MSCI Quantifies The Post Brexit Impact On Financial Markets

Optimism or uncertainty? Deal or no-deal? Such have been the Brexit associated questions being asked in the financial markets for the investors to devise their short and long-term strategies. If there’s one thing that the investors and analysts have a consensus on, however, is that the implications for the FTSE 100 index are going to be massive in either case.

According to MSCI, in an event that the United Kingdom (UK) has to depart from the European Union (EU) without a deal, a sharp decline in FTSE 100 can be expected. The index provider (MSCI) has performed an elaborate stress test to quantify the impact on the financial markets in an event of a deal as well as a no-deal Brexit.

The Potential Drop In The Financial Markets Following No-Deal Brexit

The consequences of no-deal Brexit, as per the MSCI report, are going to be rather harsh for the United Kingdom. To begin with, the UK will have to face increasing trade barriers, not only in the form of tariffs, but non-tariff based as well. The immigration policies will have to be redefined while the border disruptions aren’t out of the question either. Such a post-no-deal Brexit scenario will be economically threatening for the United Kingdom.

The MSCI report has further highlighted that there is a good probability for such no-deal Brexit outcomes to already be factored in the FTSE 100 index, however, a further drop of as much as 15% can be anticipated following no-deal Brexit.

The forecast of the MSCI report states that German and U.S financial markets can also be expected to remain under pressure in an event of no-deal Brexit. German equities can exhibit a drop of around 5% while the U.S market will likely fall by as much as 3% following the decision.

On the other hand, the currency pairs aren’t going to receive no-deal Brexit any better either. A 10% decline in GBP/USD and 5% in EUR/USD is in sight if the UK leaves the EU without a deal.

The Potential Hike In The Financial Markets Following A Deal

As evident, in an event of an actionable deal between the two parties, the opposite will immediately be set into action. MSCI has forecasted a 10% gain in FTSE 100 index while the German and U.S equities can be expected to hike by around 6% and 2% respectively. Such an event will also fuel the GBP/USD and EUR/USD pairs which may present a gain of around 8% and 3% respectively.