Good morning,

The government is going to be tested on one of its first post Brexit decisions on trade tariffs:  The government is being challenged in court by British Sugar PLC over their decision to allow 260,000 tonnes of raw cane sugar into the country on a tariff free basis for 12 months from January 1st.  British Sugar say that this amounts to state aid for Tate and Lyle, because they’re the only ones that refine sugar from cane in the UK and it also breaches the UK-EU Trade and Cooperation Agreement, because the EU exports half a million tonnes of sugar to the UK every year and is now at a competition disadvantage. The government has rejected British Sugar’s argument, but the high court has ruled that the case will be heard, though admits that there are some “formidable obstacles” if the court is to be convinced.  There’s a lot more to this story than we can get in a paragraph and it’s well worth having a read up on, particularly as it could have profound implications for trade agreements and legislation going forward if it were to be won by the claimant. The FT has the detail.

Angela Merkel will meet Boris Johnson today in London, in her last visit to the UK as German Chancellor before she steps down after the summer, having been in her post since 2005 and worked with five different British Prime Ministers over that time! The Times reports that the big negotiation over Brits travelling to Europe if they’ve been double jabbed is likely to have been agreed on ahead of time and that the main outcome of the meeting will be to agree an annual UK-German cabinet session in a bid to reset Anglo-German relations. Germany has a similar agreement with France, but this will be first commitment by the UK to engage with any country at a ministerial level annually.

As Boris tries to improve relations with Europe, the DUP’s new leader Sir Jeffrey Donaldson used his inaugural speech to push for the scrapping of the Northern Ireland protocol “in the weeks ahead”. The UK and EU have agreed a three month extension to grace periods whilst they try and establish a long term working solution, but Mr Donaldson’s view on the subject seems pretty clear, saying “it’s not about the integrity of the EU single market, it’s about punishing the UK because they dared to leave the EU, it’s about using Northern Ireland as a stick to beat the UK with, and that has to stop”.

Briefly back to the European travel piece:  The EU hasn’t yet authorised the AZ vaccine that is manufactured in India, nor does it recognise it as part of their new vaccine passport scheme.  This could mean that up to five million Brits that have had this vaccine as one or both of their jabs could be locked out of European travel for the time being. The batch numbers to look for on your vaccination certificate are 4120Z001, 4120Z002, 4120Z003. The Telegraph has the story.

In the markets: It’s been a quiet week, though the dollar has continued to find more followers and appreciated by more than 2% over the month of June. It was a similar performance for stock markets over the past month, but if you look at them on a quarterly and year-to-date basis, the continued appreciation seems quite staggering:  The S&P is up 8% on the quarter and almost 15% for the year so far. Using history as an indicator (which can be a terrible idea) there hasn’t been a year where markets that had a double digit rise in the first half, which went on to have an overall annual decline, and with the amount of stimulus that Joe Biden is talking about, plus the Fed being able to hold off with any meaningful policy action until next year, there probably isn’t a reason for this year to be all that different.  The FTSE100 is showing more modest gains of ‘just’ 8%, whilst the FTSE250 index does crack double digits at 10.5% YTD. The Dollar’s gains have been to the Pound’s costs though and we do seem to have broken away from the gravitational pull of the 1.40 level for the time being.

Today is the day where this could all change though: Non-Farm Payrolls numbers out today is the number the market has been waiting all week for and it’s another month of great expectations. Estimates are for 700,000 jobs to have been added in the US last month and for the headline unemployment rate to drop to 5.6%. If they show that or better, the market goes into the weekend happy.  If there’s a big miss, then it’s not too clear whether that is a bad thing, or reinforces the recent comments by policy makers that rates are going nowhere and in turn makes the bad news good.

We’ve also heard this morning that Labour has held the seat of Batley and Spen in the by-election, albeit by a margin of just a few hundred votes. Still, a win is a win and this does mean that the pressure is off  Keir Starmer for a little while, following the hammer blows he was given in the wider local elections back in May.

The data focus for the weekend is that of England Vs. Ukraine in Rome: The teams have met seven times previously, with four wins for England, two draws and one loss over those experiences. The bookies have England as clear favourites with 2-5 on, whilst a Ukraine win returns you 9-1.

It’s Coming Home.


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