We got there in the end. After a week of diplomatic toing and froing and more than one trip back to the drawing board, the UK finally reached a historic deal on its EU divorce terms (very) early on Friday morning.
Of course, all this was supposed to be sewn up on Monday. Then, UK Prime Minister Theresa May met Jean-Claude Juncker, the president of the European commission, for a high-profile lunch that many believed would mark the end of phase one of the Brexit negotiations. Having finally agreed the divorce bill (£50 billion, give or take) and the rights of EU citizens, May and co. believed they had found a fancy solution to the thorny issue of the Irish border – “regulatory alignment”. This would see a post-Brexit Northern Ireland remain “aligned” to EU laws, thereby removing the need for a hard border. Dublin liked it. The EU liked it. Mrs May liked it. The trouble was, no-one had thought to run it past the Democratic Unionist Party (DUP), which immediately balked at the idea – killing the deal dead in 20 minutes. This miscommunication was somewhat surprising, given that the DUP are the Tories’ partner in government.
Cue a flurry of intense phone calls between the UK, EU and DUP, as all sides tried to hammer out a deal. In the event – and after a fair bit of compromise – a last-minute agreement was reached: there would be no “hard border” between Northern Ireland and the Republic of Ireland. This promise was deemed sufficient for the talks to now move onto phase two – trade. Oh, and there’s also the little matter of the two-year transition period to iron out. In other words, we’re just getting started.
Not so taxing, after all
For a while, it appeared the Santa Rally – that perennial Yuletide surge in stock prices – had come early this December, with the S&P 500 Index hitting another all-time high on Monday. Under the Christmas tree this year? The prospect of huge (or should that be bigly?) tax cuts in the US. If enacted, the Senate’s tax bill would represent the biggest overhaul of the tax system since good old Ronnie Reagan was in the White House. Republican proposals include slashing corporation tax from 35% to 20%, lowering the top rate for millionaires from 39.6% to 38.5% and reducing the cost of cash repatriations (US companies have around $2.6 trillion stashed overseas). Democrats called bah, humbug!, noting that the bill could add $1 trillion to the deficit and kick an estimated 13 million people off their health insurance by 2017. Markets also cooled on the idea, with the rally fizzling before it really got started. As for the bill, it is now headed to the conference committee for some last-minute horse-trading, with the hopes that it will reach President Trump’s desk by Christmas.
Buckle up!
It was a bumpy week in the markets. After Monday’s tax-fuelled sugar rush, equities were on a bit of a comedown from Tuesday onwards. Tech stocks came under pressure over concerns that the new tax bill would adversely affect the sector. Meanwhile, mining stocks faltered after copper hit a two-month low, while energy shares also slipped as the price of oil dropped to its lowest level in two weeks. As the week drew to a close, however, bargain-hunting traders ‘bought the dip’, driving equities back into positive territory. Tech stocks also made a triumphant comeback, with Alphabet and Facebook leading the charge. Meanwhile, Bitcoin continued its rocket-propelled rise, crashing through the $16,000 mark on Thursday. The cryptocurrency is now up over 50% for the month. What could possibly go wrong?
A week of high drama, then, that ultimately amounted to not that much – the S&P 500 and FTSE 100 indices were relatively flat (-0.2% and 0.3% respectively), while the FTSE Europe (ex UK) index was up 0.9%.
And finally…
Omaha Police Department held a retirement party with a difference this week – the bash was for a horse. Blaze, the 18-year-old nag in question, had served with the ‘boys in blue’ for over three years, but an injury meant it was time for pastures new. Horse-pitality at the do included a cake made out of hay, carrots and apples and an entry into Horse of the Year (although there was no stable-tennis). Blaze will now live out the rest of his days on a farm in Ohio. His parting gift? A carriage clock, of course.
