What does May’s victory mean for markets?

Quick thing before I start this morning if you fancy having lunch with my colleague Merryn and the FT's Claer Barrett or you know someone who does then put in your bid here before it's too late!

Back to today's business so, yesterday morning, we heard that Theresa May would face a vote of no confidence from her own party.

Yesterday evening, they all went in and voted.

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She had to win by one vote. She got 200, versus 117 against.

In short, no one is a huge fan of May but they have no idea who'd they'd replace her with. Which is how it's been for at least a year.

So what's changed after this latest little political drama?

The best barometer of Brexit sentiment

The pound is the best Brexit barometer at the moment, if you want to know how the markets are feeling or what they are expecting.

UK-listed stocks don't brilliantly reflect the mood. The FTSE 100 derives much more than half of its earnings from overseas, so it typically goes up when the pound goes down. The FTSE 250 is a bit better as it's more domestically focused, but clearly there are a lot of more immediate issues affecting various sectors that have more impact.

Gilts are still seen as a "safe haven", which you have to see as reassuring. If the market starts selling off both gilts when they get nervous, rather than buying them, that suggests you've got a bigger problem.

So what did the pound think of Theresa May's big day yesterday? Not much. It was pretty clear at the start of the day that, barring an upset (and of course, you cannot rule out political surprises these days), it was in the bag for May.

So again, we ask what has changed?

Some people will go on about the margin of victory, which was not very convincing. And she's also said that she won't be standing at the next general election (in 2022), which of course, technically makes her a lame-duck prime minister.

But this is all a red herring, and betrays a certain amount of wishful thinking by those writing about it. May knows she's not anyone's first pick. She's known that for a long time (it became very, very clear at the last general election). But so far she's chosen not to resign, and I can't see that changing now.

What really matters about this vote

So the most significant change is that the prime minister is now immune to all challenges from within her own party for another 12 months. That's a big shift and a not-insignificant victory for her, regardless of the margin.

Conservatives being the Conservatives, chances are they'll suck that up and start to focus a bit more on the task in hand, now that there are no more backroom deals to be done. All the politicking and alliance-building will now focus on who will lead the party come the next general election.

If any of the other parties looked like potential homes for stranded MPs, there might be a risk of resignations or floor crossings. But look around. There is absolutely nowhere for a politically homeless Tory to go. Centrists might once have gone to the LibDems or even (just maybe) New Labour. Not now. Hard Brexiteers might once have considered Ukip. Not today.

So the only way to depose May is for an opposition party (again technically speaking, it doesn't have to be Labour, but any other party wouldn't get the time of day) to call a vote of no confidence in the government.

The opposition can do this as often as they want there is no limit on the number of "no confidence" votes you can call. But clearly, if you don't manage to make it count the first time, then that's not going to work.

If a vote of no confidence is called, the government only has to lose by one vote. At that point, there's a 14-day period in which to form a new government which wins a further act of confidence. If this doesn't happen, a general election has to be called.

However, even with the support of every other party in the house, Labour can't win unless some Tories defect, or the DUP votes with them. That's highly unlikely to happen. So Labour for now would rather hold off until the Brexit deal gets put to the House.

In short, if nothing else, we can now be pretty sure that May will indeed be the one who leads the country into the next stage of Brexit. (I was about to write "the denouement", but it's pretty clear that this is all going to take a while.)

In other words, we have a modicum of added certainty just before the Christmas break.

But only a modicum. Because other than knowing that May's position is slightly more secure, nothing else has changed. The deal on the table is still no more likely to be passed.

There are two main risks there. One is that we reach a point where someone decides that the only way through is to go back to the country in the form of a general election, or a second referendum.

The tricky thing there is who is going to force that through? Realistically it can only be done by either May herself, which currently seems unlikely, or by the opposition, who'd have to pull together the votes to do it.

The second one is that we just end up leaving on 29 March. I've looked at the potential consequences of that in the latest issue of MoneyWeek magazine, out tomorrow. If you're not already a subscriber, I suggest you sign up now you get your first six issues free and it's a good time of year to be getting on top of your finances in any case. Treat yourself to an early Christmas present here.