So we seem to be – for now – at a point where the legislation to block a no-deal will pass through the Lords by Friday and the call for a snap election by Boris has failed. He could yet get an election, by trying to legislate for it as it would only need a simple majority, but that isn’t the working assumption (for now).

So where does this leave us? It bizarrely seems to be in Jeremy Corbyn’s hands at the moment, as he could well call a vote of no confidence to trigger an early election once a no-deal scenario has been entirely averted. The Labour party are still nine points behind in the polls and are reported to be in chaos behind the scenes, so it’s probably not their ideal scenario but it’s all that they’ve got to work with.

Those Tory MP’s that voted against the government on Wednesday won’t be able to stand on a conservative ticket (the irony of Johnson not letting people vote against the Party, when he did so continuously against Theresa May!). But they might be the ones to get an election afterall… the BBC has said that Johnson’s high risk option to get an election would be to call a vote of no confidence in his government which if no alternative governing arrangement was formed within 14 days then we would automatically go to election.

The government appears to be on the campaign trail already, with Sajid Javid’s new spending plans being revealed alongside stories of his youth and dreams of a better future! The targets of his £15bn spending spree are Labour ‘leave’ seats as well as the police, health and education – which certainly need some investment, but cynically are definitely the areas you target when trying to win votes. Mr Javid has declared this as the ‘end of austerity’, but the distance between the levels of funding these departments will have next year compared to what they had before 2010 is as much as 25% – so maybe ‘the beginning of the end of austerity’ might have been a more accurate soundbyte.

Whilst this is playing out the manufacturing sector is in a ‘pre-Brexit nosedive’ according to industry experts. The domestic order books have declined and despite the drop in Sterling, export demand hasn’t grown to fill any gaps. The speed at which the sector is contracting is the fastest in seven years too. Manufacturing makes up 10% of the UK economy, but when the construction sector is in free fall and services is barely above the waterline, it does look like we’re headed for recession – if not already there and waiting for the data to catch up.

 

Away from Brexit: Christine Lagarde was giving testimony at confirmatory hearings for her new job at the top of the ECB and has pledged to review the bank’s policies on negative rates and bond buying. We’re not sure that anything will be enacted after those reviews as she has already acknowledged that support will need to be in place “for an extended period of time”. Ms Lagarde also made calls on European governments to start on fiscal stimulus to steer economies away from recession – something her predecessor was never really able to get governments to agree on. One other point of interest was her willingness to look at combining government bonds into a single bond instrument that would give investors exposure to all of Europe – similar to a collateralised debt obligation (you’ll remember those as the bonds that broke the US economy back in 2008)

Former Fed president Alan Greenspan has warned that the US taking on negative interest rates is ‘only a matter of time’. He argues that it’s simply a case of investors chasing yield and that the demand for something that returns a positive yield is so high that it will eventually turn negative. The Federal Reserve are forecast overwhelmingly to cut rates when they meet this month, but a 25 basis point cut will still leave the Fed interest rate well above where equivalent bonds are currently trading.

Someone taking advantage of this is Apple. They’re set to tap the bond market for the first time in a couple of years. Apple hadn’t needed to go to the markets for a while, as Trump’s tax amnesty on overseas profits allowed it to bring back its vast overseas cash-pools and spend those, but now it will raise debt to go towards more share buybacks. The company wants to become net cash neutral over time, which is going to involve continuing their spending spree.

Looking to today: We’d hope political drama is off the table, but we could well stand corrected. If it is though, then we’d take some time to look the raft of US data that’s due out, including employment numbers ahead of tomorrow’s non-farms, Services PMI and also their energy inventories which might move commodity markets.

Have a great day.