We’ll kick off with Brexit and Boris saying that the 15th October European Council Meeting is going to be the deadline to get a deal done. He’s echoing the words of lead negotiator David Frost, who wrote in the Mail On Sunday that Britain will be leaving the EU at the end of the year, come what may. According to Dominic Raab, speaking with Andrew Marr yesterday, the only two sticking points are fisheries and state aid – on the former, the EU want full access to UK waters in return for full and free trade for UK fisheries with the bloc. To the latter, the EU are concerned that without similar legislation in place, the UK can unfairly subsidise industries, if it’s in our interests to do so. The posturing comes ahead of a week of negotiations, which start today in London.
The FT has a piece on the UK’s planned legislation to over ride certain parts of the withdrawal agreement, that could mean the Northern Ireland border arrangements are put at risk. The UK Internal Market Bill is apparently being put through to make trade between UK nations seamless, but has clauses within it that undermine some of the agreements made with the EU that allow there to be no physical border on the island of Ireland. There’s also a finance bill that’s set to go through that would conflict with agreements on tariff payments. This legislation is to be published on Wednesday, right in the middle of the talks, which is no coincidence, so let’s hope the government knows what they’re doing!
The Times are reporting that Rishi Sunak has told Boris that he should be raising taxes now and then cutting them ahead of the next election. This isn’t sitting well with the wider Tory party, but his plan might be politically shrewd, as the taxes would primarily be ‘wealth taxes’ such as capital gains, corporation and inheritance, which might not disenfranchise the Labour votes that the Conservatives won over in the last election and, if they can then prove that they can get these taxes back down in future they won’t lose their party faithful either. We haven’t got a date for the budget yet, but we would imagine after October 15th makes the most sense, as any contingency spending for Brexit can be added or discounted accordingly.
UK covid cases have seen a spike over the weekend, with three thousand cases reported yesterday. That number is likely to be adjusted upwards too, as the weekend test results are traditionally a lot lower than they actually are. Matt Hancock has called the number “worrying” and though the cases are likely to be amongst the young, the concern is that then leads to older family members contracting the virus which in turn leads to increased hospitalisations, which is what they’ve seen on the continent, where cases were at these levels a couple of weeks ago.
Across the Pond: A strong payrolls number on Friday wasn’t what the market wanted to see. Payrolls increased by nearly 1.4 million in August, which has led the government to think that further stimulus might not be necessary. Markets would prefer the government pumped more money in to people’s pockets, and the thought that they may now not meant that stock markets finished the week on a low.
The next funding the government needs to look at is for themselves: As is often the case, lawmakers need to agree to raise the debt ceiling to give them enough headroom to raise the money they need to keep paying the bills. Steve Mnuchin says he’s confident of getting a deal that would last until the beginning of December and such a short term deal probably wouldn’t be too much of a stretch for Democrats, who won’t want to be seen to be doing anything that would put jobs at risk or causing more disruption. The current ceiling limit will be hit by 30th September.
The Department of Justice is gearing up to file a lawsuit against Google. It’s an antitrust suit that focuses on them preferring to promote their own businesses through search results, rather than being neutral. Ironically, you can read about it on Yahoo!
Elsewhere in the world: The FT is reporting that the border tensions between India and China risk blowing up. There has been a quiet amassing of troops on both sides of the mountainous Himalayan border and is being called “an accident waiting to happen”. The story is well worth a read.
Oil has fallen more than a dollar after Saudi cut their official selling price for Arab Light Crude to try and get ahead of what they see as a fall in demand. The prices are now a levels last seen in July and with the US driving season over after today’s Labor day holiday, stockpiles aren’t going to continue to diminish.
Looking to the week ahead: Those Brexit talks are obviously going to be the big event and a breakthrough would certainly breathe life into the Pound, which has felt pretty lacklustre over summer – of course a breakdown in those talks would also have the same effect, but in a different direction. Tomorrow we see the final readings for Q2 GDP in Europe, which will give us the full assessment of just how bad things were at peak lockdown. On Thursday we get the ECB interest rate decision and press conference, which will be worth a watch. Friday is a long data sheet with plenty of items of interest, but that currently feels a very long way away!
Have a great week.