Good Morning,

A story in the Telegraph overnight should have had the market moving, but has been largely ignored so far… They’re writing that the government’s ‘central working assumption’ is that there will not be a deal done with the EU ahead of the end of the year and that we’ll be trading with each other on WTO terms thereafter. The latest round of face to face talks end tomorrow and with nothing likely to be agreed upon, it means Boris will also have missed his target of getting something across the line before the end of July. The news of this being the government’s working assumption is disappointing on the one hand, but on the other it means that at least the next few months can be spent preparing as best as we can for whatever disruption this brings.
Additionally, the FT is reporting that the government has given up hope of getting a deal done with the US ahead of the presidential election in November -perhaps no bad thing given who’s in charge.

The long awaited release of a report on Russia’s possibly interference into UK politics was finally over, yesterday. The report highlights that Russia did try and influence the outcome of Scotland’s independence referendum, but was unable to determine if they got involved in the Brexit vote. The committee behind the report has urged the UK intelligence services to carry out their own investigation into whether or not the Kremlin were involved and publish an unclassified summary of it. This report was fairly damning of Russia and said that they consider the UK “one of its top intelligence targets”. It also talks about London being open for business in welcoming oligarchs and their vast wealth, whilst asking very little questions over the origin of the funds. The report raises as many questions as it answers, its just a shame it took a year for the government to publish it! Reuters has some more detail and the Times is reporting that Boris will hand more powers to security services to stop this happening again – though he’s confident that Russia didn’t interfere in the Brexit referendum.

Clinical trials of the Oxford covid vaccine are going well and early indications are positive that it creates a strong immune response. This has led them to cautiously predict that it could be rolled out by the end of the year. A 10,000 subject strong trial is now underway and there are plans for a larger 30,000 person trial to get underway shortly.
Yesterday’s New York Times Daily podcast was focused on the possible uptake of a vaccine in the US and their public health reporter believes that as many as 50% of Americans wouldn’t want to get vaccinated. They cite issues such as anti-vaccers with a lot of influence, fear over the pace at which it has been developed and therefore the unknown long term side effects and also the concern that Trump would be the one to effectively sign it off as reasons why people wouldn’t volunteer to get it. Creating herd immunity through vaccination would require about an 85% vaccination rate and at 50% would mean that the virus would hang around potentially for years to come.

Trump has changed his tune and held his first covid briefing for three months. The president now recommends the wearing of face masks and taking social distancing measures, saying that doing so is being patriotic. He’s also warned that things are likely to get worse before they get better. His remarks come as the virus continues to grow and Dr Faucci warned senators that 100,000 people per day could become infected if things carried on as they are. The cynic in us thinks this might have as much to do with Trump’s polling numbers as it does public health, which are universally lower than Biden’s by enough margin to lose the election.

In Europe: Getting the bailout package across the line pushed the euro higher across the board. The combination of loans and grants was signed off in conjunction with the first post-Brexit EU budget and lays down a seven year funding plan for the bloc, putting it in a good place for a strong recovery. Getting this across the line was seen as a key test of the Euro project, however it’s not entirely a done deal that funds will be distributed as planned, as countries applying for grants will have to submit detailed recovery plans that will be reviewed by all member states. Additionally, Europe has had to sacrifice a couple of its high ideals to get the deal done, watering down clauses to ‘respect the rule of law’, at the insistence of Poland and Hungary – the latter of which is working towards a dictatorship within EU. Poland also got a break from having to work towards stringent climate change targets – a relief for them as their industrial economy is heavily dependent on coal fired power stations, but a big setback in the EU’s world leading climate change combat agenda.

Looking to today: The data sheets are quite light, but we do get a live Q&A from Christine Lagarde, run by the Washington Post. We’ll also see a lot of US energy inventory data, which will have an impact on the oil market. The last set of numbers showed a much larger than forecast inventory build, which put the brakes on crude’s gains of late.
Lastly, it’s worth keeping an eye on the gold and silver markets, which are close to recent highs. The build in positions could be a pre-emptive flight to safety.

Be well


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