The DUP have warned the Prime Minister that they’ll take matters into their own hands and unilaterally suspend checks on goods coming into the country if they’re signed up to an “unacceptable” new Brexit deal by Westminster. The new-new leader of the DUP, Sir Jeffrey Donaldson, gave his first interview to the Times yesterday since being elected and said that the DUP weren’t going to implement anything that continues to damage relationships with Britain. Earlier in the week David Frost said that the Northern Ireland protocol needed a complete overhaul, but that has since been rejected by Ursula von der Leyen, who offered to be creative and flexible, but not to go back to the drawing board. Up until now the talks have been between Westminster and Brussels and haven’t included Northern Ireland. This is likely to change now as any deal that gets agreed is going to need the approval of the DUP and they’ve set out seven tests for any agreement to pass before they approve it – which seems like a high bar with little chance of Boris and co. clearing it.
The FT ran a story this morning about the access to medicines in Northern Ireland starting to reduce and the possibility that as many as 2,000 drugs that are made in GB could stop being transported into Northern Ireland once the grace period for medicines regulation ends in December. If nothing else is agreed, the expiry of this transition period would mean that all medicines would need to be licensed separately and undergo safety inspections and other checks – which would involve infrastructure being built and specialist employment, that would likely make it economically unviable. Already manufacturers are withdrawing drugs from the Northern Ireland market on a scale not seen before. The hope is the UK government will come in with at least some financial support for this, but even that can’t be considered a long term solution.
The European Central Bank
The European Central Bank held their monetary policy meeting and press conference yesterday, with the main outcome being a commitment through forward guidance that interest rates will remain low for a long time. They’ve tweaked the guidelines on their mandate to allow them to sit tight on raising rates, even if inflation heads above their 2% target. Their long term outlook on inflation is that it will average 1.4% in 2023, but there will be a peak ahead of then, that they can now look past without falling foul of their own rules. The adjustment didn’t get unanimous agreement and the German and Belgian members of the ECB were concerned that the wording made it appear that they were making too much of a long term commitment to low rates. They’ve made no changes to their asset purchase programmes either, so all in all a pretty dovish outcome for the bloc and the single currency.
Across the Pond: Biden’s infra deal looks to be in sight, after the bipartisan working group managed to find some extra money in the medicine cabinet to pay for it. The plan is to delay a Trump-era change in Medicare that was designed to lower the cost of drugs for US citizens, who currently pay some of the highest medicines cost in the world. The change now means that less money needs to go into Medicare and can therefore be used to fund some of the infrastructure bill – which seems marginally absurd, but there you go.
The White House has expressed disappointment that China have rejected a World Health Organisation plan for a second phase of the probe into the origins of Covid. The plan was for the WHO to audit the labs and research facilities in and around Wuhan, but China have called it “disrespect for common sense and arrogance towards science”. China will support global studies into the origin of the virus, but have said that the visit by the WHO at the start of the year ruled out the possibility that the virus had escaped from a laboratory.
UK COVID Cases
The explosive growth in cases in the UK had got markets worried early in the week, but they seem to have put that behind them as we go into the last trading day. Case numbers in the UK are incredibly high compared to other countries, but so is the amount of tests we conduct compared to other countries – so putting two and two together and coming up with the most reassuring answer, markets have concluded that we’re no more at risk than elsewhere and therefore it’s safe to buy!
Looking to Today
Today’s trading has got off to a strong start already and the FTSE has pushed back above 7,000, having fallen below this level on Monday for the first time since May, with UK retail sales numbers from last month boosted by the football and a splurge in food and drink sales. The S&P could close at another record high if it can find about three quarters of a percent before the closing bell – data that might help it on its way is reasonably light, but there are US service and manufacturing sector PMI numbers that both have high expectations.
Have a great weekend