The Monday note - 21 January 2019

• The FTSE 100 rose slightly towards the end of last week on news suggesting that the US is considering reducing tariffs on Chinese imports. The index closed the week at 6,968.3. Gilt yields increased to 1.36%. 
• Rumours have circulated that BlackRock and Goldman Sachs Asset Management are preparing to move key UK-based fund managers to the US in the event of a no-deal Brexit, before relocating them to Europe, according to Reuters. 
• UK inflation slowed 20 bps month-on-month to 2.1% in December 2018, leaving the Bank of England under no pressure to raise interest rates any time soon. 
• Italy’s central bank cut its GDP growth forecasts. The Bank of Italy warned that the economy had probably contracted in Q4 2018, taking the country into technical recession. 

Chief Economist comments: 

It is interesting to see Eurosceptic politicians in TV interviews arguing that weak economic growth in the Eurozone works in Britain’s favour in the Brexit negotiations. I expect the Eurozone politicians are actually approaching the talks with an eye on the long-term, and a quarter or two of bad GDP figures are not going to sway them. Also, my overall sense is that influence is ebbing away from the Eurosceptics. They certainly have the government front bench running scared, but the backbenches are manoeuvring to take control of Brexit. If that happens, then we come back to the fact that three quarters of Westminster’s MPs voted to remain at the referendum.