,” finnCap said.
“Expect campaigning and selection based on how the UK can exit the EU and trade-off around free movement versus access to the single market, with the risk being that a bidding war ensues for increasingly undeliverable promises.”
Stock pickers should stay loyal to their small cap holdings, despite Brexit volatility, says Royce, the New York fund house
“Small-caps are obviously sharing in the first wave of selling - and are likely to sustain larger losses at this early stage, consistent with the asset class’s historically higher levels of volatility," say the firm’s co-chief investment officers Chris Clark and Francis Gannon.
“What may potentially shift this short-term pattern is the realization that small-caps as a group derive a far greater percentage of their respective revenues from domestic sources than larger companies. Small-caps carry far less exposure to the global economy.”