The week started so well for the Prime Minister. Tory rebels failed to muster the necessary 48 votes to force the no confidence vote. The withdrawal agreement had proven unacceptable to all parties. The saving grace ... the no-deal option appeared to be even worse. Staying in the EU was becoming a more favoured option.
Theresa May had made it clear she would exhaust all options, herself included. The performance on Radio 5 live evidence of the long haul. Mrs May has the "emotional engagement of an answering machine", claimed Patrick Kidd in the Times today.
Press 1, if you want a facilitated customs arrangement; Press 2, if you want to avoid a hard border down the Irish Sea; Press 3 for tariffs; 4 for another vote; Your call is important to us, just keep those questions coming!
"Is your deal better than the one we have already, staying within the European Union?" asked Michael from Kent. Was this Heseltine? Who knows ... "Don't be absurd" the PM wanted to reply but held the line. "It will be a different world but a good one, I genuinely believe there is bright future for this country". Taking back control, a truly global Britain, seeking a rightful place in the world, on the edge of Europe, that sort of thing.
The EU plans to meet this week-end. Angela Merkel is planning to veto the session unless France and Spain get into line. "Fish and Gibs" on the menu. The French reluctant to let go of the fishing quotas, the Spanish requiring additional assurances on the future of Gibraltar.
It all seemed so clear last week-end, an ambitious free trade agreement the outcome at the end of the withdrawal agreement. We get to keep the fish, save some money, expats get to stay in the sunshine. Then came the fudge ...
"Britain and the EU "envisage having a trading relationship on goods that is as close as possible with a view to facilitating the ease of legitimate trade." Plus ...
The French just won't let go of the fish. the EU boats will continue to seek access to British fisheries. Both parties have agreed to use "best endeavours" to conclude and ratify a fisheries agreement no later than July 2020. It's a fix and a fudge, agreeing not to disagree, the basis of agreement once again.
For the DUP, the deal is worse than Jeremy Corbyn in power. For Dominic Raab, the deal is worse than staying in the EU. For all parties, Brexit is like the battery advert, Theresa May the Duracell bunny.
Last one standing, in the end we may all say ... "Look whatever you agree in the end is fine with me ... especially if that means "status quo ante referendum". Yep get them to vote on that ... status quo ante referendum ... we have exhausted all other options ...
Where next for oil prices ...
Oil prices Brent Crude closed below $60 dollars this week-end. WTI closed at $50 dollars. Demand is slowing, stocks are rising, the Saudis continue to pump oil above quota for now. President Trump thanks Saudi Arabia for pushing prices lower in a tweet. "Thank you Saudi Arabia but let's go lower".
Energy bills in the Trump Hotel Group the main beneficiary. Not so the shale oil producers of America, with an average cost of production at around $50 dollars. US output will be slashed. The nodding donkeys will be put to sleep and soon.
We expect a 20% drop in the oil rig count if prices stay at current levels. The correlation between the count and prices is high, 0.9775 with a 16 week lag. The US and Russia are just as much the price governors as OPEC. Lower prices will mean job losses in oil and coal! The good news ...
It seems unrealistic for prices to remain at current levels on fundamentals. With so much troubled oil on the waters at any given time, futures trading may yet push prices lower. We have seen this in the recent past and could do see it again in this short cycle.
Back in the UK, there was a slight setback for the Chancellor this week. Borrowing in October came in some £1.6 billion higher than prior year. Receipts were up by just 1.2%, spending in the month was up by almost 8%. Austerity is over, the pay caps have been released. Borrowing for the year to date was £26.7 billion down by £11.2 billion prior year. For the year as a whole we expect borrowing to be around £28 billion. Total government debt was £1.8 trillion around 84% of GDP. Over on the U.S.A. ...
Let's be honest ...
President Trump was in great form for Thanksgiving this week. Recovery from the mid term election set back was evident. “I made a tremendous difference in this country,” he said. “This country is so much stronger now than it was when I took office and you wouldn’t believe it and when you see it, we’ve gotten so much stronger, people don’t even believe it.”
Leaders around the world say to me when we meet, "You have made such a tremendous difference, your country is so much stronger now than it was when you took office apparently. We don't believe it."
In many ways they are right to have their doubts. Despite strong GDP growth this year, the stock market gains have been eradicated as markets fret about tariffs and trade wars. Fears for growth in 2019 materialize as Trump policies generate domestic inflation and hit job prospects.
The President no longer claims credit for the strength of the stock markets, blaming Fed Chair Jerome Powell for the rapid rise in rates. This week he attacked Steven Mnuchin, the Treasury Secretary who made the Powell appointment in the first place. Mnuchin, Mattis and John Kelly may be on the way out.
The President pardoned "Peas" the Thanksgiving Turkey this week. It is a tradition bordering on farce with an element of tragedy. The average life span of a turkey with a Presidential Pardon is less than two years. Over fed and over weight, life on the farm is not rich in longevity. Two years at best. 'That's better than the average life span of a senior official in the White House!
That's all for this week, have a great week-end, Don't Miss Our Monday Morning Update, we will expand further on market moves ... and assess the fortunes of our "Empires of the Cloud" tech fund ...
The Saturday Economist
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