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.

    Italy: Di Maio happy with China Belt & Road MOUs, Salvini pledges to oppose if national security compromised

      Italian Deputy Prime Minister Luigi Di Maio, head of ruling Five-Star Movement, said that President Sergio Mattarella support signing up as part of China’s “Belt and Road” initiative. He noted that “I am pleased to see the president’s office has shown its support to the MOUs.” He added that the MOUS will help Italy’s port infrastructure and boost export to China.

      On the other hand, another Deputy Prime Minister Matteo Salvini, head of coalition partner League, warned he will firmly oppose to the MOUs, if that compromises national security. He also said earlier this week that “we’re absolutely not ready to do so if it’s a question of foreign companies colonizing Italy.”

      Prime Minister Giuseppe Conte indicated that he might sign the Belt and Road MOUs when Chinese President Xi Jinping visits Rome and Palermo later this month.

      BDI: Disorderly Brexit could slash Germany GDP by 0.5% to just 0.7% in 2019

        President Federation of German Industries (BDI), Dieter Kempf, warned that “in the case of the disorderly exit of the British from the EU in the current year threatens a relapse to only 0.7 percent increase in gross domestic product” in Germany. That would be 0.5% lower than current forecast of 1.2% growth for 2019.

        Kempf also complained that “the extension of the time limit for the self-imposed departure of the British from the EU continues the exhausting uncertainty for our companies”. And, “there is a risk that British policymakers once again buy expensive time at the expense of the economy – without wanting to take responsibility for the bill.”

        BDI’s release in German.

        Bundesbank: Rapid and strong economic recovery unlikely

          Bundesbank said in its regular monthly report that Germany would recover slowly after severe recession. It said, “substantial restrictions are likely to remain until a medical solution such as vaccination is available. For this reason, a rapid and strong economic recovery currently seems unlikely.”

          Though, it added that “there is no fear that the German economy will get into a self-reinforcing downward spiral”. Fiscal and monetary policies will support the recovery. But inflation is likely to decline sharply in the coming months when lower oil prices are quickly passed onto consumers.

          US initial jobless claims dropped to 217k

            US initial jobless claims dropped -1k to 217k in the week ending October 29, slightly above expectation of 215k. Four-week moving average of initial claims dropped -500 to 219k.

            Continuing claims rose 47k to 1485k in the week ending October 22. Four-week moving average of continuing claims rose 30k to 1418k.

            Full release here.

            ECB’s Villeroy foresees 2024 rate cut possibility, dismisses immediate action

              ECB Governing Council member Francois Villeroy de Galhau indicated that the central bank will not pursue further interest rate hikes. In an interview with the French newspaper La Depeche du Midi, Villeroy stated, “Our decisions to increase interest rates are fully playing their role as a remedy against the disease that is inflation.”

              He added, “This is why, barring any shock, there will be no further increase in our rates — the question of a reduction may arise in 2024, but not now.”

              Villeroy expressed confidence in the progress made in the fight against inflation, noting that “we are well on our way… even if we are not yet finished.” He urged patience with the duration of these measures, reiterating the ECB’s commitment to bringing inflation back toward 2% by 2025 at the latest.

              Furthermore, he pointed out that disinflation is occurring faster than anticipated due to two main factors: slowdown in energy prices, unaffected by conflicts in the Middle East, and deceleration of other prices, including services and manufactured products, as a result of ECB’s monetary policy.

              New Zealand’s trade deficit narrows to NZD -1.2B, led by decreased trade with china

                New Zealand’s goods trade deficit narrowed from NZD 1.7B to NZD 1.2B in November, aligning largely with market expectations. Exports fell by NZD 337m, representing -5.3% yoy decline, settling at NZD 6.0B. Meanwhile, imports saw a more substantial reduction of NZD 1.3B, -15% yoy decrease, totaling NZD 7.2B.

                A key factor in these changes is reduced trade volume with China, which led contraction in both imports and exports. Exports to China decreased by NZD 183m, -9.7% yoy fall. Imports from China also saw a substantial reduction of NZD 347m, marking -17% yoy decrease.

                Other key trading partners also showed varied trends. Exports to Australia and EU declined by NZD 35m (-4.5% yoy) and NZD 27m (-9.1% yoy), respectively. Conversely, exports to US increased by NZD 110m, a significant 18% yoy rise. Exports to Japan experienced a sharp decline of NZD 99m, -27% yoy drop.

                In the realm of imports, alongside China, EU, Australia, US, and South Korea all registered declines. Imports from the EU decreased by NZD 164m (-14% yoy), from Australia by NZD 219m (-23% yoy), from the US by NZD 68m (-11% yoy), and from South Korea by NZD 231m (-32% yoy).

                Full NZ goods trade balance release here.

                Contrasting comments from Fed Brainard and Bullard

                  There are some contrasting comments from Fed officials today.

                  Fed Governor Lael Brainard said that “with fiscal stimulus in the pipeline and financial conditions supportive of growth, the shorter-run neutral interest rate is likely to move up somewhat further, and it may well surpass the longer-run equilibrium rate for some period.” And to her, gradual interest rate hikes are likely to be appropriate.

                  On the other hand, St. Louis Fed President James Bullard emphasized that “you can’t just say, ‘unemployment is 3.9 percent, obviously we have to raise rates’; or, ‘growth is fast, obviously we have to raise rates.'” He noted that “I don’t think that feedback to inflation is very strong to be able to make that argument.”

                  US PPI at 0.3% mom, -0.2% yoy in Aug, PPI core at 0.4% mom, 0.6% yoy

                    US PPI rose 0.3% mom in August, above expectation of 0.2% mom. PPI core rose 0.4% mom, above expectation of 0.2% mom. Annually, PPI picked up to -0.2% yoy, up from -0.4% yoy, above expectation of -0.7% yoy. PPI core rose to 0.6% yoy, up from 0.3% yoy, beat expectation of 0.3% yoy.

                    Full release here.

                    Fed Bostic: We are going to get our policy rate certainly to a neutral space

                      Atlanta Fed President Raphael Bostic said yesterday, “we are going to get our policy rate certainly to a neutral space where we are no longer providing accommodation. If inflation stays at high levels or levels that are too high — by too high, it’s really not moving back towards our 2% target — then I am going to be supporting moving more.”

                      “We moved our policy rate 25 basis points and the 30 year (mortgage) moved 2 percentage points. That is tremendous responsiveness,” Bostic also noted. “The moves that we have seen in rates and in yields are a sign that the markets still believe the Fed has credibility. They have said what we are going to do and they have priced in us doing them … That is an important dimension in the marketplace.”

                      Eurozone PMI composite finalized at 20-mth low, hopes of avoiding recession further dashed

                        Eurozone PMI Services was finalized at 48.8 in September, down from August’s 49.8, a 19-month low. PMI Composite was finalized at 48.1, down from prior month’s 48.9, a 20-month low.

                        Looking at some member state, Ireland PMI Composite rose to 52.2 while France rose to 51.2. But Spain dropped to 48.4 (8-month low). Italy dropped to 47.6 (20-month low). Germany dropped to 45.7 (28-month low).

                        Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “Any hopes of the eurozone avoiding recession are further dashed by the steepening drop in business activity signalled by the PMI. Not only is the survey pointing to a worsening economic downturn, but the inflation picture has also deteriorated, meaning policymakers face an increasing risk of a hard landing as they seek to rein in accelerating inflation.

                        Full release here.

                        US Mnuchin on Chinese Yuan, trade and Fed

                          US Treasury Secretary Steve Mnuchin met with China PBoC Governor Yi Gang on the sidelines of the IMF summit in Indonesia. Mnuchin said after the meeting that “I expressed my concern about the weakness in the (yuan) currency and that as part of any trade discussions, currency has to be part of the discussion. And he added that “we had a productive explanation from his standpoint on those issues” regarding Yuan’s depreciation against Dollar. It’s reported that Yi told people in a closed-door session that China’s monetary policy was on an opposite cycle to that of the US.

                          Mnuchin declined to comment on whether China would be named a currency manipulator in the upcoming Treasury report. But he emphasized that “The currency report is something we report to Congress. It is done pursuant to two separate pieces of legislation. This is not a political document.”

                          But on trade, Mnuchin insisted that”It has to be that we can reach an agreement on action items that can rebalance the relationship. We’ve made it clear that if they have real action items that they want to discuss that we will listen.”

                          On Fed, Mnuchin said “The president likes low interest rates. The president is concerned about the Fed raising interest rates too much and slowing down the economy and those are obviously natural concerns.” Meanwhile he called this week’s stock market rout as a ” natural correction after the markets were up a lot”. And according to Mnuchin, it’s not related to high interest rates and Fed policy and “there’s really no new information in the market on the Fed or on trade for that matter.”

                          Australia NAB business conditions back to pre-Covid level, confidence still negative

                            Australia NAB Business Confidence improved to -4 in September, up from -8. Business Conditions also rose to 0, up from -6. Trading conditions turned positive, from -2 to 6. Profitability condition also turned positive, from -3 to 2. Employment condition rose from -14 to -6, but stayed negative.

                            Alan Oster, NAB Group Chief Economist “after some volatility in the last 2 months conditions are around the level seen pre-COVID. That said, they only lie at the threshold of improving/deteriorating and are well below average. Trading conditions and profitability are back in positive territory, which likely reflects the ongoing opening of the economy and the support provided by policy makers. Employment continues to lag, however, likely reflecting the fact activity has not yet fully recovered and firms remain cautious. Confidence increased in the month, building on the gains of last month, and is now well above the trough in March. That said, it remains negative and likely fragile.”

                            Full release here.

                            Japan PMI manufacturing rose to 42.6, any hopes of robust recovery need to be tempered

                              Japan PMI Manufacturing rose to 42.6 in July, up from 40.1. PMI Services improved slightly to 45.2, up from 45.0. PMI Composite rose to 43.9, up from 40.8.

                              Bernard Aw, Principal Economist at IHS Markit, said: “The Japanese economy continued to struggle at the start of the third quarter, with latest flash PMI data indicating a further sharp contraction in business activity during July… Any hopes of a robust recovery need to be tempered as business sentiment about the year-ahead outlook remained pessimistic on balance”.

                              Full release here.

                              ECB Lane: Standard Poole analysis calls for a two-sided and flexible PEPP approach

                                ECB Chief Economist Philip Lane said in a speech there is “considerable uncertainty about pandemic dynamics. Recent intensification in some countries represents a “significant downside risk” and requires “prolongation of various fiscal support measures”.

                                But, “the launch of vaccination campaigns is a milestone in the eventual resolution of the pandemic health crisis, even if there is only cloudy visibility of the calendar towards sufficient immunity to enable the restoration of normal economic activity,” he added.

                                Under these conditions, standard Poole analysis calls for a “two-sided and flexible approach” to the total scale of PEPP. “If favourable financing conditions can be maintained with asset purchase flows that do not exhaust the envelope over the net purchase horizon of the PEPP, the envelope need not be used in full. Equally, the envelope can be recalibrated if required to maintain favourable financing conditions to help counter the negative pandemic shock to the path of inflation.”

                                Full speech here.

                                Canada employment dropped -1.1k, missed expectation, USD/CAD slightly higher

                                  Canadian employment market contracted -1.1k in April, much worse than expectation of 20.5k. Unemployment rate was unchanged at 5.8%, in line with consensus.

                                  From US, import price index rose 0.3% mom in April, below expectation of 0.50%.

                                  USD/CAD recovers in reaction to the release, but there is no follow through buying yet. It has to overcome a minor support at 1.2813 before forming a temporary bottom. For now, further decline is still expected in the pair before the weekly close.

                                  Sterling surges as CPI accelerated to 2.7%, beat BoE’s projections

                                    Sterling surges broadly after stronger than expected consumer inflation reading. Headline CPI jumped to 2.7% yoy, up from 2.5% yoy and beat expectation of 2.4% yoy. Core CPI also accelerated to 2.1% yoy, up from 1.9% yoy and beat expectation of 1.8% yoy. The headline inflation reading is notably higher than BoE’s own projection of 2.5% as projected in the latest inflation report. That could prompt policy rethink among BoE MPC members. And inflation hawks likes Michael Saunders now have some reasons to strike back. Full release of CPI here.

                                    Also released, RPI jumped to 3.5% yoy, up from 3.2% yoy and beat expectation of 3.4% yoy. PPI input slowed to 8.7% yoy, down from 10.3% yoy. PPI output slowed to 2.9% yoy, down from 3.1% yoy. PPI output core slowed to 2.1% yoy, down from 2.3% yoy. Also from UK, house price index accelerated to 3.1% yoy in July, above expectation of 2.9% yoy.

                                    RBNZ downgraded both GDP growth and inflation forecasts

                                      The overall RBNZ monetary policy decision is rather dovish. OCR is left unchanged at 1.75% for a 19th straight month as widely expected. Governor Adrian Orr noted in the statement that growth and employment remain “robust” and near their “sustainable levels”. But CPI remains below the 2% mid-point of target. And, the best way to see inflation moving back to target would be “to keep the OCR [overnight cash rate] at this expansionary level for a considerable period of time”. RBNZ is clearly is no rush to raise interest rates.

                                      Adding to that, the GDP growth and inflation forecasts were also downgraded for the period ahead. The downgrade in GDP forecasts were quite significant in 2019 and 2020. CPI is still projected to hit 2.0% target 2021 but is expected to be lower in both 2019 and 2029.

                                      GDP is projected to grow 2.8% (2018), 3.1% (2019), 3.3% (2020), 3.1% (2021). Back in February, GDP projections were 2.9% (2018), 3.3% (2019), 3.5% (2020), 3.1% (2021).

                                      CPI is projected to be at 1.1% (2018, 1.6% (2019), 1.8% (2020), 2.0% (2021). Back in February, CPI projections were 1.1% (2018), 1.7% (2019), 1.8% (2020), 2.0% (2021).

                                      This is May’s forecast summary.

                                      This is February’s forecast summary.

                                      And here is the press conference:

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                                      Fed Kaplan worries about imbalances and instabilities due to interest rate pledge

                                        Dallas Fed President Robert Kaplan said in a telephone interview that if Fed makes the pledge to keep rates near-zero into 2023, “you need to fulfill it, unless there’s an extraordinary reason why you can’t…. My worry was that this would encourage in the shorter run more risk- taking and maybe create imbalances and instabilities.”

                                        As the economy recovers, the so call-neutral rate will rise. In that case, he said, “if you keep your setting of the fed funds rate exactly where it is, you are actually increasing the level of accommodation.” If unemployment rate approaches 3.5% while inflation is a little below 2%, ” do you actually want to be increasing the level of accommodation? I don’t know if you do or don’t, and that’s the point,” he added.

                                        German factory orders rose -10.4% in May, still 30% lower from pre-crisis level

                                          Germany factory orders rose 10.4% mom in May, below expectation of 15.0% mom. Excluding major orders, real new orders in manufacturing rose 8.9% mom. Comparing with February, the month before coronavirus restrictions, new orders were -30.8% lower.

                                          Look at some details, domestic orders rose 12.3% mom. Foreign orders rose 0.8% mom. New orders from Eurozone rose 20.9% mom. New orders from other countries rose 2.0% mom. Intermediate goods rose 0.4% mom. Capital goods rose 20.3% mom. Consumer goods rose 4.7% mom. Automotive rose

                                          Full release here.