The Monday note - 24 September 2018

• The FTSE 100 closed at 7,490.23 on Friday, which was 186 points higher than at the start of the week. The index was boosted by the fall in sterling’s value. The 10-year gilt yield rose to 1.56%.
• The Sunday Times reported rumours that Downing Street is preparing contingency plans for a snap election in November, after the EU leaders rejected her Chequers proposal. 
• The Eurozone manufacturing PMI fell to a four-month low of 54.2 in September, as manufacturers curbed investment and recruitment on escalating trade tensions between China and the US. 
• CPI inflation in the UK jumped to a six-month high of 2.7% in August, driven by a larger than usual increase in spending on sea and air fares.

Chief Economist comments: 

We have now reached the hard ball part of the Brexit negotiations, and what happened last week at Salzburg was not surprising. It has only caused a jolt because the UK government has been abruptly reminded that it is negotiating with the EU, not just its own backbenchers. The EU now has May’s attention. Hidden among the recriminations in the weekend press was a mention that Barnier still plans to offer the UK a free trade deal better than any previously granted to a third county. Cool heads are needed in Westminster, as there is plenty to play for.