Morning Report – Monday 28th September

Main Headlines

The EU told U.K. negotiators they must accept some of the bloc’s key demands, such as committing to a clear, legally binding mechanism for resolving disputes, if they want to make progress by an October deadline. The two sides meet today for a final round of formal talks where it is hoped that a basis for working on the text for a deal can be established.

European stock futures suggest a strong open, while Asian equities and U.S. futures rose as investors weighed further signs of recovery in China versus more virus outbreaks in other parts of the world. Crude and Treasuries slipped, and gold was little changed.

GBP

The British Pound continues to be weighed down by uncertainty over the future of the EU-UK relationship as the October 15 deadline nears. The market will await news from negotiations this week for direction.

EUR

Christine Lagarde warned against removing fiscal stimulus too soon, as it might short-circuit the recovery. Ignazio Visco agreed with the ECB chief, saying advances in the Covid-19 fight probably won’t give any unexpected GDP boosts, so “more public spending is needed.” The same goes for monetary stimulus, Governing Council member Pablo Hernandez de Cos told La Razon. He foresees inflation at well below target, and recent currency moves mean there is “no room for complacency.”

USD

The dollar hovered near a two month peak against a basket of currencies in early trade, as doubts about recovery persisted ahead of a barrage of economic data and political developments in the United States. While a rebound in U.S. stocks on Friday has helped to curb the rally, signs of slowdown in the nascent recovery from the pandemic and political uncertainties have kept investors on guard. Investors now look to the first U.S. Presidential debate on Tuesday as the election in early November is fast approaching.

Main Economic Data/Central Banks/Government (All Times BST)

10:45 a.m.: ECB’s Schnabel speaks
1:50 p.m.: France sells bills
2:30 p.m.: ECB’s Schnabel speaks
2:45 p.m.: ECB’s Lagarde in European Parliament hearing
3:00 p.m.: BOE’s Bailey speaks

Final scheduled round of Brexit talks in Brussels