United Kingdom

Global stocks and US equity futures roared upward to new record highs to start the second-to-last week of the year, boosted by optimism over a Republican agreement on the shape of U.S. tax cuts aimed at lifting growth; incidentally this is the 6th consecutive day that the "tax bill" has been priced in by the market, and according to cynics, 6th consecutive week and/or 6th month. Meanwhile, the dollar dropped and Treasuries headed lower.

EU leaders formerly endorsed the harmless sounding Permanent Structured Cooperation, or PESCO, pact on Thursday evening in Brussels. After the shock of Brexit, the goal of defence integration was revived by former military foes, Germany and France, supported by Italy and Spain, in a show of EU unity. A similar proposal was blocked by the French parliament in the 1950s (see below).

Following the humiliation of losing the House of Commons vote on Friday, in which MP’s took the final say on the Brexit deal from the executive, UK Prime Minister was in Brussels as EU leaders gave approval for Brexit talks to move to phase 2. At a dinner last night, she was applauded by leaders of the other 27 EU nations after giving a speech. This morning, the European Council approved the recommendation from the European Commission that talks should proceed to the next phase. Donald Tusk, President of the European Council, tweeted the news.

U.S. equity index futures point to a higher open, having rebounded some 10 points off session lows with the VIX stuck on the edge between single and double digits, while European and Asian shares decline as investors assess central banks’ shift toward tighter monetary policy and concern over tax overhaul ahead of final plan. 

It has been a groggy end to what is still set to be a third week of gains for MSCI’s global stock index following more upbeat data and signs that central banks including the Federal Reserve will keep treading carefully with interest rate hikes.

We said two days ago that it’s been a tough week for anybody who needs to heat their home or put gasoline in their cars in Britain. The litany of negative events and mishaps includes extremely low temperatures, the shutdown of the Forties pipeline due to a hairline crack and an explosion at one of the Europe’s biggest gas hubs in Austria, which further tightened UK supplies.

As we noted, the price of gas futures surged by the most in 8 years. The timing of the gas hub explosion, as we head into Winter, couldn’t have been worse either.