Good Morning,

The government has insisted that the good Friday Agreement is not at risk, following a tweet from Joe Biden that “any trade deal between the US and UK must be contingent upon respect for the Agreement and preventing the return of a hard border. Period”. The government’s line is that this legislation is actually protecting that agreement, because this transition agreement, as is, would inadvertently put the agreement in jeopardy. The PM has agreed to an amendment in his bill that would give MP’s a vote ahead of enacting any possible law breaking. Europe’s position is that they are still optimistic that a deal can be done with the UK. Our position is that we’d like that sooner rather than later.

Other UK news is mostly covid focussed, with the government pondering a second national lockdown following advice from SAGE to do so. It’s almost inevitable that this will have to happen if the government wants to keep the pressure off the NHS, the question will be whether they can hold out long enough for it to coincide with the October half term, so that school closures don’t cause even more disruption. Cases in the UK are doubling about every week at the moment and though that might well slow with lockdowns in place regionally, that would put us well in excess of 20,000 cases per day by the time a national lockdown came back into play – which seems like a much bigger number than anyone would be comfortable with.

The BBC is reporting that rail franchises could be nationalised in the not too distant future, as the bailout in place to keep firms afloat with diminished passenger numbers expires this Sunday. The government is yet to put in place new agreements and the number of journeys being made is still woefully low by any standard, meaning that operators may just choose to hand back their franchise instead of pumping their own money in to tide them over (for some that’s less of a choice, as the cash just isn’t there). There’s a sensible case for the government to extend the scheme, not least because they’re not doing the best job of handling what is already on their plate, but to bring something down to the 11th hour and for the transport secretary not to have something of this importance under control by now does seem a little reckless.

Yesterday’s Bank of England meeting saw a 9-0 vote in favour of keeping monetary policy where it is, but the market did take the opportunity to sell sterling when the Bank disclosed that they will begin “structured engagement” with regulators on how negative interest rates would work in practice. The continuing conversations over negative rates and them now moving  to the operational requirements means that it probably won’t take much in the way of bad news and lower inflation before the bank flip the switch – though the market expectation is that they’d probably load up on more QE first before they took the even greater unknown of negative rates.

This morning we’ve seen UK retail sales number, which show the fourth consecutive monthly rise. The number was also higher on August last year, which bodes well for an overall trend to towards normality (albeit in isolation from any other data that shows the trend going the other way). The big winners wer DIY and home furnishings, up almost 10% compared to the pre-pandemic numbers in February. Clothing and fashion demand remains strongly supressed though, at about 16% below February’s levels.

Across the Pond: Trump has said that he doesn’t want Chinese parent company ByteDance to retain a majority stake in TikTok, because that would still put Americans’ personal information at risk. ByteDance are proposing an IPO on the New York Stock Exchange of the newly structured US TikTok entity as a way to keep the white House happy. The FT are reporting that Kevin Systrom the founder of Instagram could be installed as the CEO of the new company, which would in itself be a reason to buy the stock, let alone the continued explosion in popularity of the platform.

Trump will be feeling a little disappointed this morning after US pharma company Moderna signalled that their vaccine timeline isn’t going to meet Trump’s pre-election availability promises. The company may have to wait until December to have analysed the data from their mass participation trial. In a slightly ironic twist, it would be a slowing infection rate that would delay the data being available to them, whereas an increasing rate would mean they could crunch the numbers sooner.

Today’s data highlight was the UK retail sales numbers. Despite them being slightly better than expected, the FTSE has traded lower on the broader lockdown picture. Currently it’s trading 25 points above the 6,000 level and investors will be hoping it can remain above that going into the weekend. Hopefully we’ll get some optimistic Brexit comments from the powers that be to give us something to smile about as Friday draws to a close!

Have a great weekend and Shanah Tovah

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