More Brexit chaos for markets after U.K. PM moves to suspend Parliament: Don Pittis

If U.K. Prime Minister Boris Johnson's latest plan to shut down Parliament actually resolved the never-ending story that is Brexit, even some of those who oppose his plans to pull out of Europe might breathe a sigh of relief.

Certainly British media friends have told me they are heartily sick of an issue that they wish would just go away. The question is at what cost.

Markets notoriously hate uncertainty, and yesterday they indicated they are more, not less, concerned that Brexit chaos will continue.

Although it recovered some of its losses later in the day, the British pound plunged by one per cent on the announcement that Johnson would ask the Queen to prorogue Parliament. The Queen did as her PM requested, and the break will be longer than usual, ending just in advance of Britain's deadline to depart the European Union, with or without a deal.

Perversely, the large stocks in the London market's high-profile FTSE 100 index were stronger as a lower pound made their mostly overseas revenue higher in pounds. The FTSE 250, which includes more domestic companies, declined.

The hope that swift and decisive action would cauterize the suppurating wound that is Brexit appears forlorn.

"The prime minister's decision to suspend Parliament … increases the downside risks to the economy and the pound by decreasing the chances of a further delay to Brexit and increasing the chances of a no-deal Brexit on 31st October," wrote Paul Dales, chief U.K. economist at Capital Economics.

Henry Nicholls/Reuters

Leaving the EU without a deal is a bugaboo even for many who favour Brexit, leading to anxiety about years of trade disruption, the loss of important markets, an unresolved Irish border and new rules for British people who want to travel or do business on the continent. 

Instead of calming things down, the storm of outrage over Johnson's action actually raised the temperature in the hostile divide over whether, or how, Britain would step outside the EU.

The PM's statement that shutting down Parliament, the longest in 400 years, was not Brexit-scheming but merely a way to introduce a "very exciting agenda" seems to have been believed by almost no one.

"We will help the National Health Service, fight violent crime, invest in infrastructure and science and cut the cost of living," wrote Johnson, in a letter to MPs justifying his request to the Queen.

Eye-watering fury

Opposition members and many in the prime minister's own Conservative Party accused him of using the break to bypass Parliament, which a current tally shows would stand solidly against a no-deal Brexit if it were presented for a vote.

The roar of fury against Johnson was eye-watering. 

Parliamentary Speaker John Bercow called it a "constitutional outrage," but there were plenty of stronger comments.

"Following in the steps of other dictators, this is the desperate act of a man who knows Parliament opposes No Deal Brexit but will push it through regardless of parliamentary sovereignty," tweeted Naomi Long, Northern Irish member of the European Parliament.

"Everyone can see this for what it is, a grubby attempt to force No Deal," tweeted former Conservative cabinet minister Justine Greening.

There were calls for a new round of street demonstrations and calls, by MPs no less, for a public occupation of Parliament. 

Ostensibly, Parliament will still have a chance to block Johnson's move. But by sending MPs home early, the British PM has disrupted cross-party plans to pass a law blocking a no-deal Brexit and has limited possible strategies to thwart him. Some Brexit watchers say the move may strengthen his hand in negotiations with Europe.

One suggestion is that forcing the cross-party alliance against him into a no-confidence vote would frighten off those, especially Conservatives, worried about what would happen in a resulting election.

At the very least the surprising move will put his opponents on the back foot. Apparently, Johnson's top adviser is a student of Sun Tzu's The Art of War and according to London's Financial Times, it fits with the master's suggestion to "confuse and demoralize the enemy with disorienting moves, feints, bluffs."

With so much at stake for markets, economic commentators are weighing in to imagine what could happen next. A flow chart from ING Economics shows a worrying chain of possible outcomes, but adds the proviso "list of scenarios is not exhaustive."

Henry Nicholls/Reuters

"The U.K. government's decision to suspend Parliament means the Brexit process is likely to go down to the wire," says the ING's evaluation of the new Johnson plan. "'No deal' has become more likely, although we still narrowly think a no-confidence vote, which leads to an Article 50 extension and early elections, remains the most probable scenario."

Whatever happens, most British commentators see years of political and economic uncertainty ahead. Some market analysts are suggesting getting out of U.K. investments until Brexit is resolved.

Johnson's latest move has received a vote of confidence from U.S. President Donald Trump, a fan of heavy-handed leaders.

But as fear of a global recession grows, Britain finds itself adding to the confusion, no closer to knowing how a prolonged and destabilizing period of Brexit chaos may finally end.

Follow Don on Twitter @don_pittis