Daily Brief

Daily Brief

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Project Reassurance

No Fear

Governments on both sides of the Atlantic were doing their best on Sunday to assuage economic concerns. In London, minister Michael Gove dismissed the impact of a no-deal Brexit as "bumps in the road". In New Jersey, the US President saw no sign of a domestic recession even though "the world is in recession right now".

The early signs are that financial markets have swallowed their stories. Sterling looked perky ahead of London's opening this morning after being the front runner for two days in succession. It is an average of 1.7% higher on the week. A third day of constructive UK economic data showed retail sales increasing by 0.2% in July rather than falling by the 0.2% predicted by economists.

In the States, too, retail sales exceeded forecast, rising 0.7% on the month with the Control Group, the figure watched most closely by the Fed, up 1.0%. The manufacturing news was mixed: Industrial production fell 0.2% in July while the Philadelphia Fed's August survey was simultaneously lower on the month and higher than expected at 16.8. The main US disappointment was Friday's provisional Michigan consumer sentiment index, down by more than six points at 92.1 at a 2019 low.

Euroland stimulus

On Thursday and again at the weekend, significant European politicians dropped heavy hints that more economic stimulus could be on the way. For the first time there was talk that not all of that help would necessarily come from the European Central Bank. Fiscal stimulus from Germany was floated as a possibility.   

Finnish central bank governor Olli Rehn suggested in an interview with the Wall Street Journal that the ECB will reveal a "significant and impactful" policy package next month. The WSJ's take is that "the level of stimulus is likely to be at the upper end of analysts' expectations".

On Sunday, finance minister Olaf Scholz indicated that Germany has scope to mobilise an extra €50 billion of government spending if push comes to shove. That was the sort of money deployed during the global financial crisis and "We have to be able to muster that and we can muster that". Mr Rehn's comments hurt the euro on Thursday: Mr Scholz's did it no harm this morning. It is two and a quarter cents lower on the week against sterling.

Euroland inflation

There is no shortage of meat in this week's agenda but almost none is to be found on today's list. Euro zone inflation this morning is only of theoretical importance, given the near-certainty of monetary policy easing by the ECB.

Figures released earlier today showed UK house prices rising 1.2% in the year to August, with turnover stronger than usual for the month. Japan's balance of trade data revealed that exports continue to fall more rapidly than imports as the deficit widens.  

The finalised Euroland inflation numbers are forecast to leave the headline rate unchanged at 1.1%. Tonight the Reserve Bank of Australia will release the minutes of its policy meeting earlier this month.

GBP: Two days in the lead

GBP: Two days in the lead

USD: No recession, says president

USD: No recession, says president

EUR: Stimulus expected

EUR: Stimulus expected

AUD: RBA minutes tonight

AUD: RBA minutes tonight

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