English Channel Deaths
The tragic news of 27 deaths in the English Channel yesterday has put Anglo-French relations back in the spotlight. There’s blame being attributed to both sides, but whilst the words between PM Johnson and President Macron are conciliatory and around doing more together, the likelihood is that there probably won’t be a step change in the actions being taken. Boris will be pressing for UK personnel to be patrolling French beaches, but that is politically unpalatable for the French, whilst even more money being sent to France will be a difficult one for Boris to justify as the last £56m pledge made very little impact, however the ‘take back control’ message of the PM seems deep-rooted enough that he won’t want to make any structural changes to our asylum/immigration system and that therefore really leaves us back where we started. The boat that capsized yesterday was one of dozens to have launched yesterday, with people risking the crossing in very poor conditions ahead of storms that are set to arrive this weekend and could leave people stranded in make-shift camps in France for months. So far this year more than 30,000 migrants have attempted to make the crossing, around eight thousand have been rescued and the death toll stands at 34.
UK
Boris was in the firing line at PMQ’s yesterday, but was well backed up after the tory whip rallied the troops and packed the seats behind him to show support. The opposition are hanging on to his disastrous speech last week, which has already seen his approval ratings drop to their lowest since he’s been in power. Some in his own party are also saying they’ve had enough, albeit not publicly, but Graham Brady, the chair of the 1922 committee, has received letters of no confidence from Tory MP’s. We don’t know how many, but he’d need to receive more than 50 letters to trigger a leadership contest which at this time seems unlikely to be met. The PM’s party faithful are placing the blame on his team at Number 10, which they believe lacks the experience needed and will be completely underequipped to deal with the inbound challenges of this winter, including energy prices, cost of living, covid and the pressure on the NHS.

The FT has a good run down of the situation…

Germany
Germany has a new chancellor now, finally. Olaf Scholz has been unveiled as the Chancellor after a three way coalition has agreed terms to become the new administration. This now forces the end of the Angela Merkel era and paves the way for a coalition led by a left wing leader to make their mark on Germany, and ergo Europe’s, future. The “traffic light coalition” of the Social Democrats, Greens and Liberals have put climate change and social equality at the top of their agenda, with plans to cease the use of coal by 2030 and gas by 2040 – the former some eight years ahead of previous plans, which is impressive given how much of it they burn today. They intend to increase the minimum wage to €12 per hour, build 400,000 publicly subsidised homes and heating subsidies for low income households. They’re going to get things started with a €1bn bonus payout to healthcare workers too. The ideas are bold and if Germany starts then other European countries may follow (though none have pockets quite as deep) however the biggest issue to tackle is covid and the announcement of the coalition coincided when Germany’s death toll from the virus crossed 100,000. Mr Scholz has promised a crisis management team to be set up immediately, consisting of scientists, virologists, psychologists and sociologists who he hopes can collectively advise on the best way forward. Best laid plans here could be derailed by the coalition itself though; it took 300 negotiators split into 22 groups nearly two months to get the deal between the parties across the line and as much a there is now unity on paper, keeping this in practice with all the challenges that are going to come their way seems a tough ask.
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FOMC
Back to finance and across the pond: The FOMC minutes were released yesterday, and it seems that more fed members are open to increasing the speed of the asset purchase taper than previously telegraphed. The consensus amongst central bankers is that inflation has come in faster and looks more prolonged than they had thought and that a taper that would see asset purchases wind down by June next year should be accelerated to get them over and done with sooner, paving the way for interest rate rises to also come in at a faster pace. The market reaction to the news was very tame, but dollar assets have been gaining in value for the past few weeks on the expectation that something like this was on the way, so if anything the market is ahead of the Fed when it comes to seeing price pressures for what they are – here to stay.

 

Oil
Joe Biden has announced 50 million barrels of oil from the strategic reserves are going to be released in a bid to bring oil prices down. The US will be joined by India, the UK, Japan and South Korea in their efforts, albeit with almost insignificant contributions compared to the US – though even 50 million barrels only equates to 2.5 days’ worth of domestic US consumption, so we can’t see it making much of an impact! The move also risks turning OPEC in the other direction and they might decide to constrain their own supplies, which would far outweigh the temporary increase from the US. The Associated Press has a good rundown and the auction for the first 32 million barrels today with deliveries set to arrive between December and April.

The Associated Press has more…

 

Looking Ahead
It’s Thanksgiving today, so US markets are closed and the rest of the street is likely to be quiet as a result. This will probably also be true of tomorrow as Turkey hangovers and Black Friday keeps traders away from their desks – though anyone who shops on the internet (read: everyone) will have noticed that Black Friday deals, much like Christmas decorations, go up way too early!
Have a great day