16 February

@lyle_h_hill

16 February

Good morning,

Following Boris Johnson's attempt to unite Remainers and Leavers earlier this week, it appears that the government may finally be ready to outline its own position on the future relationship of the financial services sector with the EU. But not without overcoming some considerable stumbling blocks first.

The Financial Times is reporting this morning that the UK is pursuing what it describes as the "mutual recognition" option. Or, as one source put it, the “dynamic reciprocal mutual recognition model”.

However it is described, this model involves aligning regulations in order to maintain the City of London's favoured position and its access to the EU. Unsurprisingly, it is said to be backed by the chancellor, Philip Hammond, and the Bank of England governor, Mark Carney.

Whether this goes down well with Leave cabinet colleagues is another matter, and allies of the chancellor have briefed that he is going to publicly endorse the model as early as next week, despite it not having the full sign off of cabinet.

And as with much of the ongoing Brexit debate, sources in Brussels are warning that this solution is unworkable, as the EU chief negotiator, Michel Barnier, has continually argued that there will be no "special arrangements" for the UK financial services sector.

Another example of one step forward, two steps back? We shall wait and see.

News

The Ministry of Justice, in a drive to tackle prison overcrowding in England, is considering releasing thousands of inmates early, according to a report seen by The Times. The MoJ has asked governors to review the cases of prisoners eligible for the home detention curfew scheme, after learning that thousands who were eligible had been overlooked for release.

Nikolas Cruz, the teenager arrested for the shooting at Marjory Stoneman Douglas High School on Wednesday, has admitted the attacks. Police in Florida announced that Cruz appeared in court yesterday charged with 17 counts of premeditated murder. Yesterday, the FBI revealed that it had received a tip-off about Cruz over a year ago.

Dom Parsons has won Britain's first medal at the Winter Olympics in Pyeongchang, after he finished 0.11 seconds ahead of his rival for the bronze in the skeleton. Parsons had been a little fancied outsider going into the games, but a new and controversial British 'speed suit' has helped the skeleton riders compete for medals.

Business & Economy

Shinzo Abe has renominated Haruhiko Kuroda as the governor of the Bank of Japan, reiterating the Japanese prime minister's commitment to sustaining the monetary stimulus in the economy for another five years. The move has been seen as a continued effort to remove Japan from the grips of deflation, and Kuroda is the first person to serve a second term as governor since 1961.

Research from the Institute for Fiscal Studies has found that home ownership amongst middle income millennials has collapsed. The study found that only a quarter of young adults born in the late 1980s owned their own home by the time they were 27, in comparison to over a third born earlier in the 1980s.

The world's largest hedge fund, Bridgewater, has revealed almost $22 billion of short positions on large companies headquartered in the EU. The move comes amidst boss, Ray Dalio, warning that rising populism in the EU made investing more troublesome. However, of the information released, the companies shorted by Bridgewater - including Sanofi and Airbus - have larger presences outside the EU than within it.

Markets

What happened yesterday?
The FTSE100 ended yesterday slightly up, closing at 7,234.81, or a rise of 0.29%.

This increase was despite the fact that one of the index's biggest constituents, Standard Life Aberdeen, suffered a heavy hit to its share price. The newly merged behemoth, which is the second largest fund manager in Europe, closed down 7.5% on the day. At one point, shares had dipped as much as 10%.

Lloyds Banking Group announced yesterday that it was pulling the plug on an asset management contract worth £109 billion, citing that the new Standard Life Aberdeen was now a material competitor and that it would not be proper the remain in a relationship with the fund manager.

At the other end of the table, stocks with interests in South Africa rose considerably following the news of President Zuma's resignation. Old Mutual closed up 3.05% on the back of the news, alongside Renaissance Capital, raising the stock to 'buy'.

Finals
BGEO Group
Segro

AGMs
Schroder European Real Estate Investment Trust

International Economic Announcements
(07:00) Wholesale Price Index (GER)
(13:30) Housing Starts (US)
(13:30) Import and Export Price Indices (US)

UK Economic Announcements
(09:30) Retail Sales

Columns of Note

Tobias Buck, in the Financial Times Big Read, examines the German military and its combat readiness. The German army has now been welcomed back onto the global military stage but lacks the resources needed to be a successful military organisation.

Emily Thornberry, the shadow foreign secretary, writes in The Guardian that Jeremy Corbyn's foreign policy warnings on Iraq, Libya and Syria have been proved right. She also speculates that Iran may be the next battleground and that 15 years on from the Iraq war, peace looks further away than ever.

Did you know?

Police estimated that attendance at the February 2003 Iraq War protest in London was well in excess of 750,000 people. The BBC estimated that around a million attended. At the finishing rally in Hyde Park, the organisers announced 3 million attended. It remains probably the largest protest march in UK history.

Parliamentary highlights

House of Commons

In recess. The House will next sit on Tuesday 20th February.

House of Lords

In recess. The House will next sit on Tuesday 20th February.

Scottish Parliament

In recess until Monday 19th February.