The Monday note - 25 March 2019

• The FTSE 100 closed the week 21 points lower on Friday at 7,207.6. London sank in tandem with European markets as the latest Eurozone purchasing managers index (PMI) indicated a slowdown on the continent. Gilts dropped to 1.02%. 
• German 10-year bond yields turned negative for the first time since 2016, as the Eurozone slows and investors expect monetary policy to ease. 
• Italy is hoping to attract more investment by endorsing China’s Belt and Road Initiative. The two countries have announced agreements in sectors such as energy and steel. 
• CPI inflation in the UK edged up to 1.9% in February on rising prices for food, alcohol and recreational activities. 

Chief Economist comments: 

The Brexit cliff edge has been moved from Friday this week to the 12th April. If we have agreed May’s deal by then, on the 22nd May the UK enters a transition period while trade talks are held. However, there is much more talk now of a change of direction towards a Norway Plus deal, where the UK stays in the EU’s single market and customs union. For this to happen, either Prime Minister May must abandon her red lines, or leave office. Ahead of us is three weeks of political rumour and speculation. On the positive side, the business-friendly Norway option is in the running.