“Brexit and Negotiations…”

Brexit and Negotiations

In a summit on Saturday European leaders have unanimously signed off the negotiating guidelines for the Brexit. The signing opens discussions that will reach the climax once the UK leaves the bloc in March 2019, with or without a deal.  According to EU President Donald Tusk there is a desire to maintain a close relationship.  Many leaders are not in favour of allowing Britain to enjoy better terms outside the bloc, as such a concession could cause a precedent for other member states to leave the bloc.  He also added that the trade talks Britain wants will not start before sufficient progress has been made on divorce terms and all members agree that this benchmark has been reached.  With regards to the membership fees the UK has to pay, no formal figure was mentioned in Saturday’s meeting.  The guidelines request the UK to “respect the obligations resulting from the whole period of the UK membership” indicating the UK would have to pay until the agreed seven-year budget period has been reached at the end of 2020, even though the UK would have left by then.  The European Union chief negotiator Michel Barnier drafted a negotiating mandate that sets out the need to focus on the rights of European citizens and the border with Ireland, besides the UK’s financial obligations.

China

The manufacturing purchasing managers’ index fell to 51.2 in April from an almost five-year high of 51.8 in March, while the services PMI decreased to a six month low of 54 from 55.1. In view that both readings are over 50, the gauge shows momentum.    According to the National Bureau of Statistics (NBS) the sub-gauge for employment slipped from 50 in March to 49.2, while output fell from 54.2 to 53.8 and new and export orders also showed a decline.  In a statement the NBS said that manufacturing weakened on falling market demand, lower commodity prices and slower export growth.  Furthermore, factories remain expanding driven by growth in high-tech equipment and consumer goods.

Euro-Area Inflation

The inflation in the European area has reached the goal as set by the European central bank and setting up a debate whether the stimulus policies are close to exit. According to data from Eurostat, consumer prices increased at an annual 1.9 percent in April after climbing to 1.5 percent in March. Furthermore, core inflation that excludes volatile items such as food and energy prices increased to 1.2 percent, which is the most in almost four years and stronger than anticipated.

News from the US

Wall Street Banks – President Donald Trump is looking into the old system of separating consumer and investment banking. During his electoral campaign he called for a “21^st century” version of the 1933 Glass-Steagall law that required the separation of consumer and investment banking.

Increasing the US Gas Tax – Another consideration by President Trump is that of increasing US gas tax.

US and North Korea – Trump also said that under the right circumstances he is willing to meet with North Korean leader Kim  Jong Un if it would defuse the tension in Korea.

Bipartisan Deal – A budget deal on a $1.16 trillian spending bill was reached by a partisan group of law makers saving the government from being shut down and keep running until the end of September, the end of fiscal year 2017.  The President showed signs of frustration as the bill does not provide for a defense build-up as he had requested and neither fund a wall on the Mexican border.

HealthCare – On Thursday House Republicans plan to vote to repeal Obamacare.  A number of GOP moderates are still opposing or are undecided about the appeal.  One representative Fred Upton reversed his earlier opposition after a meeting with President Donald Trump and he asked for an amendment that would boost funding for people with pre-existing conditions.

The Fed – And finally in a Federal Open Market Committee meeting on Wednesday US central bankers left the interest rates unchanged.  In a statement, Federal Reserve officials were direct indicating that the disappointing first quarter will not put off the committee from its path of raising interest rates two more times this year.  Furthermore, there was no signal of a change in its balance sheet policy.  Discussions are underway as to how to start shrinking the $4.5 trillion in holdings.  The jobless rate is in line with the maximum employment mandate and inflation stands at near the Federal Reserve goal of 2 percent.  On Friday Fed Chair Janet Yellen and other officials shall further explain and give reasons for their decisions.  The Fed’s next meeting is scheduled to take place in June on the 13^th and 14^th.

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