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  • Recent media report suggest that the European Union (in spite of protestations from France) will offer the UK a Brexit extension date of January 31st, At the time of this note, October 31st will be a date celebrating Halloween rather than the glorious Brexit date promised by Boris Johnson. The reality is that this date was nothing more than a political promise with a general election scheduled for circa mid-December carrying significantly more importance on the success or lack thereof for Johnson’s exit deal. Notably, Michel Barnier’s appointment as Head of the EU’s “UK Task Force” is a reminder to investors and the general public alike that Phase 1 of Brexit negotiations (the Withdrawal agreement) is only possibly coming to an end and that Phase 2 (the negotiation of a future trading agreement) may be more complicated and more drawn out that many anticipate.
  • Mario Draghi conducted his final ECB meeting with little controversy. We believe history will look kindly on his tenure although there is little in the way of monetary stimulus that can be provided by his successor Christine Lagarde. Hence, fiscal stimulus will be sought from those European countries that can provide it and Lagarde’s political skills will be required to convince leaders of the necessity of such stimulus.
  • Eurozone manufacturing PMI (see chart), unsurprisingly in light of a global economic slowdown, continues to disappoint and reiterates the need for some form of stimulus. Private Economists from German research institutes have been quite vocal in recent weeks highlighting the unique opportunity the German government has in borrowing for the purposes of investment and ultimately the re-acceleration of growth.