They say a week is a long time in politics; if that’s the case, then the last set of five days must have felt like an eternity for a beleaguered Theresa May. With Jo Johnson’s resignation as Transport minister still ringing in her ears from the previous week, the Prime Minister pushed ahead with her Brexit agenda as news broke that a draft agreement was in the offing.
With the news that finally there may be some clarity emerging on a divorce deal, Tuesday saw sterling climb to a six-and-half-month high versus the euro, and with an endgame in sight, the more domestically focused FTSE 250 leapt nearly 1%. However, as many have come to expect with Brexit negotiations, little is simple and, although a tense five-hour meeting at No.10 on Wednesday yielded a backing from May’s cabinet, Thursday saw any hope vanish.
The political merry-go-round clicked into full gear during the second half of the week as Dominic Raab, Brexit Secretary and the man put in charge of negotiations with the EU, was first to hand in his notice, citing that he could not “in good conscience support the terms proposed for our deal with the EU.” He was followed out the door by Esther McVey, the Secretary of State for Work and Pensions, soon after. With the Prime Minister’s plans seemingly in tatters, her problems were further compounded by Tory Eurosceptic Jacob Rees-Mogg going on the search for the necessary party signatures to trigger a vote of no confidence in her leadership.
The turmoil in Westminster soon spread to the City punishing domestically focused sectors such as banks and housebuilders. RBS sunk nearly 10% in choppy trading whilst Persimmon, Barratt Developments and Taylor Wimpey all saw 7% wiped from their share price. Sterling plummeted 1.7% against the USD and 1.9% against the euro. Some respite was felt on Friday however, as Theresa May vowed to stay on as leader, and Environmental Secretary, Michael Gove, also ending speculation that he will be the next to go.
Stock market pain was not just confined to the UK this week as international bourses attempted to arrest five straight days of losses. The main culprit was oil, dragging down major benchmarks during the beginning of the week. As fears of oversupply built, prices fell 7% on Tuesday, not helped by Donald Trump’s tweet pressuring OPEC not to cut supply to prop up prices.
On the economic data front, UK retail sales came in well below consensus forecasts showing that the consumer is still reluctant to spend whilst the Brexit cloud looms overhead. The data acted as more bad news for beleaguered high street retailer Debenhams, who had seen its largest ever stock price decline this week. Drapers, the fashion industry magazine, reported that some suppliers have allegedly stopped working with the retailer. Wednesday saw 21% knocked off Debenhams’ share price followed by a further 9% the following day. According to the magazine, some suppliers had cited cuts to Debenhams credit insurance and fears of missed payments.