Sterling slipped below $1.20 this morning after Boris Johnson further increased the pressure on MPs by threatening to call a general election on October 14th. Ahead of a potentially turbulent day in Westminster, the pound dropped to a level briefly seen in 2016 but not regularly traded at since the 1980s. 

Rebel Conservatives may work with the Labour Party today in an attempt to hand control of the House of Commons to MPs, a move which Johnson said would “wreck” his negotiating strategy. If the vote goes against the Prime Minister today, he has threatened to call the election in order to ensure that the UK leaves the EU as scheduled at the end of next month. 

Elsewhere, Asian stocks were mixed last night amid further tariff war frustration. Washington refused Beijing's request to delay tariffs which took effect over the weekend, while Chinese and US officials are struggling to agree on plans for a potential meeting later this month. 

Amidst the uncertainty, UK 10-year gilt yields fell to a record low of 0.38%. The German Bund equivalents also breached new territory, as did Italy's sovereign debt as optimism grew that members of the 5-Star party will strike a coalition deal with the Democratic Party. 

British manufacturing shrank at the fastest rate in seven years in August as the fears of no-deal Brexit moves some supply chains abroad and the weak pound drove up import costs. The UK manufacturing purchasing managers' index (PMI) fell to 47.4 from 48 the previous month, significantly undershooting forecasts.  

Similarly, the IHS Markit Construction PMI reading for July disappointed economists' expectations. Data released this morning show that new orders for UK construction companies suffered their sharpest drop since the financial crisis, as the Brexit predicament scared away potential customers.  

Walker Crips
Old Change House
128 Queen Victoria Street
London EC4V 4BJ

020 3100 8000
www.wcgplc.co.uk
[email protected]

Important information

This publication is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips.

Walker Crips Investment Management Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Registered office: Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ. Registered in England number 4774117.