03 Oct 2017

Market Brief: More and more speeches!

Sana Hanassi-Savari

Dealing team

The UK’s and EU’s lead Brexit negotiators wrapped up the week’s talks with a press conference yesterday.

Today's data release
  Key levels
09:30 UK Mortgage Approvals
  Support Resistance
UK Q2 GDP (Final reading)
GBP/ USD 1.3305
10:00 EZ Inflation
GBP/ EUR 1.1270 1.1435
13:30 UK BoE's Broadbent speaks at conference
Market overview

 The UK’s and EU’s lead Brexit negotiators wrapped up the week’s talks with a press conference yesterday. Michel Barnier, the Brussels lead, has given a warm nod to last week’s speech from PM May, saying it created a new dynamic in talks this week. However, he also highlighted several stumbling blocks which are still preventing talks progressing. They include that the UK has only made clear it will meet 2019 and 2020 budget commitments whilst Barnier also pointed out stumbling blocks including the European Court of Justice’s (lack of a) role in UK citizens’ rights plans. Overall, it does not appear the EU is ready to jump into trade talks just yet, an issue the UK has pushing. Barnier concluded saying as soon as ‘I see real progress’ we can move onto phase two of the talks. The next round of talks will begin from October 9th, two weeks before the EU Summit.US Treasury Secretary Mnuchin said that Trump’s proposed tax plan will actually “cut” the US deficit by US$1trn, as the plans “will not only pay for itself, but it will pay down debt” by generating additional revenue. Conversely, the Committee for a Responsible Federal Budget said the plans could add US$2trn to the deficit over the next 10 years. Notably, a Bloomberg survey suggests 21 out of 26 economists expect the tax plans to increase the budget deficit. Elsewhere, White House’s economic advisor Gary Cohn said the tax plans was aimed at helping the middle class, but he could not guarantee that everyone in that tax bracket would get a cut. The US Dollar index dipped 0.3% while sterling gained, mainly on the back of hawkish comments from BoE Chief Economist Andy Haldane which suggest the central bank is preparing the ground for a rate hike (to 0.50%) in November.For the Eurozone, numerous September confidence indicators beat expectations. The economic sentiment index rose 1pt to a fresh 10-year high (113 vs. 112 expected), while both the business climate (1.34 vs. 1.12 expected) and industrial confidence (6.6 vs. 5.2 expected) were also higher. The consumer confidence was in line at -1.2.

The day ahead

Looking at the day ahead, we have the Eurozone CPI (1.2% yoy expected for core) and September unemployment change in Germany. In the UK, there is the final reading of Q2 GDP along with mortgage approvals. Over in the US, we have PCE core for August, personal income and spending, the Chicago PMI as well as the University of Michigan consumer sentiment index. In the UK, IMF’s Lagarde and BOE’s Broadbent will speak at the BoE conference (Mr Draghi has cancelled his talk due to a relative’s sickness). While over in the US, the Fed’s Harker will speak at a Fintech event.

Thought of the day

On this day in 2008, the Dow Jones Industrial Average fell 777 points, its largest single-day point loss in history following the bankruptcy of Lehman Brothers. It was a crazy period in the history of financial markets but when you look at the facts it brings to life just how extreme the situation was. In the UK alone 3.7m people lost their jobs, it cost the British economy £7.4 trillion in lost output and the Government spent £850bn bailing out the banks. Alistair Darling, the former Chancellor of the Exchequer, probably illustrates the extremity of the situation though when he recites what the Chairman of RBS answered him when he asked him one morning ‘How long can you last before running out of the cash?’ His answer was ‘Well we’re going to run out of money in the early afternoon!’ Let’s pray that we don’t encounter such moments again but it acts as a stark reminder about just how volatile and uncompromising financial markets can be!

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