Morning Report – Tuesday 8th September

Main Headlines

David Frost warned the EU that progress must be made in talks starting today if an agreement is to be reached in time for Britain’s final separation from the bloc at the end of the year. “We have now been talking for six months and can no longer afford to go over well-trodden ground,” Britain’s chief negotiator wrote in a statement before he meets counterpart Michel Barnier. State aid and fisheries remain sticking points.

Donald Trump vowed to limit the U.S. economic relationship with China. The president sought to contrast himself with Joe Biden by threatening to penalise any American companies that create jobs overseas and to forbid those that do business in China from winning federal contracts. His administration is also weighing a ban on cotton products from Xinjiang over human rights in a move that could affect the world’s largest clothing brands.

China is hitting back at U.S. efforts to keep its tech companies out of the internet and is set to launch its own initiative to set global standards on data security. Chinese Foreign Minister Wang Yi will announce the plan today in Beijing, the WSJ said.

Chinese stocks and the yuan fell amid rising China-American tensions. U.S. equity futures were mixed, with Nasdaq futures bucking gains. European contracts ticked higher. Oil extended its retreat below $40 a barrel. Treasuries rose and Gold slipped.

GBP

Sterling looks on track to post loses for a fifth day in a row as Brexit concerns increase. The pound has continued to fall from recent highs after U.K. Prime Minister Boris Johnson ratcheted up the chances of trade negotiations failing with the European Union. Investors are refocusing on Brexit with the two sides accepting they need to reach a deal by mid-October in order to pave the way for a smooth exit at the end of the year, when the Brexit transition period ends.

EUR

The main focus this week is on the European Central Bank’s policy decision on Thursday. The recent rise in the euro is causing consternation at the European Central Bank, but investors say its policymakers could have a tough task on their hands in trying to weaken the currency.

USD

The dollar held firm overnight as investors focused on whether the ECB will become more accommodative. Volumes were low yesterday during holiday trade.

Main Economic Data/Central Banks/Government (BST)

8:30 a.m.: South Africa Q2 GDP
9:00 a.m.: Italy July Retail Sales
10:00 a.m.: Euro-Area Q2 GDP, Employment