A Brexit Delay Until New Year’s Eve Could Spell Trouble for Markets

(Bloomberg) -- A delay in the U.K.’s Brexit process could be setting investors up for a Christmas headache.

An extension until Dec. 31 this year -- a date many European Union governments seem to be coalescing around -- would mean the U.K. leaving at a time when market liquidity was particularly thin, increasing the risk of outsized moves in the pound or other U.K. assets.

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That would be particularly true if the nation has still failed to ratify an exit deal, raising the prospect of last-minute summits or Parliamentary votes over the traditionally quiet Christmas holiday period.

“An exit date in early or mid December would make more sense,” said MUFG analyst Lee Hardman. “I don’t think a no-deal Brexit would be allowed at an illiquid time.”

Last year, U.S. stocks gave an insight into the type of wild swings that can happen during spells of low liquidity, falling more than 2 percent on both Dec. 21 and Christmas Eve, before jumping 5 percent on Dec. 26.

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