Good morning,

Freight costs to get goods in to the UK are soaring post Brexit, with a rise of almost 700%.  Foreign hauliers are whacking their prices up to cover any possibility that they’ll be delayed on their journey in to the country and also won’t be going back with a lorryload of goods bound for the continent, as the confusion over the new paperwork required to export is leading to a significant reduction in outbound shipments.  The Road Hauliers Association has rightly pointed out that this paperwork issue cuts two ways, and that it’s also firms on the continent that are not being able to export their products to Britain because the processes are too complex and those that understand them are in such high demand that they haven’t got the capacity to be able to help.  This is impacting the consumer already and we’re starting to see supermarket shelves looking emptier than they should be, meaning the consumer isn’t only suffering through lack of choice but also those increased costs are likely to be passed on to the end user.  Freight volumes have been kept artificially low over the New Year, with many firms having stockpiled ahead of Brexit and then stayed clear until things settled down, but this week they’re ramping up, possibly by as much as 40% compared to last week, so here comes the test.

The immediate expected resurgence of the Pound following Brexit didn’t materialise, but Sterling does seem to be moving in the right direction for time being.  The moves don’t look to be corelated to the economic prospects of the UK, but are more attuned to the general eb and flow of broader risk appetite in the market.  We’re not sure whether this theme continues but one other supportive factor that may come to play in the weeks ahead are the negotiations with the EU over financial services regulation.  At the moment there is nothing in the deal that covers financial services and the intention for both sides was to review that within three months.  Yesterday negotiators said that talks will start this week and have set a deadline for the end of March.  The ‘dream’ for many companies in the space would simply be back to the same level of access that we had before, but that would mean at least guaranteeing the same level of regulatory burden as European firms.  If the government are planning on relaxing regulations to make doing business in the UK more attractive, then that would be an unacceptable conflict for Brussels and the likelihood of getting what we once had seems slim.

In other UK news: The government are set to trial longer opening hours for covid vaccination centres.  At the moment they run a twelve hour shift, but there has been criticism around that still leaving twelve hours in a day when people aren’t being vaccinated.  The government have said that the issues with getting the vaccine out faster aren’t due to opening hours but instead due to the supply of the stuff coming into the country.  As of Monday night 2.1 million people had received their first dose and 393,000 of them have also received their second dose.

China is experiencing its worse rise in covid cases in almost six months.  They reported 115 new cases, with the majority clustered near Beijing, a rise from 55 the previous day. China’s new year holiday is set to start on the 11th February, but there are reports that factories could close as early as this Friday in a bid to try and stem the rise in cases.  China will be keen to try and knock this on the head and their early and tough interventions early last year meant that once they got back to work their economy actually grew by about two percent in 2020.
Unrelated to the above, there’s an interesting long read in the FT today entitled “Jack Ma vs Xi Jinping: the future of private business in China”. Jack Ma hasn’t been seen in public since the 26th October, when he gave a speech that infuriated the upper echelons of the ruling communist party and has since led to the launch of all kinds of action against Alibaba, the company Jack Ma founded. It’s worth a read.

Today’s the day that we get to see what the Republican party really thinks of Donald Trump:  At 8pm UK time the House will vote on whether or not to impeach Trump and this time the Republicans haven’t been whipped and can therefore vote freely.  There would need to be at least 17 of them voting for impeachment for this to move any further, but there have been noises from some very senior figures that they think he crossed a line and they may vote with the Democrats. We’re not sure how this plays out, but this will be the first time the US has tried to impeach a president twice and if it goes through the first time one will be impeached post their term, which according to the Washingto Post is unconstitutional, so expect confusion to reign if this does go anywhere.
Trump has had his social media wings clipped even further as YouTube finally got round to suspending his channel for seven days.
The market doesn’t seemed to fussed by all of this and is instead more eager to see what kind of stimulus Joe Biden has in mind, but will have to wait for tomorrow for that announcement. News that it can get its teeth into today includes US inflation data, the Fed’s beige book and more oil inventory data (yesterday’s API inventory numbers showed a large reduction in oil stockpiles and therefore a rise in prices of more than 2%). What we’re seeing now is data start to regain its ability to move markets, having taken a back seat to sentiment over the past nine or ten months – hopefully this trend continues.

Be well.


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