The Monday note - 3 September 2018

• The FTSE 100 ended last week 1.9% lower, closing at 7,432.4 on Friday. The index fell to its lowest level since late-April amid geo-political uncertainties. The ten year gilt yield rose to 1.43%. 
• The sense of crisis surrounding emerging markets increased further, as Argentina’s central bank increased its policy rate to 60% to support the peso. 
• Qatar, who already own stakes in VW, Deutsche Bank and Siemens, are expected to invest billions of euros in Germany’s Mittelstand (the medium-sized business sector), according to a report in Handelsblatt. 
• A CBI study found sentiment among UK computing, consultancy and telecoms firms dropped to -4 from +14 in its quarterly survey. This was attributed to slowing sales, rising costs, and Brexit uncertainty.

Chief Economist comments: 

We in the UK think we have problems with Brexit, but Argentina’s woes set matters in perspective. It has been a bad year for emerging markets, with first South Africa, then Turkey, and now Argentina on the wrong side of the currency speculators.

To this backdrop, the EU’s hint of a ground breaking trade deal for Britain last week should be welcomed by the UK government. The emerging markets have shown what happens if you always put the political infighting ahead of economic reality.