It is better to jaw-jaw than to war-war
- That did not take long. Four days after the UK delivered its letter of intent to leave the EU, a senior UK politician hinted that war with EU countries may be a solution to disputes. While war does not seem imminent, this is a reminder of how difficult these negotiations could get.
- Investors are looking ahead to the talks between Chinese President Xi and US President Trump later this week. A handshake between the two men would be a good place to start. With parts of the US administration's agenda having failed (immigration, healthcare), there is a risk of a "doubling down" on trade.
- It is opinion poll day, with US and EU surveys of manufacturing sentiment. The problems: 1) No one fills in surveys. 2) If they do, they tend not to answer the questions asked. 3) Surveys are skewed by an increasingly sensationalist media. 4) There is a risk of political bias in the answers.
- This matters because although survey evidence is increasingly divorced from the underlying economy, markets still pay attention to surveys. For investors, it seems bad data is better than no data. The hard data today is from the Eurozone – producer price inflation and unemployment.