The Monday note - 17 December 2018

• The FTSE 100 closed on Friday at 6,845.2 – 10.5% lower than at the start of 2018. Worries about the fall-out from Brexit saw retailing and housebuilding shares hit last week. The ten year Gilt yield stood at 1.25%. 
• The Netherlands has surpassed Britain as Europe’s number one private equity market by value. Deal value in the UK dropped by a third to €21.4 billion across 187 deals in the year to 7th December.
• High-yield bonds in the US are struggling to attract investors, amid rising interest rates and continued market volatility. An index tracking the leveraged loan market has declined 3% since October according to S&P and LSTA.
• Downing Street aides denied media reports they have begun planning for a second referendum on Brexit. Political commentators noted the denials seemed to be carefully worded. 

Chief Economist comments: 

Last week’s politics at Westminster can be summed up in two words: Banana Republic. Can order return? I think so, as MPs have had a weekend back with their constituents and local party chairmen, and I doubt they heard any positive comments. There is also growing talk of putting all the main Brexit options to Parliament as a free vote – deal, no deal, or a second referendum. This sounds like a tempting option, but we will be in uncharted territory if the MPs reject all the choices. Then, the only option would be abandoning Brexit on the grounds of stalemate, something that would get an angry response.