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Brexit bouncette

Not so easy to win

There was plenty to entertain investors at the end of last week and over the weekend. US and Canadian employment data came out on Friday, China's balance of trade figures appeared a day later and the threat of new Trump tariffs emerged on Sunday.

American nonfarm payrolls went up by a provisional 201k in August, about 10k more than analysts had predicted, but the increase was neutralised by a 10k downward revision to the previous month's figure. The other good-news-bad-news trade-off was the 2.9% annual increase in average US hourly earnings: it was of little value in an environment of 2.9% inflation. Canada's figures were unhelpful: unemployment rose to 6.0% with the loss of 52k jobs.

Beijing's balance of trade numbers on Saturday cast doubt on the efficacy of Trump's protectionist tariffs. China booked a record $31bn monthly surplus with the States in July. There is no evidence yet for the US president's assertion that trade wars are easy to win. But he is pushing ahead anyway: the talk at the weekend was of 25% tariffs on a further $200bn of Chinese imports.

Curate's egg

On Friday EU negotiator Michel Barnier said there were "lots of positive things" in the Chequers plan for Britain's post-Brexit relationship with Europe. As they have so often in the past, investors put two and two together to make five and they piled into sterling.

M. Barnier said he was "determined" to reach a deal with Britain and that 90% of the divorce agreement was complete. His tone was markedly different from the one reported earlier in the week when he was said to have been "strongly opposed" to the Chequers plan.  

Sterling moved almost a cent higher following the news of M. Barnier's support. It held onto most of that gain against the euro, netting to thirds of  a cent. Against the US dollar sterling had to hand it all back, for a net daily loss of a fifth of a cent. Some of that was down to the headline US jobs number; the rest was driven by flows into safe-haven Treasury bills and bonds.

Production and trade

Almost every one of the ecostats released during the London session relates to Britain. Earlier this morning Japan reported on second quarter growth and China published the inflation data for August. NAB's Australian business confidence figures come out tonight.

Revised gross domestic product data from Japan indicated a 0.7% expansion of the economy in Q2, with annual growth at 3.0%. The numbers exceeded expectations but did nothing for the yen.  Chinese inflation came in close to target at 2.3%, with factory gate prices 4.1% higher on the year. Norway also reported on inflation, putting it at 3.4% for the year to August.

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