14 Nov 2018
UK Brexit draft agreement presented to cabinet at 2pm today
Downing Street confirmed last night that technical talks with Brussels have settled on a draft Brexit agreement. Cabinet is set to meet at 2pm today to discuss the shape of the agreement, which has not yet been published.
PM May met with a number of Cabinet ministers last night for some arm twisting to try and ensure Cabinet would back the deal at today’s meeting. Assuming Cabinet does get behind the deal, it seems likely that that the text would be released shortly. Comments so far from the DUP, based only on reports on the shape of the deal, suggest the deal would not be seen favourably by them, though no doubt we will hear more once the package has been released. The DUP is said to be unhappy that whilst a hard border on the island of Ireland or down the Irish Sea is avoided, the UK has been hit with other regulatory requirements set by Brussels.
Parliament vote crucial
Assuming PM May does not face a sizeable rebellion, it seems likely that the deal will then go for consideration at an EU Summit on 25 November, with any final adjustments made in the time between now and then. We remain of the view that the biggest challenge of all will be getting the ‘meaningful vote’ on the Brexit deal passed through Parliament. As noted yesterday, if May fails to get Parliament behind her, one route forward could be a cross party motion, instructing the government to return to negotiations with Brussels. This could lead towards the UK seeking a closer relationship with the EU than Mrs May’s proposals.
Mixed Chinese data
Economic data for October presented a mixed picture on the economy. Providing some reassurance will be the industrial production and fixed asset investment figures which strengthened and were slightly better than expected. The annual rate of growth in industrial production firmed to 5.9% from September’s estimate of 5.8% and marginally above the 5.8% consensus. Fixed asset investment also strengthened to 5.7% (y/y) beating the market expectation of 5.5%. However retail sales unexpectedly softened to 8.6% (y/y) from September’s 9.2% and were below the market consensus of 9.2%.
Irish Banks: Central Bank report shows ‘vulture’ funds engage better with borrowers than banks
A report issued yesterday by the Central Bank of Ireland has found that so-called ‘vulture’ funds are considering more restructuring arrangements with mortgage borrowers in arrears than banks and other regulated non-bank lenders. The report, commissioned by the Irish Minister for Finance, found “no evidence” that servicing firms acting on behalf of distressed debt funds were not engaging with borrowers in arrears, and that there was “no material difference” in the level of home repossessions between these funds and banks.
Distressed debt funds have come in for intense media and political criticism in Ireland amid a perception that borrowers in arrears will be less leniently treated than a comparable bank would treat them. This in turn has led to significant pressure being brought to bear on any retail bank that has explored the sale of residential mortgages to such distressed debt funds, leading to some non-performing loan portfolios being pulled from sale. The CBI report found that existing loan conditions were being honoured by the credit servicing firms acting on behalf of the vulture funds, and that no material breaches of the code of conduct had occurred.
German Q3 GDP
Figures out this morning show that the German economy shrank 0.2% in Q3 (consensus -0.1%) after having expanded 0.5% in Q2. This was the first contraction recorded since Q1 2015. Destatis reported that this was mainly due to a narrowing in Germany’s trade surplus, while domestic demand saw “mixed signals”. Still, some comfort can possibly be taken that part of the weakness looks to be on account of the all-important automotive sector which has been disrupted by the introduction of new EU emissions tests in September. The euro has weakened slightly on the back of this morning’s release and is currently trading at 1.1283 to the dollar.
09.30 UK CPI
09.30 UK PPI
10.00 EZ GDP
13.30 US CPI
14.00 UK Brexit draft agreement presented to cabinet
15.00 US FOMC member Quarles speaks