Daily Brief

Acceptance

Don’t worry

Investors it seems will have to come to terms with the Internal Market Bill, despite criticism it risks breaking international law. MPs yesterday granted it a second reading by 77 votes, with sterling on average unchanged on the day, beaten only (just) by the Australian dollar.

Parliamentary procedure being what it is, the Prime Minister cannot be certain that his bill will make it all the way into legislation. However, with a theoretical majority of 80 seats, it would require a good deal of bravery on the part of Tory back-benchers to stop it in its tracks. A week ago investors were expressing considerable concern about the situation, which cost the pound three euro cents in three days. Yet ahead of last night’s vote and in the Far East this morning there was only minimal downward pressure: half-cent ranges were the order of the day for sterling.

The late-night vote was not just the highlight of sterling’s day, it was the only item on Monday’s agenda. Ahead of London’s opening this morning there was some help from the UK employment data. Despite increases in redundancies and unemployment “the employment rate was up and the economic inactivity rate has fallen”. Unemployment was in line with forecast and slightly higher at 4.1%. Although the pound did respond positively, investors managed to contain their euphoria: some of the components dated back to May and the furlough scheme could be concealing millions of incipient redundancies.

 

Scape goat

While Europe was being blamed by the UK Prime Minister for the Brexit quagmire, it was at the same time taking flak from China’s President Xi Jinping. The exchange came during trade negotiations which resulted in a modest deal to protect geographical product names.

The euro did not suffer unduly as a result of the attacks. It was flat against sterling and the Japanese yen, and added half a US cent. Euroland ecostats were limited to industrial production. In line with most contemporary data, production increased by 4.1% in July after a strong recovery during the previous two months but remained 7.7% lower on the year.

Overnight antipodean data showed NZ consumer confidence slipping to 95.1, its lowest level since 2008. The news did no damage whatsoever to the Kiwi. Australian house prices fell 1.8% in the second quarter. The AUD reacted positively to the Reserve Bank of Australia policy meeting minutes, which wished for a weaker currency while acknowledging that the Aussie is “broadly aligned with its fundamental determinants”.

 

Confidence and output

The remainder of today’s agenda comprises a miscellany of not-particularly-important ecostats. The highlights, though they are not particularly high, will be ZEW’s surveys of German and Euroland investor sentiment.

This morning there are inflation numbers from France and Italy, as well as Swedish unemployment. Analysts expect the ZEW readings to a little softer in September than in August. After lunch North America offers the New York Fed manufacturing index, US import/export prices and industrial production and Canadian manufacturing sales.

Tonight brings NZ house prices, Australian new home sales and Japan’s balance of trade. The UK inflation figures come out ahead of Wednesday’s London opening.

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