A sharp turnaround in US markets yesterday, which saw them close higher has seen markets in Europe also open on the front foot, despite rising concerns about a worsening slowdown in the global economy, in the wake of yesterday’s disappointing Chinese trade data.

There also appears to be some optimism that the US and China may want to keep the trade negotiations separate from the diplomatic spat involving the arrest of the Huawei CFO in Canada. This does make some sense given that there have been disagreements in the past, which hasn’t prevented discussions on trade, the problems with ZTE being a case in point.

Asia markets also had a mixed session with the Nikkei 225 falling back to close in on its lowest levels this year, which we saw back in October. Chinese markets fared somewhat better with a positive finish in Shanghai and Hong Kong.

The pound had another day to forget, sinking to its lowest levels since April 2017 against the US dollar, as Prime Minister Theresa May pulled the vote on the withdrawal agreement after it became apparent that it didn’t have the numbers to gain acceptance by MP’s in the House of Commons. As she heads back to Brussels to try and wring concessions from the EU it is unlikely she will succeed, and for all of the opposition’s claims that they could secure a better deal the EU have ruled that out.

In a sign of how febrile the atmosphere is in the UK parliament, when the Prime Minister asked whether the house wanted a Brexit deal, the chorus of “No’s” was quite telling.

If that wasn’t enough the waters around Brexit got murkier after the European Court of Justice confirmed last week’s opinion of the Advocate General that the UK could unilaterally revoke its Article 50 notification, but that it had to do it before 29th March 2019. This appears to give greater impetus to those calling for what some are euphemistically calling a “People’s Vote.” For now there doesn’t appear to be any majority in the House of Commons for that, or anything else for that matter, including a much touted plan B, or Norway+ option.

We hear a lot from MP’s about the fact that there is no majority in the House of Commons for a “no deal” Brexit, however there also doesn’t appear to be a majority in the house to prevent it, and this may help explain why the pound slid sharply yesterday.

Investors appear to be taking the view that in light of what is increasingly perceived as a dysfunctional political system that inertia could well take us into next year and a no deal Brexit by accident. This scenario certainly appears to be part of the political calculus on some parts of the Brexit favouring parts of the UK parliament, where a lack of consensus leaves us with a lack of time to do anything to prevent next year’s hard deadline.

It is perhaps this realisation that prompted yesterday’s sterling slide and could well signal further weakness in the weeks ahead as the pound heads back towards its 2016 lows just below $1.2000.

On the data side UK wage growth has risen again to its highest levels since the financial crisis for the three months to October, coming in at 3.3%, while unemployment remained steady at 4.1%.

In what could be good news for Italy and its fight with the EU over its budget, French President Emmanuel Macron announced a little giveaway of his own for French voters in an attempt to buy off the “gilet jaunes” protests. The only problem with that is it will blow a great big hole in the French budget sending it up to 3.5% of GDP. This will be something that Brussels will be unable to ignore if they sanction Italy for a budget well below that. Christmas may well have come early for Italian deputy PM’s Matteo Salvini and Luigi di Maio as they look to force the EU to back down over implementing an excessive deficit procedure against the Italian government. 

In earnings news international equipment rental company Ashtead reported this morning first half results which beat expectations. Revenues came in at £2.07bn, up 19% while first half pre-tax profits came in at £633.4m. The company went on to state that it expected full year results to be ahead of expectations.

The misery on the high street looks set to continue with Superdry shares plunging this morning ahead of their first half numbers, which are due out tomorrow. Analysts at Berenberg have downgraded their estimates for 2019-2021 saying that the company’s reliance on winter clothing and the poor performance from Primark augurs badly for a business that has already announced a profits warning this year, when they downgraded profit expectations by £10m. The shares were already down over 60% this year even before today’s declines, and tomorrow’s numbers could put management under further pressure.

US markets look set to open slightly lower in the wake of last night’s rebound ahead of the latest US PPI numbers which are expected to fall back to 2.5% from 2.9% largely on the back of the recent falls in oil prices.

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