2 May 2018


2 May 2018

Good morning,

The government is at risk of collapse. That is the front page headline of the Conservative-leaning Daily Telegraph today.
The pro-Brexit European Research Group (ERG), which is led by Jacob Rees-Mogg and is thought to count around 60 Tory MPs in its ranks, has sent the prime minister a 30-page report detailing their opposition to a so-called “customs partnership” with the EU.
Under the customs partnership option, backed by Philip Hammond and Greg Clark, UK officials would conduct checks and collect tariffs on behalf of the EU for any goods entering the UK that are destined for another member state. Companies would then claim back tariff rebates from the government if the goods stayed in the UK.
It’s a complex solution but it would allow goods to flow freely from the UK to the EU and across the Irish border without further tariffs or rules of origin checks.
However, hard Brexiteers argue that this outcome would deliver Brexit in name only and limit the UK’s ability to strike independent trade deals.
The ERG has described the customs partnership as a “red line”, with members threatening to withdraw their support for government bills. This would lead to legislative paralysis and put May’s future as leader in doubt.
Further exacerbating the issue is the suggestion that both David Davis and Liam Fox would reconsider their positions if the government goes ahead with the customs partnership.
On the other hand, a solution to the Irish border needs to be found to keep the Democratic Unionist Party in the government’s corner.
May’s tenure as prime minister has been characterised by her remarkable resilience, as she lurches from crisis to crisis. Might this issue be the straw that breaks the camel’s back?


President Trump’s former doctor has claimed he did not write a 2015 letter which described the then Republican candidate’s health as “astonishingly excellent”. Dr Harold Bornstein told CNN that Trump dictated the letter, adding that the assertion Trump would be the "healthiest individual ever elected to the presidency" was not his professional assessment. The White House has not yet commented and it is not clear why Dr Bornstein is coming forward now.
In other Trump related news, Robert Mueller, the special counsel investigating Russian interference in the 2016 election, reportedly warned the president could face a subpoena to appear before a grand jury. The threat came in a meeting with Trump’s lawyers, who insisted he had no obligation to talk to federal investigators as part of the probe. This is thought to be the first time that Mueller raised the possibility of forcing Trump to testify.
Facebook is to introduce a new dating service. The development was unveiled by chief executive Mark Zuckerberg at the F8 developers conference in San Jose, California. Acknowledging that 2018 had been an “intense year” for the social network, and mindful of privacy fears, he told his audience that Facebook has designed this feature “with privacy and safety in mind from the beginning”. Shares in dating business Match Group, which owns dating app Tinder, fell 22% on the back of the announcement.


Business & Economy

Shares in Apple were trading 3.5% higher after hours yesterday, following news that the company will be launching a $100 billion share buyback plan and lifting its dividend by 16%. In its first quarter results, the iPhone maker reported revenues of $61.1 billion – a 16% year on year increase. This was largely in line with Wall Street expectations and will reassure investors who had held concerns of a slowdown.
The US has extended a temporary exemption on steel and aluminium tariffs for UK and EU steel manufacturers by a month. Hours before the levies were due to come into effect, the White House said it would grant international allies a “final” extension until 1 June. Negotiations are ongoing but there are fears within the steel industry that any permanent exemption will require steel producers to export less. However, EU officials have said they will not negotiate under threat.
RBS is to close a further 162 branches across England and Wales, resulting in the loss of 792 jobs. The bank said that the latest cuts are due to the decision not to sell its Williams & Glyn business. By not establishing the new challenger bank, it is removing geographical duplication in its network. RBS has announced a total of 569 branch closures since March 2017.


What happened yesterday?

The FTSE 100 was up 0.15% to 7,520.36 at close of trading yesterday.
Just Eat climbed 4.08%, making it the day’s best performer on the main index. This was on the back of a strong set of first quarter results, with the takeaway app reporting revenues of £177 million in the first three months of the year – up 49% on the same period last year.
At the other end of the spectrum, British American was the the biggest faller, shedding 2.48%. Morrison Supermarkets also performed poorly, ending the day down 1.36%, after more details of the proposed merger between Asda and Sainsbury’s emerged.
In the US, the S&P 500 was up 0.25% to 2,654.80 and the Nasdaq gained 0.91% to 7,130.70. However, the Dow Jones Industrial Average fell 0.27% to 24,099.05.
On the currency markets, the dollar performed strongly ahead of the Federal Reserve’s May policy meeting today, and despite weaker than expected manufacturing data.
The pound was up 0.01% against the dollar at $1.3613 and up 0.02% against the euro at €1.135

Sainsbury (J)
Avon Rubber, Sage Group
Q1 Results
Convatec Group, Direct Line Insurance Group, Indivior, Inmarsat, Standard Chartered
Trading Announcements
Accsys Technologies, Convatec Group, Direct Line Insurance Group, Howden Joinery Group, IWG, Next, Paddy Power Betfair, PPHE Hotel Group Ltd
Empresaria Group, Glencore, Howden Joinery Group, Inmarsat, JPMorgan American Investment Trust, Lancashire Holdings Limited, Ocado Group, Pendragon, Phoenix Group Holdings (DI), Rio Tinto, Spirent Communications, Unilever, Verona Pharma, Witan Investment Trust, Zegona Communications

Banco Santander S.A.
UK Economic Announcements
(01:00) BRC Shop Price Index
(09:30) PMI Construction
International Economic Announcements
(08:55): PMI Manufacturing (GER)
(09:00) PMI Manufacturing (EU)
(09:00) Unemployment Rate (EU)
(10:00) GDP (Preliminary) (EU)
(12:00) MBA Mortgage Applications (US)
(15:30) Crude Oil Inventories (US)

Columns of Note


In The Times, Daniel Finkelstein calls on Tory Brexiteers to “stop living in a fantasy world”, pointing out that the parliamentary arithmetic will now allow the type of Brexit they desire. He argues that any Brexit deal will have to be approved in the House of Commons using the government’s majority, rather than counting on the support of Labour. Finkelstein also questions how challenging Theresa May’s leadership, as has been mooted in the event of a compromise on the customs union, helps the hard Brexit cause.
Writing in the Financial Times, Roula Khalaf says that the priority of European powers is to contain President Trump rather than Tehran. She points to the latest intervention of Benjamin Netanyahu, the Israeli prime minister, which was designed to influence Trump to scrap the Iran deal. Khalaf contends that the European partners needs to be the counterbalance to save an “imperfect but historic deal”.

Did you know?

Rahm Emanuel – the current mayor of Chicago who served as chief of staff to President Obama and senior adviser to President Clinton – is widely considered to be the inspiration for Josh Lyman, the fictional White House deputy chief of staff in hit television series The West Wing. However, he is not the only member of his family to provide the basis for an on-screen character. Ari Gold, the fictional Hollywood agent in Entourage, is thought to be based on his brother Ari Emanuel.

Parliamentary highlights

House of Commons
Oral Questions: Wales
Prime Minister’s Question Time
Ten Minute Rule Motion: Victims of Terrorism (Pensions and Other Support) - Emma Little Pengelly
Opposition Day Debate: Windrush generation
House of Lords
Oral Questions
Creative Industries Sector Deal - Baroness Bonham-Carter of Yarnbury
Reducing the amount of plastic used in packaging - Lord Dubs
Response of the NHS to cyber attacks - Lord Hunt of Kings Heath
Specialist cancer nurses - Baroness Thornton
Legislation: European Union (Withdrawal) Bill – Report (day 5) - Lord Callanan
Scottish Parliament
Portfolio Questions: Education and Skills
Scottish Conservative and Unionist Party Business: Health
House of Commons
Oral Questions: Exiting the European Union (including Topical Questions)
Business Statement: Business Questions to the Leader of the House – Andrea Leadsom
Backbench Business: General Debate on matters to be considered before the May adjournment - Ian Mearns, Bob Blackman
House of Lords
Oral Questions
Impact of levels of gambling advertising - The Lord Bishop of St Albans
Improving the experience of passengers requiring assistance when travelling through airports in the UK - Lord Blunkett
Establishing a nationwide video relay service for users of British and Irish sign language - Lord Bruce of Bennachie
Introduction of identity cards for UK citizens - Lord Empey
Legislation: European Union Committee report: 'Brexit: sanctions policy' - Baroness Verma
Scottish Parliament
General Questions
First Minister’s Questions