The Monday Note - 3 December 2018

• The FTSE 100 closed last week at 6,980.2, down 2.1% for the month of November as investors focussed on trade talks. Ten year Gilt yields stood at 1.36%. 
• Plans to further increase tariffs on Chinese goods entering the US have been delayed in order to allow more time for talks. 
• Qatar has withdrawn from the OPEC oil cartel. The Persian Gulf state is refocusing on liquefied natural gas production, of which it is the world’s largest exporter. 
• Year-on-year net migration from the EU to the UK fell to its lowest in six years in Q2 2018. 

Chief Economist comments: 

The threat of trade wars has a cast a shadow over the global economy, but now we are seeing signs of compromise. The deal on NAFTA’s replacement, the United States-Mexico-Canada Agreement, was brokered in September. At the weekend, the US and China have stepped back from the brink. Stand-offs over trade between the US and countries that run trade surpluses are not new. In the 1980s, Japan was the target of America’s anger. These confrontations will always end in compromise because the surplus nations fund the US government’s fiscal deficit, as central banks and sovereign wealth funds buy Washington’s bonds. Plus, spending abroad is essential if the US wants the dollar to remain a reserve currency.