European stocks and US futures are mixed following a soft Asian session. Wall Streets' close was lower as September retail sales were weaker than expected. Slower sales across headline and core indicate consumption spending is decelerating in 4Q. The unexpected drop in retail sales increased market pricing for an October 25bp rate cut by the Fed. Treasuries yields ticked lower due to weaker risk sentiment. Doubt over a Brexit deal between the UK and EU has placed a gloom over markets. GBP fell sharply for 1.2877 high, as a deal fail to materialize, despite hype suggesting talks were close. Talks are now in the critical 24-hour period. Traders should expect high, scary levels of rogue GBP volatility.
The last update hitting the wire is that Boris Johnsons Northern Irish allies would not support this Brexit deal. While progress is being made in Brussels (or so we hear), the Democratic Unionist Party still has issues with three main points. First, arrangements for dealing with a customs check between UK-Irish borders, Northern Irish veto power for customs checks and how to institute sales tax will be levied. Data indicated that UK headline inflation was unchanged at 1.7% but the MPC’s preferred measure for underlying service inflation jumped to 2.4% from 2.0% in August. However, the reaction was muted at the focus is clearly on Brexit. FX markets are likely to collectively hold its breath until clarity on Brexit is reached. With a deadline looming large anything can happen. Was once said about The Clash’s debut album “London Calling”, right now it is the only thing that matters.
By Peter Rosenstreich