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Covid, Brexit, US stimulus, AOB

Another day, another deadline

The daily agenda for financial markets, at least in London, is looking increasingly hard-wired into the system: 1. Covid lockdowns; 2. Brexit; 3. US fiscal stimulus; 4. AOB. They were the main determinants on Monday and the brief ecostat timetable suggests they will be again today.

On the Covid front, a piece from Bloomberg offers depressing consolation that the UK is not the only country in Europe with diverse, fluid and puzzling rules about who can do what, with whom, where and when. The UK aspect is not improved, however, by the current stand-off between the mayor of Manchester and the Prime Minister about financial support in case of a Tier 3 lockdown. The mayor has been given a deadline of noon today to comply.

On Brexit, an apparent softening of the EU’s stance remains unrequited by Downing Street. Parliament is suspicious that the government’s ambition for an “Australia-style deal” with Europe is disingenuous because there is no deal; trade takes place on WTO terms. Shadow Cabinet Office minister Rachel Reeves did not care about the semantics. She said in Parliament “they can call it a Narnia deal as far as I’m concerned… but let’s be honest about what that means”. And sterling floated serenely above the affray, strengthening very slightly on average while losing half a cent to the euro.


Another other deadline

House speaker Nancy Pelosi set a deadline of today for agreement to be reached between the House, the Senate and the administration. The date is not arbitrary: any later and the bill would not have time to pass before the election. The sensation last night was that an agreement today is unlikely.

As with the Brexit disagreement, the semantics are proving difficult to circumvent. Oddly, on this occasion, the President is prepared to back at least the $2.2 trillion called for by the Democratic House of Representatives but the Republican Senate says it is too much. The USD lost a fifth of a cent to the GBP and was on average unchanged.

Monday’s economic data did not bring much to the party. Crocodile tears about weaker-than-expected third quarter growth in China looked out of place, given that China could well be the only major economy to expand in 2020. Canadian wholesale sales grew for a fourth consecutive month in August while the Bank of Canada’s Autumn Business Survey indicator recovered somewhat but remains well below its historical average.


RBA rate cut ahead

The Reserve Bank of Australia minutes and Assistant Governor Chris Kent both managed to send the Aussie to the back of the field with a loss of a cent and a third to sterling. They both implied support for a rate at the RBA’s next policy meeting on 3rd November.

Australian rate cut concerns reminded investors that the Reserve Bank of New Zealand has also been leaning in that direction for a while, muttering about a negative Official Cash Rate. The NZD was only fractionally ahead of the AUD at the back of the field, down by an average of 0.5%. A quarterly improvement in NZ business confidence did nothing to lift the gloom.

The ecostats today are mostly dull. From Europe, there are Swiss trade and Euroland’s current account. The US offers housing starts and building permits. Tonight brings Australian readings for new home sales and retail sales.

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