The Monday note - 2 July 2018

• The FTSE 100 dropped 45 points from Monday’s open last week to close at 7,636.9 on Friday; although this marks a rally of 8.2% for Q2 2018. The 10-year gilt yield dipped to 1.28%.
• The EU said that $300 billion of US goods could face retaliatory taxes should the Trump administration raise tariffs on European cars. Harley Davidson announced plans to move export production for the EU out of the US. 
• UK GDP in Q1 2018 was unexpectedly revised upwards, from 0.1% to 0.2% quarter-on-quarter. The pound rallied on the news. 
• The number of UK home mortgages approved rose to a four-month high of 64,500 in May, up from 62,900 in April, according to the Bank of England. 

Chief Economist comments: 

We have a big week ahead, as Prime Minister May’s cabinet head to Chequers to agree a Brexit plan. The Sunday Times ran an article suggesting there are fears in government circles that the meeting could be followed by resignations from leading Brexiteers. Threats of resignations from Eurosceptic ministers seem to be commonplace, yet in contrast soft Brexit advocates in the cabinet are keeping quiet. This gives us a hint as to who expects to be disappointed with what they hear at Chequers.