Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

BREXIT BOMBSHELL

People wave British Union Jack flags as they celebrate in Parliament Square on Brexit day in London on January 31.

SIMON DAWSON/Reuters

If it’s autumn with a year-end deadline and a sterling sell-off, it must be Brexit. Britain’s internal market bill, a bombshell which the government readily admits contravenes international law, may wreck its EU divorce treaty, scupper chances of a post-Brexit trade agreement and trigger EU legal action.

Britain’s lower house of parliament starts debating the bill on Monday. While Prime Minister Boris Johnson has an 80-seat majority, internal party rumblings over the bill could well test his authority.

Meanwhile, sterling has lost 4% this month and at $1.28, it may not even be pricing the full risk. Clearer signals come from options markets, where positioning has turned markedly bearish.

Story continues below advertisement

CUE THE FED

Federal Reserve Board building on Constitution Avenue is pictured in Washington on March 19, 2019.

Leah Millis/Reuters

The Federal Reserve meets on Wednesday for the first time since unveiling its landmark shift to a more tolerant stance on inflation. That move steepened the Treasury curve, lifting longer-dated borrowing costs and expectations the Fed may have to increase purchases of long-dated bonds to tamp down yields.

The gap between 5- and 30-year yields has contracted since hitting three-month highs after Fed chief Jerome Powell flagged the shift on Aug. 27. But 30-year yields , sensitive to inflation expectations, remain elevated - not great news for the battered economy.

Fed purchases of more than $1.5 trillion of shorter-dated bonds during the pandemic have pinned down front-end borrowing costs. Investors will watch for a shift towards the long end.

FOLLOW THE LEADER

European Union (EU) flags fly in front of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, July 8.

Ralph Orlowski/Reuters

The Fed move towards greater inflation tolerance, essentially a pledge to keep policy loose, puts other central banks in a bind. Unless they follow, the dollar’s weakening against their currencies could threaten economic recovery and their inflation targets.

The ECB says euro strength is not yet a concern. But it, along with British and Japanese peers which meet in coming days, may eventually be forced down the Fed’s looser-for-longer route.

No policy changes are expected in Japan and Britain. Still, the Bank of England may flag extending its bond-buying to help an economy reeling from COVID-19 and Brexit.

The Bank of Japan (BOJ) meanwhile must contend with a new premier, likely Yoshihide Suga, who may not hesitate to pressure the central bank over yen strength. Calling for the BOJ to work with the government, Suga said recently he didn’t buy arguments such as negative rates hitting bank profits.

Story continues below advertisement

TAKE A BREAK

A screen shows the Brazilian real-U.S. dollar and several other foreign currencies exchange rates in Rio de Janeiro, Brazil, March 18.

SERGIO MORAES/Reuters

Emerging markets have been hot on the heels of advanced peers in cutting interest rates, but inflation pressures driven by weak currencies could force a pause.

Brazil is seen holding rates at 2% on Wednesday. Indonesia too should stand pat, given its debt monetization scheme has knocked the rupiah hard. The rouble’s tumble to four-year lows could induce Russia’s central bank to hold rates at 4.25% on Friday.

Yet South Africa may have little choice but to ease policy further on Thursday, after a data horror show that revealed a record 51% GDP plunge and a huge current account gap.

BACK IN LOCKDOWN

An Indonesian nurse walks through a football stadium which is being converted into a hospital for Covid-19 patients on Sept. 11 in Jakarta, Indonesia.

ED WRAY/Getty Images

COVID-19 cases are rising again in Asian nations that appeared to have successfully controlled the outbreak. Indonesia’s capital, Jakarta, is back in lockdown and its markets have duly crumbled.

But Indonesia is only part of the story. Trade-and-tourism-dependent stock markets in Thailand, the Philippines, Singapore and Indonesia have shed 18% to 24% this year and corporate earnings are seen sinking by a third. Australian shares are at 2-1/2-month lows, as Asian growth fears hurt commodities.

India, despite a four-month lockdown, has the world’s second-highest number of coronavirus cases. Not long ago, the fastest growing major economy, it will contract 14.8% this year, Goldman Sachs predicts.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies