Today the market is defined by high risk appetite and a recovery in US stock indices. Market sentiment has improved due to protests in the United States calming a bit, allowing state lockdowns to end as scheduled. The positive mood also persists in Europe and China due to improving economic indicators.
Brexit is once again becoming a fixture in the news stream. June 30 is the deadline for deciding whether to extend the transition period past the December 31 deadline that Boris Johnson imposed on his own (the EU had initially allotted two years to the transition). Though there is still no progress after almost half a year of negotiations, the UK Prime Minister has expressed no desire to extend the transition.
In addition, the EU has said that any agreements should actually be reached by the end of October in order to get ratified by all EU governments by the end of December. This effectively gives the EU and the UK only five months to negotiate a complete trade agreement.
It comes as no surprise that the Bank of England is once again warning of a no-deal Brexit. The BoE is encouraging other financial institutions in the UK and businesses to plan for the worst-case scenario of leaving the EU with no agreements.
Speaking of trade, there are more and more indications that the phase-1 agreement between the United States and China might collapse. China was not able to meet its commitment to agricultural imports in the beginning of the year thanks to the pandemic, but is now actively discouraging Chinese businesses from buying meat and produce from the United States.
The US is likely to announce new sanctions against China because of the Hong Kong security law introduced recently. We would likely see the real extent of China’s retaliation only then.
