Good Morning,

The FT story about Boris changing the terms of the withdrawal agreement caused some unwanted tensions between the negotiating parties on Monday. On Tuesday it lead to the most senior lawyer the government has to resign. The UK Internal Market Bill has been published today and the government talks about it being a necessary piece of legislation, without which “a Welsh lamb producer could end up unable to sell their lamb in Scotland, or Scotch Whisky producer could lose access to supply from English barley farmers”, however it is clearly not just resolving this issue, as the opposition has said it “reopens old arguments”, Scotland have said it “undermines devolution” and the Welsh Brexit minister has sad it is an “attack on democracy”.  How this plays out is anyone’s guess. The BBC has more.

Sterling has been put on the back foot because of the news, slipping back down to levels last seen in July and teeing itself up for further falls if there’s nothing positive out of the negotiations that end on Thursday. Currently those talks aren’t looking like having a happy ending, with the French minister for external trade warning that there can’t be a Brexit deal without the acknowledgement from the UK that there needs to be a level playing field. The FT has a great article on what Franck Riester had to say about the negotiations, as well as some of France and Europe’s views on globalization and reshoring supply chains of strategically important products.

Stock markets have also taken a hit, but mostly on the general theme of  ‘how long can we keep pretending everything is OK?’ which is a state of mind that people are struggling to maintain. Adding to yesterday’s downward move was news that AstraZeneca have had to halt its phase 3 vaccine trial in the US after one patient suffered a serious adverse reaction. This could just be a tiny blip in the race to get a vaccine out there, but it’s almost because everything has gone so well so far that this feels like a major knock to confidence. Currently the market is wrestling with itself over the sky high values that it has set for assets and the economic realities that are hitting Main Street and any reminder of the realities doesn’t sit too comfortably. That said, there’s still so much money out there and so much pressure to produce an inflation beating return that we can’t see an end to some of the recklessness for a while. Geoffrey Gundlach told Bloomberg that he sees high yielding bond defaults as being likely to double, but that nobody is heeding the warnings. He says “it’s foolhardy to believe that one can have this kind of a shock to an economy and it just gets healed through a one-shot deal” – I agree.

One stock on a rollercoaster is Tesla. Yesterday it lost the combined market value of Ford and GM as it was passed over for inclusion in the S&P500. The 21% drop is the largest the company has ever seen, knocking $82bn off the value – though for context late last month they managed to add more than $50bn through the share price rising in a single day! The share price was almost $500 at the end of August and is now ‘only’ $330.

Oil took a hammering yesterday, with a 5% move lower. The fall is a continuation of a theme that we’ve seen for the last few sessions, albeit at a faster rate, as investors struggle to work out where demand for product might come from or the rest of the year.

In the US Presidential race, Miami is looking like the swing state to watch: Polling there shows a dead heat between Trump and Biden. Interestingly this is happening in a county in Florida, Miami-Dade, where half of the residents are born outside of the US and is being driven by a massive overspend by the Trump campaign on Spanish language TV advertising. Biden is actually behind where Hillary was at this point in the state and needs to double down on efforts quickly if he’s to make back some of his losses. The latest polls do still show that Biden is ahead on a national basis with a 7-10 point lead, which translates to a roughly 70% chance of him taking the win.  The first presidential debate isn’t until the end of this month and the vice presidential debate is  the 8th October – so there’s a while to go before the fun really starts.

Trump Is deploying a tactic he used against Hillary in 2016, by announcing a list of potential supreme court justices later today. He made the move back in 2016 to show just how conservative an approach he was taking . This time round he’s doing it to shore up support for him from the supreme court bench having had a couple of rulings against decisions that his administration made back in June.

That list is the ‘highlight’ of today’s expected announcement, but as always, it’s the unexpected that’ll get ya.

Have a great day.

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