UK PM May denied childish document on plan to announce Brexit deal on Nov 19

    BBC reported, based on a “leaked” document titled “Brexit Communications Grid Summary” that UK Brexit Minister Dominic Raab is set to announce the full withdrawal agreement on November 19 and put to parliament. And, according to the document, the Parliament would vote on the bill on November 27.

    But Prime Minister Theresa May’s spokesman quickly came out and denied it. The spokesman said “The misspelling and childish language in this document should be enough to make clear it doesn’t represent the government’s thinking. You would expect the government to have plans for all situations – to be clear, this isn’t one of them.”

    For your entertainment, here is the full text of the notes:

    Brexit Communications Grid Summary

    Cabinet reviews the deal this Tuesday, the 6th November. They expect all the details to then leak.

    “A moment of decisive progress” will be announced this Thursday. Raab to announce.

    The narrative is going to be measured success, that this is good for everyone, but won’t be all champagne corks popping.

    Then there’s recess until 12th.

    After the announcement of decisive progress there follows the 10 days of Sherpa meetings with EU 27 and then daily themed announcements.

    19th November – “We have delivered on the referendum” PM speaks at the CBI conference.

    Saying this deal brings the country back together, now is the time for us all to unite behind it for the good of all our futures etc. She will also hold a business reception.

    This is the day both the Withdrawal Agreement and Future Framework will be put to Parliament by way of a statement from Raab who will also do media. Junior ministers are doing regional media all day. Government lining up 25 top business voices including Carolyn Fairburn and lots of world leaders eg Japanese PM to tweet support for the deal.

    20th – Theme is Delivering for the Whole of the UK – PM to visit the north and or Scotland and the Commons will debate in business motions the date of the Meaningful Vote.

    PM will be back in the house to vote. The Cabinet Office publishes its explainer of the deal and what it means for the public, comparing it to No Deal, but not to our current deal.

    Other business leaders to come out and back it eg Adam Marshall from Chambers of Commerce and supportive voices in devolved regions like Andy Street and Andy Burnham. Also hoping to get 3rd Sector voices out supporting it.

    21st – Theme is Economy, Jobs, Customs. Philip Hammond to open debate in Commons and Raab to close it. Institute of Directors to speak out.

    Hoping for Stephen Martin, Martin McTeague etc

    22nd – Theme is immigration – take back control of our borders. Home Sec doing media and visits. Raab on QT in the West mids.

    Hope Mike Hawes of SMMT will speak out in favour along with influential voices from the rest of the world saying how great this is for the flow of global talent.

    23rd – Theme is money – NHS funding and structural funds. Matt Hancock hospital visit. David Everett to welcome the deal alongside Tech for UK.

    24th Theme is Northern Ireland and The Union – no hard border in the UK and the integrity of the Union is protected. PM visits border communities and business in NI and maybe also to Wales to visit agri and export businesses. Karen Bradley doing media.

    Trying to get Varadker to support and Anand Menon and Henry Newman too.

    25th – Theme is global Britain. We can strike trade deals with RoW (rest of world) security in this one too.

    Speech from Liam Fox. Jeremy Hunt on Marr. Hope Miles Celic to come out in support (City UK).

    Lining up lots of former foreign secs to come out in support and Mark Littlewood of the IEA.

    26th – theme is taking back control of our laws, Raab doing media. PM interview with Dimbleby.

    27th – morning theme is agri and fisheries. Gove doing a visit and media.

    Evening is the vote. HISTORIC MOMENT, PUT YOUR OWN INTERESTS ASIDE, PUT THE COUNTRY’S INTERESTS FIRST AND BACK THIS DEAL.

    UK PMI manufacturing rose to 53.1, lacklustre picture of manufacturing sector

      UK PMI manufacturing rose to 53.1 in November, up from 51.1 and beat expectation of 52.0. Markit noted that trends in output and new orders strengthen slightly. But new export orders decrease for the second month running.

      Rob Dobson, Director at IHS Markit, which compiles the survey:

      “The November PMI provided a lacklustre picture of the UK manufacturing sector, as ongoing global trade tensions and Brexit uncertainty weighed on current business conditions and dampened the outlook for the year ahead.

      “Although November saw the headline PMI regain some lost ground and trends in output, new orders and employment picked up slightly from a weak October, growth is still among the weakest seen over the past two-and-a-half years. Based on its relationship against official ONS data, the survey indicators suggest manufacturing output is on course to make no contribution to GDP growth in the final quarter, with a clear risk of output contracting unless December proves a stronger month.

      “While demand from the domestic market was a positive spur, in some cases as clients built up stocks in response to Brexit and other supply-chain uncertainties, manufacturers also reported a further decrease in new export business as slower global economic growth and Brexit worries took a bite out of foreign demand. Brexit worries also increasingly dominated the outlook for the sector. Although still forecasting growth for the year ahead, manufacturers’ confidence fell to its lowest ebb since August 2016.”

      Full release here.

      Germany GDP stalled in Q1, worst than expectations

        Germany GDP stalled in Q1 (price, seasonally and calendar adjusted), below expectation of 0.1% qoq growth. GDP was up a price adjusted 0.2% compared with the first quarter of 2022. The price and calendar adjusted GDP was -0.1% lower because there was one working day more than in the same period a year earlier.

        The final consumption expenditure of both households and government declined at the beginning of 2023, according to the Federal Statistical Office (Destatis). Positive contributions, in contrast, came from capital formation and exports.

        Full Germany GDP release here.

        EU: UK Johnson’s letter does not provide realistic alternatives to Irish backstop

          In response to UK Prime Minister Boris Johnson’s letter, European Council President Donald Tusk reiterated that the backstop is an “insurance” to avoid a hard Irish border” until an alternative is found. . And, “those against the backstop and not proposing realistic alternatives in fact support reestablishing a border. Even if they do not admit it.”

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          European Commission spokesperson Natasha Bertaud also said Johnson’s letter “does not provide a legal operational solution to prevent the return of a hard border on the island of Ireland”. She reiterated that the backstop is the “only means identified so far by both parties to honor this commitment” of avoiding hard Irish border.

          Italy might lower 2019 deficit target, Euro lifted, German-Italian spread drops below 300

            Euro is given a lift on reports that the Italian coalition is considering adjustment on its 2019 budget plan. Il Messaggero newspaper quoted Armando Siri, a Transport Ministry undersecretary saying that “In order to save the budget and avoid an increase in market turbulence … a small fine-tuning (of the deficit target) could be considered.”

            Separately, it’s reported that Deputy Prime Minister, leader of Five-Star Movement, Luigi Di Maio also said deficit target reduction is not a problem as long as budget measures remain the same. On Sunday, another Deputy Prime Minister, leader of the League, Matteo Salvini also said “no one is stuck” to the deficit target, hinting at some flexibility for adjustment.

            The cabinet is expected to meet today in the evening to discuss reduction of the 2.4% deficit target of 2019. And that could open up the door for constructive dialogue with the European Commission to avoid Excessive Deficit Procedure.

            Italian 10 year yield dips notably today and is down -0.191 at 3.223. German 10 year yield is currently up 0.028 at 0.372. That is, spread is now below 300 alarming level.

            Australia retail sales rose record 16.3% in May, insufficient to recover April’s record decline

              Preliminary data showed that Australia retail sales rose 16.3% mom in May. that’s the largest rise on 38 years of record. But that wasn’t enough to recover the record contraction of -17.7% mom in April.

              ABS said, “there were large rises for clothing, footwear and personal accessory retailing and cafes, restaurants and takeaway food services, as restrictions on trade were lifted during May. Despite the rises, both these industries remain well down on the levels of May 2019.”

              Full release here.

              SNB hikes 50bps to 100%, cannot rule out more

                SNB raises the policy rate by 50bps to 1.00% as widely expected, to “countering increased inflation pressure and a further spread of inflation”. The central added that additional rate hikes “cannot be ruled out”. It also maintained the willingness to be “active in the foreign exchange markets as necessary”.

                In the new conditional inflation forecast based on 1.0% policy rate, inflation forecasts was lowered from 3.0% to 2.9% in 2022, left unchanged at 2.4% in 2023, and raised from 1.7% to 1.8% in 2024. Inflation forecast was indeed raised from Q3 2023 through Q4 2024.

                The higher inflation forecasts was “attributable to stronger inflationary pressure from abroad and the fact that price increases are spreading across the various categories of goods and services in the consumer price index.”

                Regarding GDP growth, SNB expects its to be at around 2.0% this year. But weaker overseas demand and higher energy prices are likely to “curb economic activity marked in the coming year”. SNB expects GDP growth to slow to 0.5% in 2023.

                 

                Full statement here.

                EU de Montchalin: Any tariffs on UK is economically rational position not revenge

                  EU is expected to approve today the negotiation mandate on future relationship with UK after the Brexit transition period. It’s widely believed that EU will guard against any distortions of trade and unfair competitive advantages as the basis of tariffs and quota free trade agreement.

                  France’s Europe Minister Amelie de Montchalin said that “we can have an agreement with zero tariffs and zero quotas if we can be sure … we will have common norms …regulatory proximity on the basis of EU rules.” And, “If we cannot maintain this regulatory proximity, then we must … apply tariffs or quotas,” she said. “It’s not a position of revenge, it’s an economically rational position.”

                  The time frame to complete a deal by year end is seen as extremely challenging by EU officials. German Europe Minister Michael Roth warned “this is an extremely ambitious timetable.” “The time pressure is immense, the interests are huge, it’s a very complicated treaty, so it will be very hard work.”

                  UK, on the other hand, is expected to publish its own negotiation guidelines on Thursday. It’s believed that the economic and political independence will remain the primary bottomline in the talks.

                  SNB Maechler: Expansionary monetary policy absolutely needed

                    SNB board member Andrea Maechler said that the central bank is “not anywhere close to” normalization as “expansionary monetary policy is absolutely needed”. She added that “the negative rate of minus -0.75% and interventions are needed to relieve pressure on the franc as needed.”

                    The bank still see inflation “staying below 1%”, labor utilization “below what it can be”, and Franc “continues to be highly valued”, she said.

                    EU still assume UK to leave on March 29

                      European Commission spokesman Mina Andreeva said that EU’s assumption is that UK will still leave as planned on March 29. Brexit Minister Stephen Barclay and Attorney General Geoffrey Cox will meet EU chief negotiator Michel Barnier again on Tuesday.

                      Andreeva also noted “good progress was being made” on the EU-UK political declaration on future ties and on “alternative arrangements” and “possible additional guarantees” on the Irish backstop. She added that both sides “agreed on the need to conclude this work in time before the European Council (of March 21)”.

                      BoJ Ueda: Underlying inflation is still a bit below our target

                        In the face of mounting economic uncertainties, BoJ Governor Kazuo Ueda provided insights on Japan’s monetary stance and the regional economic dynamics. Bank of Japan, despite witnessing annual inflation of 3.1% in July, anticipates softening of this rate towards year-end.

                        Speaking on Saturday at the Jackson Hole Symposium, Ueda remarked, “We think that underlying inflation is still a bit below our target,” subsequently justifying their persistence with the current monetary easing framework by stating, “This is why we are sticking with our current monetary easing framework.”

                        Despite the inflationary indicators, health of Japan’s domestic demand remains a focal point for the central bank. Ueda highlighted that domestic demand appears to maintain a “healthy trend,” but swiftly added a caveat: “although that’s something that needs to be checked with” Q3 data.

                        Addressing the wider Asian economic landscape, Ueda did not mince his words, labeling China’s recent economic deceleration a “disappointment,” and highlighting July’s data as skewing “on the weak side.” Diving deeper into China’s challenges, he pinpointed, “The underlying problem appears to be the adjustment in the property sector and the spillover to the rest of the economy.”

                        However, it’s not all gloomy on the horizon. Ueda acknowledged the US economy’s resilience, noting its “relative strength” as a potential counterbalance, offering “some offset” to Japan amidst regional economic fluctuations.

                        ECB accounts: Main risk is tightening monetary policy too late

                          In the accounts of February ECB meeting, it was argued that monetary policy in the current environment was to “ensure that inflation expectations remained firmly anchored ” and to “avoid the risk of the prevailing high inflation becoming entrenched.”

                          “Caution was expressed about basing the Governing Council’s assessment on wage data which were only available with a lag.  In this environment, the main risk was no longer of tightening monetary policy too early but too late,” the accounts noted.

                          It’s also argued that “an earlier monetary policy normalisation would reduce the risk of abrupt tightening later on, which could potentially be associated with high economic and social costs.”

                          “In the light of the increased uncertainty and the heightened upside risks to the inflation outlook, the general view prevailed that the Governing Council should convey its increased alertness and should monitor incoming information carefully, in particular regarding second-round effects.”

                          Full accounts here.

                          Fed Bullard: Upcoming policy adjustments no longer part of normalization campaign

                            St. Louis Fed President James Bullard said if economy evolves as expected, current interest rate will be appropriate through 2019. Balance sheet reduction program will end this autumn. “These events mark the end of monetary policy normalization in the U.S.”

                            Bullard said the normalization campaign has been “largely successful”. Nominal short-term interest rates have been raised from near-zero levels, and the size of the Fed’s balance sheet has been reduced as the economic expansion has continued.

                            Going forward, the FOMC may elect to adjust monetary policy going forward. However, Bullard said that will not be “part of an ongoing normalization strategy”. Adjustments will be “in response to incoming macroeconomic data”.

                            On yield curve inversion, Bullard said “yield curve information is not infallible, and inversion could be driven by other factors unrelated to future macroeconomic performance”.”Nevertheless, the empirical evidence is relatively strong. Therefore, both policymakers and market professionals need to take the possibility of a meaningful and sustained yield curve inversion seriously.”

                            Press release on Bullard’s presentation.

                            US retail sales rise 0.1% mom in May, ex-auto sales down -0.1% mom

                              US retail sales rose 0.1% mom to USD 703.1B in May, below expectation of 0.3% mom. Ex-auto sales fell -0.1% mom to 569.0B, worse than expectation of 0.2% mom growth. Ex-gasoline sales rose 0.3% mom to USD 649.5B. Ex-auto and gasoline sales rose 0.1% mom to USD 515.5B.

                              Total sales for the March through May period were up 2.9% from the same period a year ago.

                              Full US retail sales release here.

                              ECB left policy statement unchanged, keeps forward guidance

                                ECB left monetary policy unchanged as widely expected. Main refinancing rate is held at 0.00%. Marginal lending facility and deposit facility rates were held at 0.25% and -0.50% respectively. The asset purchase program will continue at a monthly pace of EUR 20B.

                                The forward guidance was also kept unchanged. “The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”

                                Full statement here.

                                ECB President Lagarde speaks at EPC Thought Leadership Forum

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                                  UK CPI rose to 0.60% yoy in Dec, core CPI rose to 1.4% yoy

                                    UK CPI rose to 0.6% yoy in December, up from 0.3% yoy, above expectation of 0.5% yoy. CPI core rose to 1.4% yoy, up from 1.1% yoy, above expectation of 1.3% yoy. RPI also rose to 1.2% yoy, up from 0.9% yoy, above expectation of 1.1% yoy.

                                    Full release here.

                                    Fed Rosengren prefers inflation range targeting

                                      Ahead of a broad review on monetary policy framework, Boston Fed President Eric Rosengren said he’d prefer a range targeting approach on inflation. That is, Fed could be forced to accept inflation below 2% during recessions. On the other hand, Fed should commit to achieve above 2% inflation in good times. For example a range of 1.5-2.5%.

                                      Rosengren echoed other platemakers’ comment that the current 2% target is “symmetric”. But in practice, people saw that figure as a “ceiling”. He added, “even though we’re only missing by a little bit it actually does matter if you miss by a little bit on a regular basis.”

                                      CAD/JPY ready for down trend resumption as Canada CPI looms

                                        Today, Canada’s consumer inflation data takes center stage as markets anticipate a slowdown in headline inflation from 5.9% yoy to 5.4% yoy in February. If this decrease materializes, it would mark the lowest inflation reading in over a year. BoC’s preferred core inflation metrics, the trimmed and median CPI, are also projected to decelerate from 5.1% yoy to 4.8% yoy and from 5.0% yoy to 4.8% yoy, respectively.

                                        BoC became the first major central bank to pause its tightening cycle last Wednesday, following eight consecutive rate hikes totaling 425 basis points. Market participants are still expecting one more rate increase this year, but these odds could dwindle if inflation continues to decline.

                                        CAD/JPY is closely watching the 94.61 support level after a recent drop. A decisive break below this threshold would rekindle the broader downtrend from the 110.87 high and aim for a 61.8% projection of 110.87 to 94.61 from 100.85 at 90.80. However, if the cross breaks above 97.53 resistance, it could delay the bearish scenario and extend the corrective pattern from 94.61 with another upswing.

                                        Eurozone CPI surged to record 4.9% yoy in Nov, core CPI rose to 2.6% yoy

                                          Eurozone CPI accelerated to 4.9% yoy in November, up from 4.1% yoy, well above expectation of 4.4% yoy. That’s the highest level on record in the 25 years of the series’s history. CPI core accelerated to 2.6% yoy, up from 2.0% yoy, above expectation of 2.3% yoy.

                                          Looking at the main components of inflation, energy is expected to have the highest annual rate (27.4%, compared with 23.7% in October), followed by services (2.7%, compared with 2.1% in October), non-energy industrial goods (2.4%, compared with 2.0% in October) and food, alcohol & tobacco (2.2%, compared with 1.9% in October).

                                          Full release here.