The Monday note - 18 February 2019

• The FTSE 100 closed on Friday 2.3% higher on the week at 7,236.7, thanks to improved UK retail sales and optimism on Sino-American trade talks. The ten year Gilt yield stood at 1.17%. 
• Seven Labour MPs have quit the party this morning, and will sit as “a new independent group of MPs”. 
• UK inflation fell to a two-year low in January of 1.8%, which further reduced the likelihood of a near-term base rate hike. 
• European financial regulators have issued UK clearing houses with temporary licences to continue processing securities for EU-based clients in the event of a no deal Brexit. 

Chief Economist comments: 

More and more businesses and organisations are starting to seriously consider how they will respond to a no deal Brexit, and in both the UK and the EU the options are unwelcome. Porsche has warned it will pass on tariffs to UK buyers, and others will do the same. In Europe, the hope that the services offered to EU clients by the City of London can easily be replicated in Frankfurt or elsewhere is fading. Both sides are looking over the brink, and suddenly no deal seems like a bad idea. The choice now seems to be either deal or delay.