Good morning,

From a market perspective, yesterday’s busy data calendar turned out to be a bit of a non-event. Fed minutes didn’t really show too much and even though there was a hint of frustration that the central bank didn’t offer more supportive signals about what might be next for their monetary policy, nobody really threw any toys out of the pram – presumably because they’re of the view that the grownups will soon be in charge and deliver them what they want, which is to say another massive round of fiscal stimulus.
On the note of stimulus; it will be interesting to see what format it takes under a Biden presidency and whether he’d be able to get something passed that would be a much larger payment, or recurring series of payments, to individuals, rather than funds going to businesses. It wouldn’t be a huge departure from what’s gone before it, but would definitely have a more immediate impact on consumer spending, which could provide a quicker cushion to a falling economy.

Rishi Sunak’s Autumn Statement was the other big news of the day, though  most of it had already been reported, so making it official in the Commons was really just firing the starter gun for critics of his plans to come out in force. The most contentious of issues seem to be the public sector pay freeze and the reduction in international aid from 0.7% to 0.5%. Mr Sunak’s delivery in the Commons also spoke of this only being the beginning of the economic shock and as such his borrowing forecast of £394bn by the end of this year might even be a little on the low side – amazing as that is 20% of GDP! He’s not yet ready to start talking about tax rises though and that’s something that the opposition agrees on too – Their sights are on how wasteful the government is being, as a report out yesterday showed that the government’s lack of preparation and organisation over PPE has cost the tax payer £10bn more than it should have done.

One thing that barely got a mention from the Chancellor was Brexit, which feels a lot like avoiding the elephant in the room. The latest is that the EU are accusing the UK of playing with the countdown clock and Ursula von der Leyen has said “these are decisive days for our negotiations with the UK but frankly I cannot tell you today if in the end there will be a deal”. Meanwhile Michael Gove has pre-emptively laid the blame for border delays at the EU’s door, saying that their “rules are rules” approach to checking goods, in the same way they do for all other third countries, will be the reason for holdups, whereas the UK has decided to suspend border checks for six months (because we haven’t yet got the technology or the systems in place?)

In the tech world: The EU is warning tech companies about the consequences of breaking rules that are being proposed, saying that they might even go so far as to break up the European operating entities of tech giants if there were to be persistent rule breaking. The Digital Services Act and Digital Markets Act aren’t likely to come into law for a year or two, but could hail a big shake up in the regulatory approach, which has so far been conspicuously absent.

China is finding the financing costs for state companies rising, after a series of defaults on debt by stated owned enterprises. Despite China seemingly having a much better time of recovery than anyone else, the debt servicing costs have jumped by 1% and is a reflection of the market over concerns that even though the company is state owned, it’s no longer a risk free trade. This is important because half of China’s total corporate debt is in state owned enterprises and if they’re suffering then the other companies will be too – and that total debt pile is said to be $4trillion. The question now is whether that rise in yields is enough to accurately reflect the risk or whether it needs to go higher still – and if it does then that will have a massive impact on companies being able to afford to service the debt they’ve got, which leads to a self-fulfilling prophecy.

Looking at today: We’ll hear from Matt Hancock later on what areas are in what tiers, come next week and it seems likely that most will go back into a tier two or three – London being touted as tier two and nobody is likely to be in tier one – and there will be a review on the 16th of the month. The data calendar is pretty light and it’s a public holiday in the US, so markets are closed. As such it’s likely to be a pretty quiet day all round.

Happy Thanksgiving


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