In a boisterous finale to the Conservative party conference Prime Minister Boris Johnson promised to “get Brexit done” and “send Jeremy Corbyn into orbit where he belongs”. Boris spoke about his proposals to solve the Irish backstop fiasco and said his offer provided a compromise for both sides.
Mr Johnson insisted that Northern Ireland would leave the customs union immediately (with customs checks being carried out away from the border). Northern Ireland would remain in a “special relationship” with the EU until 2025, when it would make a decision on whether to stay in the “special relationship” or move in line with the rest of the UK, which may have diverted away from regulatory alignment by this stage.
The “two borders for four years” plan was briefed to major EU counterparts on Tuesday and the prime Minister has stressed this offer must form the basis for a deal with a take it or leave it stance. It is thought that if a deal is not reached by October 11th, Boris will look to take the UK out of the EU without a deal on 31st October.
The shadow chancellor, John McDonnell, insisted that Jeremy Corbyn must lead any temporary government should the PM be ousted, although the prospect of a hard-left Marxist leading the country is failing to gain support from other opposition parties who are instead wanting to install their own caretaker PM.
In Europe, Angela Merkel said EU countries would examine the proposal “closely and evaluate them together. It is important that we stick together”. And Mr Juncker said the European Commission was “ready to work 24/7 to make this happen” although highlighted the big differences that remain. Overall, Boris’s proposals received a lukewarm reception but it’s clear, there’s a lot of work to be done if a deal is to be struck before the 31st October.
There was little economic data available in the eurozone yesterday, but Sweden suffered a ferocious slump in manufacturing output, the worst reading since 2008. The country’s PMI reading plummeted to 46.3 in September, pointing to increasing stress in Europe’s supply chains. Sweden’s economy is watched closely by analysts as it is a leading indicator for global industry and typically trends approximately 2 months ahead of the eurozone. “If you think the euro area mess is over, then think twice. Sweden is the canary in the coal mine,” said Andreas Steno Larsen from Nordea Bank.
Today sees the release of much data in the eurozone, including Markit Services PMI, Producer Price Index and Retail Sales. Results will be closely watched as analysts try to forecast future economic performance of the eurozone and the possibility of a recession.
The Purchasing Managers’ Index recorded its lowest reading in 10 years as the China trade war hit US exports and employment. The US factory sector posted a score of 47.8 for September, its lowest reading since June 2009, and that followed August’s contraction of 49.1. The consensus had been for a rise to 50.1. Manufacturing work had been one of the US’s successes but with global trade tensions rising with little resolve in sight, this sector is now too feeling the squeeze.
Adding further fuel to global trade tensions, the World Trade Organisation has paved the way for the US to impose retaliatory tariffs on EU exports to the US, following the EU’s illegal subsidies to Airbus.
The US can now apply annual tariffs to the tune of $7.5bn although this long running trans-Atlantic aircraft dispute won’t come to a close anytime soon as next year the WTO rules on how much the EU can impose on tariffs against the US, in a separate case against the US aircraft provider Boeing.
Following the Reserve Bank of Australia’s 25 basis point cut on Tuesday, the third cut this year, interest rates are now sitting at 0.75%, a new record low. The cut had been widely forecast and did not come as a surprise. It is hoped this latest cut will stimulate modest growth whilst keeping control on unemployment, which hit 5.3 percent in September.
Previous cuts helped house prices in Sydney and Melbourne (Australia’s two largest cities) rebound in recent months and National house price figures released yesterday showed the biggest rise since March 2017. Callam Pickering, a former RBA economist said, “Bank officials are reluctant to discuss quantitative easing, but it becomes a real possibility the closer we come to a cash rate of 0%”.
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