J.P.Morgan: Brexit: The Talks Go On, And We Still Expect A Deal

J.P.Morgan note that "although both the UK and EU sides continue to emphasize that significant differences remain, we take it as a positive sign that the discussion appears to be moving beyond simple leitmotifs of "sovereignty" into questions of practical design for 'managed divergence'. Our fear was that by today the rhetoric on both sides would have ramped up while negotiators continued to make no progress, and hence any continuation of the talks would have been purely for the sake of appearance rather than a genuine attempt to seek a compromise. While there is plenty of rhetoric on both sides, the area of disagreement seems narrow and the sides are reported to be engaging with it creatively. Although the issue of fishing is also not settled, there are also reports that creative solutions (involving compensation to fishing communities who may lose out amid quota reallocation) are being discussed in that space. We continue to think a deal is more likely than not, and put the odds at 60-40 in favor of a deal, even if getting there is proving to be at least as difficult as we always thought it would. That is despite the fact that senior officials on both sides have stated their view that no-deal appears the most likely outturn over the last couple of days: each side appears to take the view that demonstrating their readiness to go through with "no-deal" will generate concessions from the other."