The UK and EU are set to meet today to discuss the Northern Ireland protocol. Ahead of the meeting, David Frost has said that the EU needs to drop the threat of legal action and tariffs if they are to find a way forward. The talks won’t be the easiest and there’s a lot of ground to cover ahead of 30th June expiry of the current transition period. The list of points is covered in detail towards the bottom of this Times article, with the key ones being medicines, livestock, processed meat, steel tariffs and supermarket supplies. Both sides will be keen to make progress and we’re hopeful that Joe Biden’s words to each side will be ringing in their ears when they do sit down. If there isn’t progress, then at least we can hope that the negativity doesn’t spill over into the G7.
Rishi Sunak is all up for a global minimum tax rate, but wants a carve out for the city of London and financial services! His concern is that banks with global head quarters in London would be adversely affected – though the likely larger concern is that with banking giants making the bulk of their profits from China, the tax revenue currently paid to the treasury might end up being redistributed to Beijing. The issue will be that if there’s an exception for banks, should there be an exception for tech and if there’s an exception for tech, etc…. The FT has the story, but we’ll be waiting for Rishi to make his case in more detail to see whether it makes sense.
The government have said they have no plans to bring a Commons vote over the reduction in overseas aid, having narrowly avoided a tory rebellion on Monday and the Speaker of the House saying that MP’s should be given a say over the decision to cut spending from 0.7% to 0.5% of income. The house debated the cut yesterday, but the government won’t bring it to a vote, saying that they have every intention of returning to 0.7% once in a position to do so. We’re not sure we’ve heard the end of this yet. Sky News has more.
Joe Biden has walked away from bipartisan talks over an infrastructure deal and now wants to go almost alone in getting at least something over the line. The White House had reduced the cost of their proposed bill by a trillion dollars in a bid to get something universally agreed, whilst Republicans had increased their offer by just $150bn and as such the ‘meeting in the middle’ approach wasn’t something that the president was willing to wait around for. Now his focus will be on delivering a package that gets full Democratic support and is also good enough to woo ten Republican senators, which would give him the votes to get the legislation passed. The market couldn’t have been any less interested in this news if they’d tried, with the S&P and Dow Jones moving just 0.1% in the day.
The only area the Senate can agree on is the ‘US Innovation and Competition Act’. This is the $200bn wide reaching bill designed to counter China’s increasingly competitive global position, which passed the Senate yesterday. The bill is likely to be combined with the EAGLE legislation making its way through the House and provide a very wide-ranging approach to the US becoming less dependent on China in various areas – semi conductor manufacturing, steel production, 5G technology and science and technology R&D. CNN has a concise summary of the various points of the bill.
Chinese factory gate inflation hit its highest level in 13 years last month, according to data out this morning. The measure is the increase in prices of goods leaving Chinese factories, meaning that we’re now seeing the surging price of commodities being passed on from the manufacturer, which will ultimately make its way up the supply chain to the consumer. The 9% rise was the largest seen since 2008 and above analysts’ expectations, though as it is a year-on-year figure and as such there are those ‘base effects’ that make the number look a little more worrying than it possibly is. China is also trying to get on top of the booming commodity market by regulating supply and also kicking retail investors out of buying and holding commodity linked investments, which its hoped will see prices stabilise, if not soften somewhat.
Today’s calendar is pretty light, but there is already more movement in markets than we saw yesterday, with Sterling making some early advances on comments from Andy Haldane on LBC this morning about the Bank of England maybe needing to turn off the monetary policy tap. He’s leaving the Bank this month though, so his opinions won’t carry the weight they used to.
Have a great day.