Where to start with the UK government…

Our Washington diplomat has got himself in some hot water with Trump after calling his administration ‘inept and dysfunctional’ and suggesting the whole administration might ‘crash and burn’! To be fair, you’d think government email servers would be fairly secure and therefore writing what you think wouldn’t be the end of the world. An investigation has been launched to establish the source of the leak.

Onto the leadership contenders: Boris has clearly been enjoying the sport at the weekend and claiming he’ll make Britain ‘match fit’ for a hard Brexit, but aside from saying he’ll spend his way out of any issues by using the £39bn bill that would otherwise go to the EU, he’s not put any substance to it. Meanwhile Jeremy hunt still lags behind in the Tory opinion polls – a gap that looks insurmountable. As the Independent reports though, the wider public wouldn’t choose either of them to be PM.

Meanwhile the UK economy is barreling towards recession as well as a possible hard Brexit: The FT cites asset manager Fulcrum’s ‘nowcast’ which suggests UK economic activity has fallen to -0.8% from as high as +1.0% in mid-May. The two areas of most decline are in business sector equipment investment and with businesses that stockpiled ahead of March 29th winding down their inventories and not stockpiling for 31st October. The article makes an interesting observation that despite all this, unemployment is at record lows… they put this down to businesses deciding that it’s easier to unwind unnecessary hires than it is to pause big cap-ex projects – the downside to this is two fold; hiring more people doesn’t make a more efficient economy and if there is no-deal Brexit, expect those unemployment numbers to jump quickly.

Before we move away from the Brexit mess, spare a thought for Mark Carney: Bloomberg reports that the BoE governor is at loggerheads with the market, who are pricing in a rate cut in the event of a disorderly Brexit. however, because the government’s stated policy isn’t a hard Brexit the BoE can’t apply that to their forecasts, as such the market is thinking one way and the rate setters the other. This one is worth a read.


Deutsche bank have confirmed what the market was thinking: they’re set to cut up to 18,000 jobs in a massive structural overhaul that is going to cost as much as €7.4bn in the short term. The move is going to see a large retreat from it’s investment banking business as well as equities trading and fixed income – as the BBC point out, this is all well and good, but unlike Barclays of 10 years ago, they haven’t got a massive retail business to fall back on.

In Greece – election results are in and Alex Tsipras is out as PM. His party lost  to ‘New Democracy’ who led on a campaign of frustration at the pace of change following the bailouts. Prime Minister elect Kyriakos Mitsotakis has pledged tax cuts and to get back to the negotiating table with Greece’s creditors to try and get a better deal on the money it owes – a very divisive subject that was stone walled by the troika back in 2016.

In Turkey, president Erdogan has done something Trump has been dreaming about; sacked the head of the central bank for not cutting interest rates! The move has seen the Lira weaken off, partly as a result of the central bank now lacking credibility, but also because the successor is inevitably going to be someone that will be ok with easier monetary policy.

Trump has had another go at jawboning the market lower by saying “the most difficult problem is not our competitors, it’s the Federal Reserve”. The tweet on Friday had limited market impact because it was a Friday night on a holiday weekend. Strong unemployment data from the US last week has tempered expectations for a Fed rate cut this month, but Jerome Powell might be swayed into action as Trump taking direct intervention action via the Treasury might be even more destabilising.

This week is another data-heavy week, so we could see a lot of adjustments as markets try and work out what good or bad numbers mean for interest rates. We’ll also be hearing more about the Iran situation, as they’ve now gone over their uranium thresholds and Europe aren’t doing much to bring everyone to the table.

Have a great week


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