Trump says new British Prime Minister Johnson 'will be great'

WASHINGTON (Reuters) – U.S. President Donald Trump congratulated Boris Johnson, who was elected leader of Britain’s governing Conservative Party and the next prime minister of the United Kingdom earlier on Tuesday.

“He will be great!” Trump tweeted.

Congratulations to Boris Johnson on becoming the new Prime Minister of the United Kingdom. He will be great!

— Donald J. Trump (@realDonaldTrump) July 23, 2019

His victory catapults the United Kingdom towards a Brexit showdown with the EU and towards a constitutional crisis at home, as British lawmakers have vowed to bring down any government that tries to leave the bloc without a divorce deal.

Johnson, the face of the 2016 Brexit referendum, won the votes of 92,153 members of the Conservative party, to 46,656 for his rival, Foreign Secretary Jeremy Hunt.

May will leave office on Wednesday after going to Buckingham Palace to see Queen Elizabeth, who will formally appoint Johnson before he enters Downing Street.

Here is some reaction to the news:

Leigh Himsworth, Portfolio Manager, Fidelity International:

“With Boris Johnson as prime minister, the options facing the UK remain broadly the same: a Withdrawal Agreement similar to that presented by Theresa May; a general election to win a greater majority for the Conservative party or a new referendum.

“The outcome will depend on how confident Boris feels in his own political power. His support of the Leave campaign gives him leverage over the right wing while the bluster may win Labour Leave voters. His personal background may help him retain the Tory heartland. But the key question is whether he will be able to extend his charm over the Channel.

“As far as financial markets are concerned, our eyes remain firmly fixed on sterling, which is reacting, almost by the minute, to the deal/no-deal narrative…

“We may (also) well look back in a few years’ time and regard this period as quite simply one of the best opportunities that we have seen to invest in UK equity markets.”

Paul O’Connor, Head of UK-based Multi-Asset team at Janus Henderson Investors:

“The market response has been fairly muted so far, which is not surprising given how widely anticipated this outcome was. The pervasive uncertainty surrounding Brexit has already taken its toll on UK assets and is now somewhat priced in…

“If we look to betting markets as a guide to consensus expectations, we see a no-deal Brexit is a one-in-three chance, with investor dread of this being somewhat offset by the view that there is still a one-in-four chance that Brexit is canceled…

“With the economy looking like it is one stumble away from recession, a policy response is needed. A 2019 interest rate cut seems increasingly likely and a Johnson fiscal stimulus a near certainty.”

David Zahn, head of global fixed income at Franklin Templeton:

“The main points are this increases our chances of a no deal Brexit, and 10-year Gilts at 70 bps is already pricing that in. The big risk is whether he can he form a government and I think he can…

“It will be a very Brexiteer cabinet and markets are set up for that. We have roughly 100 days until Oct 31 to sort this out, it seems unlikely. We don’t see a chance of a general election as we don’t have time.

“What we have seen from new European head is that nothing will be changed. It seems like we are headed towards a no-deal Brexit.”