The three reasons markets have fallen

The markets took a fright today as Theresa May's cabinet - and with it, her Brexit deal - appeared to be falling apart.

Markets are a bit like bookmakers, they reflect the odds of certain outcomes, and three things have just become more likely than they were yesterday. Leaving the EU without a deal, a change of Prime Minister and a general election. All three scare investors.

Here's why:

Leaving the EU without a deal is widely considered bad for the UK economy - at least in the short to medium term - and that is bad for the pound. That hits people's incomes by pushing the price of imported goods and things priced in dollars (like petrol) higher.

Cash-strapped consumers may find it harder to pay their loans, credit cards and mortgages, hence the big fall we have seen this morning in the shares of banks and housebuilders. Persimmon is down over 10% and Lloyds by more than 6%.

The odds of a general election have just gone up and that means the possibility of a Corbyn government must have increased as well. Markets don't like the prospect of that, because of Labour's intention to raise taxes on companies and nationalise large sections of the economy.

As for the day-to-day running of businesses, not a lot has changed this morning, as most companies had little faith that Theresa May's Brexit deal would get through Parliament. That lack of faith seems entirely vindicated by this morning's resignations, which have seen former ministers join the ranks of Labour, the DUP and 40 or so pro-Brexit Conservatives in intending to vote against it.

One minister described the five-hour cabinet meeting to me last night as one of the most surreal experiences of his career. The picture of a briefly triumphant PM standing outside Number 10 last night did indeed feel like a dream this morning.