Boris’ honeymoon period has lasted 48 hours and now it’s back to people asking the serious question ‘how are you going to get a deal across the line?’ and expecting more of a serious answer than ‘by ripping up the backstop’. Sadly though that is the plan the new PM brings to the table and something the EU has repeatedly said that it won’t budge on (and reminded Boris just yesterday that this is still the case).

The Times talk about concern in Europe that in the event of a no-deal the UK won’t be back to the EU, cap in hand, asking for a deal. Instead it risks becoming a ‘Brexit cold war’ that could drag on for years. This doesn’t sound like fun at all, but perhaps this sort of concern might be enough to get some more flexibility in the EU’s withdrawal terms – though even if they do flex, what’s to say that parliament would approve it?

Bookies went ‘odds on’ yesterday for a general election before the end of the year, with an implied probability of almost 60% that one could happen. Going by the bookies, the probability of a no-deal Brexit stands at 33% and a delay to Brexit is north of 63% – despite insistence from the PM that we’re going.

There’s a piece in the Spectator that’s perhaps worth a read on how GATT 24 might be used in lieu of a renegotiation of the deal – there’s been plenty of cold water oured on this when Boris brought it up during the leadership debates, but these guys still think it’s an option that avoids both side of the table losing face so maybe have a read!

Boris also has plenty of plans for the domestic agenda – all of which rest pretty heavily on having the money available to be able to implement them – you can read about them here.

The market mover yesterday came from across the Channel: Mario Draghi set the tone for the ECB to take policy action as early as September in a bid to boost European economies. The signals were so clear that Nomura has reittereated their view that Draghi’s departing legacy from the ECB will be a ‘kitchen sink’ stimulus package that includes rate cuts, reserve rate tiering, longer forward guidance and restarting the asset purchase programme!

The Euro weakened off as a result of the plan, but many have said that the ECB trying to stimulate economies is the wrong move as it will leave banks more vulnerable and also anger Trump – because of a weaker euro –  which in turn might up the trade war rhetoric and that could really damage European trade.

Still, Draghi’s intentions to cut look like token gestures compared to Trukey’s efforts yesterday. Their new (and Erdogan approved) central bank chief took more than 4% off the interest rate yesterday and signalled more could come. The market actually took this in its stride for the time being, but will be concerned about what such a cut might do to further fuel Turkey’s 15% inflation problem.

It’s been a big week for US earnings: Tesla lost 14% after an incredibly poor announcement. Amazon’s run over under-promising and over-delivering came to an end as they missed forecasts and their share price slipped slightly. Facebook reported better than forecast revenues, but also agreed to pay $5bn to make some data breach issues go away, which equates to a few weeks of earnings (or a very light slap on the wrist) so that hit them a little.

Today’s data focus is US GDP. European markets will be glad to get out of the heat and into the weekend, so we’re expecting a quiet session to start the day.

Have a great weekend


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