18 Jul 2019

UK inflation steady

Figures released yesterday, showed that the annual rate of CPI inflation had remained steady at the Bank of England’s 2.0% target in June.

This was in line with consensus expectations, but against our forecast for it to tick down to 1.9%. Detail of the release showed that disinflationary pressure from fuel prices was offset by less pronounced discounting in clothing and footwear category compared with 2018. Stripping out food, energy, alcohol and tobacco saw the ‘core’ measure of CPI rise from 1.7% to 1.8% in June (consensus 1.8%, Investec 1.7%). 


Sterling was little changed following the release, with macroeconomic data continuing to take a backseat to the onslaught of Brexit uncertainties.


US-China trade talks stall - “We have a long way to go”

The WSJ reports that trade talks between the US and China have stalled as Washington determines how to address Beijing’s demand that it ease restrictions on Huawei. The Trump administration is said to be divided on which US technologies can be provided to Huawei without compromising national security or giving the Shenzhen-based company a strategic advantage. 


While negotiators are expected to speak over the phone later this week, Beijing is reportedly reticent to make any further commitments until the US comes to a decision regarding Huawei. 


Overall, the article suggests that a resolution to the trade dispute is likely to be some way off, with President Trump saying on Tuesday “we have a long way to go as far as tariffs, where China is concerned”. 

 

Futures point to the S&P 500 opening 0.3% lower today in the wake of the WSJ article, as well as disappointing after-hours Q2 earnings reports from Netflix and CSX. 

Brexit - Possible resignations to act to limit no-deal threat

There are reports that some Cabinet ministers could resign today to allow them to vote to tie the hands of PM May's successor from suspending parliament; the initial source of the report is Nicholas Watt, the political editor of BBC's Newsnight. 


It appears as though the Cabinet ministers have their eye on the third reading of the Northern Ireland (Executive Formation) Bill, where at its last visit to the Commons, an amendment was passed that would force Parliament to meet in October. The amendment was by ‘remainer’ Tory MP Dominic Grieve and instructed parliament to report on progress on restoring power-sharing in the province every fortnight; this amendment passed by just one vote on July 9. 


The critical vote is expected to be at 1.30pm. This will be on whether to accept the House of Lords amendment to the Northern Ireland (Executive Formation) Bill. The Lord’s amendment would also give MPs the prospect of a neutral motion being tabled in the Commons, which they could try to use to stop a no-deal. The result is said to be on a knife-edge, hence the talk of possible Cabinet resignations.


Economic Releases

09.00  EU   PPI

09.30  UK   Retail Sales

13.30  US   Initial Jobless Claims