Juncker's Shock Appointment Is Actually Good News For Markets

Jean-Claude Juncker, the incoming president of the European Commission, seems to be making an attempt to mend fences with the United Kingdom in naming a British politician to oversee financial services policy in Europe as part of the new commision team. It's a shocking move.

The decision comes after British Prime Minister David Cameron fiercely resisted the selection of Juncker as commission president warning in June that it would push Britain closer to an exit from the E.U. Juncker is seen as a European federalist who would push for closer integration within the region, potentially leaving countries outside of the single currency - like Britain - isolated.

Given the history, his decision to give Jonathan Hill, former leader of the House of Lords, the important financial services job suggests he trying to quash lingering resentment before taking office. The role is seen as particularly critical as tensions rise between officials in London and other regulators in Europe.

Rhetoric between the two sides has been ratcheting up in recent months with Brussels attempting to impose a cap of 100% of salaries - or 200% with shareholder approval - on bonuses paid to bank employees. Britain has so far resisted the move because it's worried that bonus limits could make London less competitive relative to other global financial centers.

Earlier this month, an attempt by Westminster to overturn the cap was met with a cool response from judges at the European Court of Justice. Further noises from the Commission in recent months, which suggest centralizing regulatory oversight of financial institutions and markets, have also been greeted frostily on the British side.

Hill will no doubt find his new role already pockmarked with potential pitfalls when he takes office, but if it marks a deescalation of tensions between Britain and its European counterparts it is likely to be taken as positive by markets.

The last thing Europe needs right now is further instability so British sensitivities look as if they will be appeased, at least for the moment.