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Tiers and rules

Not going out

As expected, the Prime Minister introduced new and simplified anti-Covid arrangements for the country. There are three levels of alert: medium, high and very high. Political tempers are running hot but investors seem relaxed about this latest arrangement and sterling had another positive day.

The new lockdown rules and their geographical distribution had been widely trailed and did not themselves deliver any shocks. The only surprise, if indeed it was a surprise, was that the SAGE committee – “the science” – had recommended a two-week lockdown last month and thinks the government is being too tentative. To a dispassionate bystander, the greater surprise was the ease with which investors ignored both the economic implications of the new measures and the supposedly last chance deadline for a Brexit deal in two days’ time.

They also turned a blind eye to yet more chat about negative UK interest rates. There were three reminders about the possibility from the Bank of England. Deputy Governor Sam Woods wrote to bank CEOs asking how ready they are to cope with a zero or negative Bank Rate. Governor Andrew Bailey said “there are good reasons to say we shouldn’t rule [negative rates] out”. MPC member Jonathan Haskel said the bank has “an absolutely open mind” on the matter. And investors did not care. Sterling shared the lead with the USD, CHF, JPY and CAD for an average gain of 0.2%.

 

Supranational chat

With Spain, the United States and Canada on holiday, there were fewer than the normal number of ecostats. Filling the space were the World Bank and the International Monetary Fund with their virtual meetings. The OECD got in on the act, calling for a tax on the international digital economy.

Data released during London’s day were unremarkable, covering a 1.8% annual decline in German wholesale prices and a 10.8% fall in South African manufacturing output. European Central Bank President Christine Lagarde, appearing at the IMF virtual event, said the bank is looking “very seriously” at the creation of a digital euro as a supplement to cash.

Overnight, the BRC reported that retail sales in September were up by 6.1% from the same month last year. REINZ said that the median NZ house price increased by 14.7% to $685k in the year to September. The house price index was up by 11% on the year.

 

Employment: so far so good

This morning’s UK jobs numbers were roughly in line with forecast, with the ILO rate of unemployment slightly higher at 4.5% and fewer new jobseekers than expected. Average earnings were unchanged in the year to August, not entirely surprising in view of the lockdown.

China’s trade figures earlier this morning showed a further shrinkage of the surplus while there were sizeable increases in both imports and exports. German inflation was finalised at -0.4% for September, in line with forecast and a five-and-a-half-year low.

There are more inflation figures today, from Sweden and the United States. ZEW reports this morning on investor sentiment in Germany and the Eurozone. NFIB prints its index of US small business optimism. Tonight there are Australian measures of consumer confidence and new home sales.

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