Just one week until Britain is expected to trigger Article 50, sterling at a three week high, UK inflation highest since 2013, leaked EU documents suggesting Britain could be kicked out EU and fined £50bn, Bank of England (BoE) Chief Economist Andy Haldane postulating a base rate rise to 4.25% that could wipe out 1.5 million jobs but boost productivity in the long run, Scotland pushing harder for another independence vote, and the BoE predicting a further retail slowdown: all in all perhaps enough commotion to burrow yesterday’s embarrassing infighting of the Labour Party. Or perhaps not. Seems that it doesn’t matter how old a nation’s democracy, advanced its economy or established its laws; political risk teeters when the populous lambast inequality and the public coffers are constrained by their own indebtedness.
Following Labour’s commotion yesterday, with Labour deputy leader Tom Watson clashing with shadow chancellor John McDonnell and an embarrassing parliament session feud, Jeremy Corbyn’s video address seemed a phony attempt to reassure members that the embarrassment only goes to prove that ‘spirits in the Labour party can run high’. Mercifully, attention is focused less on Labours potential disconnect and more on the impending Brexit annulment. Prime Minister Theresa May’s ‘no deal for Britain is better than a bad deal’ is being threatened by the EU’s leaked plans for a prolonged legal battle, seeking £50bn of apparent dues, should the UK leave the EU with no deal. President of the European Council Donald Tusk promised to make ‘the process of divorce the least painful for the EU’ implying the obvious antithesis for the UK. But as difficult as the Brexit process could be, the legitimacy of the EU’s request for alimony seems tenuous and the potential damage to the EU from a go-it-alone Britain should prove a strong incentive for some sort of eventual deal.
Meanwhile global equity indices accelerated the week’s losses. Yesterday US stocks saw their worst one-day performance since September last year while US 10-year Treasury yields dipped back to 2.4% levels. Perhaps markets are waking up to the inherent inertia against radical changes in the US Houses. Slow progress seems increasingly likely; with tax reforms and infrastructure legislature dependent upon Republicans first agreeing on a replacement health care bill. Apparently the ‘World's Greatest Healthcare Plan of 2017’ (‘House Republican Bill 1275’) is still not great enough.