Financial markets are remarkably myopic. Faced with a choice between paying attention to the risk of nuclear war next year and the prospect of the US non-farm payroll number, out at, say, 1.30 tomorrow, the non-farm payroll number wins hands down every time.

This is not altogether daft. How should you cope with things utterly uncertain? The markets do it either by ignoring them altogether or by adopting a conventional assumption – usually the comfortable continuation of the status quo.

History tells us that most of the time things do indeed continue much as they were before. Yet sometimes big things happen. The US stock market did crash in 1929; the Second World War did break out in 1939; the Soviet Union did break up in 1991; there was a financial crisis in 2008; and the UK did vote to leave the EU in June of this year.

It should not come as a surprise that the markets barely reacted to the result of the referendum on Mr Renzi’s proposed constitutional reforms for Italy and his subsequent resignation. After all, even the opinion polls called this result correctly and the financial markets foresaw it more clearly.

That does not mean, though, that they are right to be sanguine. The prospect of an Italian euro exit is now much closer. Barring a miracle, the best that can be hoped for the Italian economy is that it will stagger on with minimal growth and continued high levels of unemployment. But if it were to suffer a serious shock, deriving from either the domestic banking sector or the world economy, then the country would be plunged back into recession.

David Fuller's view

I commend the rest of Roger Bootle’s column to you for it contains some bold but also credible forecasts.

A quick, hard Brexit, or a long, gradual negotiation with the EU? 

Instinctively, I have always felt the former was more logical, even though it may feel like a gamble and alarm some important corporations, from UK banks to Japanese automobile manufacturers.  A quick exit from the EU seems cleaner and enables the UK to commence the more important challenge of reopening free trade links with former Commonwealth allies, in addition to leading economies elsewhere, starting with China and India.  

Nevertheless, PM May’s government cannot really plan its next strategy until it knows the Supreme Court’s decision, not least regarding Scotland, Wales and Northern Ireland.  Chancellor Hammond is now advocating a soft Brexit over four years.  Quoted in The Telegraph today he said: “There is an emerging view among businesses, among regulators and among thoughtful politicians that having a longer period to manage the adjustment between where we are now as full members of the EU and where we get to in the future would be generally helpful, would tend towards a smoother transition and would run less risks of disruption.”

I am troubled by the wording above and this sounds to me like a recipe for endless uncertainty, which would only frustrate the majority who voted for Brexit, while also encouraging Remainers that it might never happen.  It would surely be more expensive, while also signalling to our business contacts, current and pending, that the UK has a weak government. 

The best argument for waiting, although I do not agree with it, is that the EU might collapse within the next four years, avoiding the problem of a difficult and divisive separation.  The EU will surely be different four years from today but I think the UK economy would be weaker and look rudderless for the delay. 

Here is a PDF of Roger Bootle’s column.