Morning Report – Thursday 10th September

Main Headlines

The European Union is studying the possibility of legal action against the U.K. over Prime Minister Boris Johnson’s plans to breach the agreement governing Britain’s withdrawal from the bloc. The EU may have a case to seek legal remedies under the divorce agreement even before controversial provisions in the U.K. internal-market bill are passed by Parliament and that it would have a clear justification once the bill becomes law, according to the bloc’s preliminary analysis of the U.K. legislation.

The luxury industry’s biggest takeover is falling apart as LVMH moved to call off a $16 billion purchase of Tiffany & Co., which countered with a lawsuit to try to keep the deal on track. The Louis Vuitton owner said the French government requested that it delay the deal for reasons related to a U.S.-France trade dispute. Tiffany said that LVMH was trying to leverage the protests against police brutality and the Covid-19 pandemic to seek a lower price.

A global equity rebound eased as U.S. and European futures fell as investors weighed whether a rally in technology shares could overcome lingering concern about valuations. Equities in Japan and Hong Kong came off the session highs. Treasuries rose while oil fell and gold was little changed.

GBP

Sterling steadied above a six week low but could lose more ground due to growing concern that Britain and the European Union will fail to agree a trade deal. Sentiment has taken a hit and the pound has lost ground against most currencies over the last week.

EUR

Investors will closely watch Christine Lagarde’s comments today as policy is set to stay on hold. Just a few days ago, the market consensus was that officials may indicate downside risks have intensified, signalling more easing before year end. However, the euro gained yesterday as insiders suggested officials have become more confident, potentially reducing the need for more stimulus.

USD

Dollar flows are being driven by US equities following the recent sell off. A small rebound has filtered through to Asia which suggest risk appetite is improving again. The greenback is a touch weaker overnight ahead of ECB decision.

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

7:45 a.m.: France July Industrial, Manufacturing Production
9:00 a.m.: Italy July Industrial Production
12:45 p.m.: ECB Rate Decision
1:30 p.m.: ECB’s Lagarde briefing
1:30 p.m.: U.S. Initial Jobless Claims
5:30 p.m.: ECB’s Villeroy speaks
6:00 p.m.: ECB’s Lagarde speaks at Bundesbank event

Corporate Events

Earnings include Knorr-Bremse, WM Morrison, Dunelm, Oracle, Chewy, Peloton