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  • The G20 meeting concluded with some form of respite for investors who were alarmed by the risk of an escalation in the US China trade war. The declared ceasefire between Trump and Xi Jinping may be only temporary especially in light of bipartisan support in the US for continued reformation of the Chinese economic model.
  • The US residential housing market is beginning to slow down with the Case Shiller index (a residential home price index of the 20 biggest cities in the US) showing a +2.53% y/y. This is in spite of record low levels of unemployment and a 30 year fixed mortgage rate of circa 3.73% (down from 4.94% in Nov ’18). More conservative lending, a scarred residential home owner from the credit crisis and over indebted students would suggest construction will not play as prominent a part in the growth of the economy as the previous cycle.
  • Both candidates in the conservative party leadership race continue to make unrealistic promises with regards Brexit (not least the renegotiating of the withdrawal agreement). However, what is recognized is the extremely tight timetable between now and the exit date (Oct 31). Amazingly, the election of a new conservative party leader is going to take longer than that of a UK General Election after which the House of Commons enters its summer recess. Post their return from holidays in early September there will be the Conservative party conference and one imagines some form of dialogue with the EU. As both candidates acknowledge the possibility of a no deal Brexit on Oct 31, it leaves little time for preparations.
  • Eurozone inflation at 1.2% y/y remains well below the ECB’s mandated target (see chart). The fall in government bond yields across the EZ highlights the concern of slowing growth but also takes into account the possibility of further ECB interest rate cuts and the re-starting of the quantitative easing program.