ERG Rees-Mogg’s letter to request no-confidence vote on PM May

    Chair of the European Research Group (ERG), Jacob Rees-Mogg, released his letter to Sir Graham Brady, chair of the 1922 Committee, requesting a no confidence vote in Prime Minister Theresa May.

    Full text of the letter:

    A few weeks ago, in a conversation with the chief whip I expressed my concern that the prime minister, Mrs. Theresa May, was losing the confidence of Conservative members of parliament and that it would be in the interest of the party and the country if she were to stand aside. I have wanted to avoid the disagreeable nature of a formal vote of no confidence with all the ill will that this risks engendering.

    Regrettably, the draft withdrawal agreement presented to parliament today has turned out to be worse than anticipated and fails to meet the promises given to the nation by the prime minister, either on her own account or on behalf of us all in the Conservative party manifesto.

    That the Conservative and Unionist party is proposing a protocol which would create a different regulatory environment for an integral part of our country stands in contradistinction to our long-held principles. It is in opposition to the prime minister’s clear statements that this was something that no prime minister would ever do and raises questions in relation to Scotland that are open to exploitation by the Scottish National Party.

    The 2017 election manifesto said that the United Kingdom would leave the customs union. It did not qualify this statement by saying that we could stay in it via a backstop while annex 2, Article 3 explicitly says that we would have no authority to set our own tariffs. It is also harder to leave this backstop than it is to leave the EU, there is no provision equivalent to article 50 of the Lisbon treaty.

    The prime minister also promised an implementation period which was the reason for paying £39bn. As was made clear by a House of Lords report in March 2017 there is no legal obligation to pay anything. This has now become an extended period of negotiation which is a different matter.

    The situation as regards the European court of justice appears to have wandered from the clear statement that we are taking back control of our laws. Article 174 makes this clear as does article 89 in conjunction with article 4.

    It is of considerable importance that politicians stick to their commitments or do not make such commitments in the first place. Regrettably, this is not the situation, therefore, in accordance with the relevant rules and procedures of the Conservative party and the 1922 committee this is a formal letter of no confidence in the leader of the party, the Rt. Hon. Theresa May.

    I am copying this letter to the prime minister and the chief whip and although I understand that it is possible for the correspondence to remain confidential I shall be making it public.

    ECB Holzmann expressed criticism toward further monetary easing

      New Austrian National Bank Governor and ECB Governing Council member Robert Holzmann set out his hawkish line over the weekend. He told broadcaster ORF that He’d “probably express more criticism toward proposals for future deepening of the monetary footprint.” He noted that “Cheap money has its charms but also its limits, especially when it lasts for a long time.”

      Holzmann also said the “probability of further effects” of monetary stimulus was “very slightly”. On the other hand, the short- or long-term risks associated “have risen to a great extent because low rates per se carry the risk of misallocation of resources and misallocation of price discovery.

      He added: “You see this in real estate prices, in gold prices and in erratic stock prices. The long-term effects could be very negative for Europe and the world.”

      BoJ Nakagawa sees positive developments, but loose monetary policy still needed

        BoJ Board member Junko Nakagawa struck a cautiously optimistic tone today about the Japanese economy, citing “positive developments” and “signs of change in corporate price and wage-setting behavior.”

        However, she was quick to note that the country has not yet achieved its price target “in a stable, sustainable fashion.”

        Nakagawa noted that there are chances inflation could accelerate beyond initial expectations. However, she also warned of the potential for inflation to decelerate once the pass-through effects of higher costs begin to moderate.

        The policymaker underscored the need for BoJ to maintain its ultra-loose monetary policy for the time being, citing the prevailing economic uncertainty.

        Fed’s Schmid: Path and destination of rate cut yet to be determined

          Kansas City Fed President Jeffrey Schmid highlighted in a speech overnight the decision to lower rates this year as a reflection of the “growing confidence” in inflation’s moderation.

          This optimism, he explained, stems from signs that “both labor and product markets have come into better balance in recent months.”

          While acknowledging this progress, Schmid cautioned, “It still remains to be seen how much further interest rates will decline or where they might eventually settle.”

          Schmid also addressed concerns about the implications of large fiscal deficits on monetary policy. He emphasized that such deficits are not inherently inflationary, as long as Fed maintains its commitment to the 2% inflation target.

          However, he warned that this approach could necessitate “persistently higher interest rates,” creating tensions with political authorities. He noted, “History has shown that efforts to avoid higher interest rates by accommodating deficits often result in higher inflation.”

          UK PM May could face no-confidence vote as soon as next Tuesday

            UK Prime Minister Theresa May’s spokesman said today that there is “strong support from the business community in recent days” for her highly criticized Brexit draft agreement. Meanwhile, May is expected to appoint another Brexit minister, rather than getting rid of the department. But at the same time, it’s also reported that May will face a no-confidence vote as soon as next Tuesday as Conservatives gather 48 written requests.

            So far, 19 Conservative MPS have made public their requests. ERG leader Jacob Rees-Mogg led the way. Others include Henry Smith, Sheryll Murray, Anne Marie-Morris, Lee Rowley, Steve Baker, Simon Clarke, James Duddridge, Andrea Henkyns, Andrew Bridgen, Philip Davies, Peter Bone, Nadine Dorries, Martin Vickers, Adam Holloway, John Whittingdale, Laruence Robertson, Mark Francois and Maria Caulfield. And of course, there are those tho haven’t made the request public.

            UK Johnson sets red lines ahead of EU talks

              UK Prime Minister Boris Johnson indicated to the parliament that he won’t accept a deal with EU that requires the UK to move in step automatically. His comments are seen as setting the red lines for tonight’s discussion with the EU.

              He told the parliament, “our friends in the EU are currently insisting that if they pass a new law in the future with which we in this country do not comply … then they want the automatic right … to punish us and to retaliate.”

              “And secondly, they are saying that the UK should be the only country in the world not to have sovereign control over its fishing waters”, he added. “I don’t believe that those are terms that any prime minister of this country should accept.”

              Johnson is set to travel to Brussels later today for a dinner with European Commission President Ursula von der Leyen to work through a list of major sticking points

              Canada Trudeau: Working on the right NAFTA deal as quickly as we can

                September 30 is seen by some as the deadline for completing US-Canada NAFTA negotiation. The legal text has to be produced by October 1 so as for the current Mexican government to sign before leaving office on November 30. But Canadian Prime Minister Justin Trudeau brushed off the deadline.

                He said yesterday that “we have seen various deadlines put forward as markers to work for.” And, “we’ll do the work and try and get there as quick as we can, but we’re going to make sure that we’re doing what is necessary to get the right deal for Canadians.”

                Also, Trump appeared to have mused about renaming NAFTA to USMC, and said the “C” could be dropped if Canada didn’t sign on. Trudeau said there were “things that we’re working on very seriously, rolling up our sleeves on. I don’t think we’ve spent much time talking about what the name or potential name or renaming could be.”

                AUD/JPY bounces, ready for 97.66

                  AUD/JPY bounces today as Aussie is somewhat lifted by the recovery in Chinese Yuan, after China stepped up efforts to slow its decline. From a technical perspective, the failure to sustain below 55 4H EMA is a near term bullish sign. Immediate focus is back on 86.83 minor resistance. Firm break there will suggest that pull back from 97.66 has completed at 95.24 already. Further rally should then be seen through this 97.66 resistance.

                  Overall, near term upside momentum is diminishing as seen in D MACD. Hence, while rise from 86.04 could extend further to retest 99.32 high, upside could be limited there on first attempt. Still, sustained break of 55 D EMA (now at 92.84) is needed to confirm topping. Otherwise, outlook will remain cautiously bullish even in case of another pull back.

                  UK urges EU to match its compromises on Brexit

                    UK Prime Minister Boris Johnson said he made a “very generous, fair and reasonable offer” to the EU on Brexit. And “what we’d like to hear from you now is what your thoughts are.” And, he also told EU, “if you have issues with any of the proposals that we’ve come up with, then let’s get into the detail and discuss them.”

                    Johnson’s spokesman also noted, “We are ready to talk to the EU at pace to secure a deal so that we can move on and build a new partnership between the UK and the EU, but if this is to be possible, the EU must match the compromises that the UK has made”. And, “the PM still believes there is an opportunity to get a deal done, but the EU must understand, in order to achieve that, the backstop has to be removed.”

                    UK CPI slows to 2.0% in May, core CPI down to 3.5%

                      UK CPI slowed from 2.3% yoy to 2.0% yoy in May, lowest since July 2021. Core CPI (excluding energy, food, alcohol and tobacco) slowed from 3.9% yoy to 3.5% yoy. Both matched expectations.

                      CPI goods annual rate fell from – 0.8% yoy to -1.3% yoy, while CPI services annual rate eased slightly from 5.9% yoy to 5.7% yoy.

                      On a monthly basis, CPI rose by 0.3%, below expectation of 0.4% mom.

                      Full UK CPI release here.

                      US durable goods orders flat in Aug ex-transport rises 0.5% mom

                        US durable goods orders rose 0.0% mom to USD 289.7B in August, much better than expectation of -2.8% mom decline. Ex-transport orders rose 0.5% mom to USD 188.5B, above expectation of 0.1% mom. Ex-defense orders fell -0.2% mom to USD 271.0B. Electrical equipment, appliances, and components, up two of the last three months, drove the increase, USD 0.3 billion or 1.9% mom to USD 14.4B.

                        Full US durable goods orders release here.

                        Fed Daly: Our tools are starting to work in the market

                          San Francisco Fed President Mary Daly said in an interview that it’s “absolutely appropriate” to have Fed working with fiscal agents to help small businesses and households to “weather this near term shutdown” due to coronavirus. The fiscal stimulus from Congress and the response moves by Fed this week are “exactly what we need to do to offset some of the near-term disruption”.

                          She noted that Fed’s tools are “starting the work in the market we care about”. “It’s encouraging to see that there’s more borrowing at the discount window; it’s encouraging to see that some of the volatility in markets has settled down,” Daly said.

                          BoJ Kuroda: We will continue with our current monetary easing

                            In an interview by Nikkei, BoJ Governor Haruhiko Kuroda said, “we will continue with our current monetary easing to support corporate funding, and stand ready to take additional easing measures without hesitation as needed.” He added that there is no plan to end the asset purchases or begin selling its holdings.

                            Most candidates in the race to replace Yoshihide Suga as LDP leader and Prime Minister are pushing for another big pandemic relief package. Kuroda said, “even if fiscal policy becomes more aggressive, interest rates will remain low and help enhance the effect of fiscal policy.”

                            “Even if fiscal policy becomes more aggressive, interest rates will remain low and help enhance the effect of fiscal policy,” he added.

                            UK confirmed arranging Brexit parliament vote on Jan 15, subject to approval

                              UK Prime Minister Theresa May’s spokesman James Slack confirmed today that a vote is scheduled in the parliament on Tuesday, January 15 on the Brexit agreement. He told reporter that “Subject to parliament approving a business motion, the debate will be opened tomorrow … The prime minister said that she would close the debate next Tuesday, which is January 15, when the vote will take place,”

                              Also he added that May is not trying to delay Brexit by extending Article 50 withdrawal notice. And, the idea may have been discussed by EU officials but not by British officials.

                              US Empire state manufacturing fell to -31.3, second largest monthly plunge on record

                                US Empire State manufacturing index plunged sharply from 11.1 to -31.3 in August, well below expectation of 5.1. The -42 pts decline was the second largest monthly fall on record. 12% of respondents reported conditions had improved while 55% reported worsened condition.

                                Expectations for six months ahead, on the other hand, rose from -6.2 to 2.1. The reading suggests that firms were not optimism about the six-month outlook.

                                Full release here.

                                Fed Bullard: Lasting impact of OPEC production cut a question

                                  St. Louis Fed President James Bullard told Bloomberg TV that OPEC’s production cut was “a surprise.” But he added, “whether it will have a lasting impact I think is an open question.”

                                  He noted the challenges in tracking oil prices, admitting that fluctuations “might feed into inflation and make our job a little bit more difficult.”

                                  Regarding the current state of the global economy, Bullard pointed out that he had already expected higher oil prices given China’s faster-than-anticipated recovery and Europe narrowly avoiding a recession. He also cited strong US data as a bullish factor for the oil market.

                                  Johnson and Corbyn couldn’t agree on timetable for Brexit bill

                                    UK Prime Minister Boris Johnson met opposition Labour leader Jeremy Corbyn today. But they failed to agree on a timetable to press ahead with the Brexit Withdrawal Agreement Bill.

                                    Labour spokesperson said “Jeremy Corbyn reiterated Labour’s offer to the prime minister to agree a reasonable timetable to debate, scrutinise and amend the withdrawal agreement bill, and restated that Labour will support a general election when the threat of a no-deal crash-out is off the table.”

                                    Afterwards in the PMQs, Johnson accused Labour of seeking to scupper Brexit. Corbyn called for “the necessary time to improve on this worse-than-terrible treaty”.

                                    Australia AiG PMI dropped to 51.6, three of six sectors contact

                                      Australia AiG Performance of Manufacturing Index dropped -3.1 pts to 51.6 in October (seasonally adjusted), down from 54.7. The result suggests much slower growth in the sector. In trend terms, three of the six sectors are in contraction, metal products; TCF, paper & printing; building materials, woods, furniture & other. Employment index dropped -4.8 to 52.8, indicating slower expansion, but stays above long-run average of 48.9. Average wages index dropped -4.5 pts to 59.3, just above long-run average of 59.2.

                                      Also from Australia, PPI rose 0.4% qoq, 1.6% yoy in Q3, versus expectation of 0.3% qoq, 1.8% yoy.

                                      China Caixin PMI manufacturing rose to 49.9, easing of the economic downturn

                                        China Caixin PMI manufacturing rose to 49.9 in February, up from 48.3 and beat expectation of 48.7. The key points are “renewed rise in output as total new business picks up, “backlogs continue to rise, but employment trend remains subdued”, and “selling prices increase for first time in four months”.

                                        Commenting on the China General Manufacturing PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said:

                                        “The Caixin China General Manufacturing PMI picked up to 49.9 in February from a recent low of 48.3 in the previous month, pointing to an easing of the economic downturn.

                                        “The subindex for new orders returned to expansionary territory in February after staying in contraction for two months. Despite slipping back into contractionary territory following a rise the month before, the gauge for new export orders hit its second highest level since March 2018. Domestic manufacturing demand improved significantly, and foreign demand was not deteriorating as quickly as last year.

                                        “The output subindex also returned to positive territory. The employment subindex dropped slightly further into negative territory, suggesting no sharp rise in pressure on the job market. The measure for stocks of finished goods fell further into negative territory, and reached its lowest level since May 2016. The subindex for stocks of purchased items picked up despite staying in negative territory, indicating a marginal recovery in manufacturers’ willingness to replenish their inventories. The subindex for suppliers’ delivery times fell further into negative territory, indicating mounting pressure on their capital turnover.

                                        “Both gauges for input costs and output charges picked up, while the one for output charges rose more notably, implying that year-on-year growth in the producer price index was likely to have picked up slightly in February.

                                        “Overall, with the early issuances of local governments’ special-purpose bonds and targeted adjustments to monetary policy, the situation in the manufacturing sector recovered markedly in February due to the effect of increased infrastructure investment. Prices of industrial products also picked up due to improving demand and the rebound in international commodity prices. However, the pressure on manufacturers’ capital turnover became obvious again, which may reflect that the financing environment was not easing as expected, and the effect of credit expansion is not yet significant.”

                                        Full release here.

                                        Chinese Vice Premier Liu He to visit Washington next week for trade talk with US

                                          White House spokesperson Sarah Sanders told reports that trade talks between US and China will resume in Washington next week.

                                          She said that “we are working on something that we think will be great for everybody”

                                          And, “China’s top economic adviser, the vice premier (Liu He), will be coming here next week to continue the discussions with the president’s economic team.”