UK government bonds are the best performing in Europe this morning but the internationally focussed stock market has slipped after a landmark decision by the High Court that delivers a blow to the government’s EU exit talks.

Britain’s benchmark 10-year bond yield has slipped 0.017 percentage points at publication time to 1.14 per cent, while yields on wider European debt are largely up today (yields fall when prices rise).

Elsewhere:

  • The FTSE 100 has slipped 0.4 per cent
  • The domestically focussed FTSE 250 is up 1.5 per cent
  • Sterling has jumped 1.18 per cent against the dollar

The moves come after the High Court said the Conservative government does not have the sole power to trigger Article 50 to start the clock on its EU exit talks without conducting a parliamentary vote.

The decision could throw sand in the wheels of prime minister Theresa May’s plans to trigger the clause before the end of March 2017. The government has said it will appeal the decision.

Mujtaba Rahman at Eurasia Group said the impact of the judgement would depend on the scope it provides parliament.

“We think the government’s broad negotiating aims and timing for the Article 50 negotiations will not be impacted” he said. “It remains highly unlikely that either the Commons or the Lords would vote down Article 50 – as they would be accused of voting against the public’s referendum decision”, adding:

If, however, legislation is required, the picture will look very different. This would entail both the Commons and the Lords to undertake three readings, a report stage and a whole series of amendments from the majority of pro-European MPs that seek to tie May’s negotiating hand regarding the Single Market/migration trade-off. Pro-EU MPs and peers insist they have a right to influence the substance of the negotiations, not merely the process of triggering them.

David Page, senior economist at AXA said the unexpected High Court ruling increases the uncertainty of the whole [[Brexit] process”:

At the extreme, it increases the opportunity for the UK to express “regret” over the vote. Political commentary is discussing the increasing chance of an early election, in 2017.

This still looks like quite a step, with neither the two-thirds majority nor vote of no confidence necessary to change the fixed-term Parliament viable/attractive options for Conservatives and risks of a political split along pro/anti-Brexit lines. But the certainty of the path towards EU exit has diminished a little in the face of this.

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