The Monday note - 23 October 2017

• The FTSE 100 closed on Friday at 7,523.2, which was down 12 points on a week earlier as investors digested mixed news on the Brexit talks. The ten year Gilt stood at 1.33%. 
• The EU leaders said that insufficient progress had been made in the Brexit negotiations to justify beginning trade talks. However, they did agree to start preparations for trade discussions. 
• UK CPI inflation reached 3.0% in September, increasing speculation that the Bank of England may raise the base rate in November. Official statistics also showed UK unemployment unchanged in August at 4.3%. 
• Communities Secretary, Sajid Javid, said the government should take advantage of the record low level of interest rates and borrow to fund house building. 

Chief Economist comments: 

Last week Angela Merkel and Emmanuel Macron said that the Brexit negotiations between the UK and the EU were progressing, rejecting media reports of deadlock. There is a difference between the EU taking a tough stance in negotiations and the talks being deadlocked. In part, some illusions are being shattered among those who expected the EU’s carmakers and prosecco producers to ride to Britain’s rescue. The EU’s preferred option is to do a deal with the UK, but they will also drive a hard bargain.