So close and yet so far apart on Brexit deal

Market movers today

In the Scandi markets, focus is on the Swedish labour market data due out at 09:30 CEST, which will be important input for what the Riksbank is going to do. Unemployment has risen from 6% in April to 7.4% in August. Our forecast is that there will be a bounce back in the September unemployment rate sa to 6.8%.

Brexit negotiations continue ahead of the EU summit starting today. A Brexit deal was not reached yesterday, as DUP is still not on board and without DUP's support it is difficult to see the deal pass in the House of Commons in a potential vote on Saturday. If DUP says yes, it is a game changer and then it looks much better for PM Johnson.

The EU council meeting starts today with arrivals at 13:30 CEST. According to the agenda, the EU leaders are set to take stock of the Brexit negotiations today but depending on what happens it may be postponed to tomorrow. The EU leaders have other things to discuss besides Brexit like accession talks with Albania and the Republic of North Macedonia, Turkey's military operations in Syria and EU's long-term budget.

We also have some interesting global data releases today, not least for the US. At 14:30 CEST building permits for September, the Philly Fed index for October, initial jobless claims and manufacturing production in September are all being released. We also have some more FOMC speeches ahead of the Fed's blackout period starting on Saturday.

Note that Chinese industrial production and Q3 GDP growth are due out overnight.

Selected market news

Risk assets had a tough time yesterday gaining momentum with a lot of Brexit-related news. Global equity markets ended the day broadly unchanged, while the yields on European fixed income products ended higher (10Y German bunds rose 3bp to -39bp).

According to some UK political analysts, DUP repeated last night that 'gaps remain' explaining why no agreement was reached late last night. Without DUP's support to PM Johnson's Brexit deal, it seems very difficult for PM Johnson to get his deal over the finish line. However, as Sky News explains in this video on Twitter , it may be difficult even if DUP supports the deal (320 MPs are needed for a majority). If so, the question is whether the 19 pro-Brexit Labour MPs who want Brexit to get done and the 20 Conservative rebels will vote for the deal or not. Some pro-Brexit Labour MPs are having a hard time supporting Johnson's proposal, which is a harder version of Brexit than Theresa May's deal was (which they rejected). Some of the Conservative rebels have already hinted they will vote against the deal. Jennifer Rankin from The Guardian has a Twitter thread explaining what the Johnson-Varadkar-Barnier compromise looks like.

Yesterday, we published our new Yield Outlook and despite last week's upward trend, we expect yields to fall back in the near future with a Bund target of -0.6% in 3M.

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