EU-UK: UK Minister-We Will Not Join Customs Union 'At Present Time'
Following comments from European Commission Exec VP Maroš Šefčovič suggesting that the UK joining a "pan-European [customs] area is something we could consider", UK Housing Minister Matthew Pennycook has stated "We’re not seeking to participate in that particular arrangement," before adding later on "at the present time". European Relations Minister Nick Thomas-Symonds said in the Commons "We are always looking for ways to reduce barriers of trade, but within our manifesto red lines, because we take a pragmatic view as to where the national interest lies. We don't currently have any plans to join PEM, and we are not going to provide a running commentary on every comment that's made."
- Šefčovič, speaking to the BBC in Davos at the WEF annual meeting, was talking about the mooted idea that the UK could join the Pan-Euro-Mediterranean Convention (PEM, "common rules that allow parts, ingredients and materials for manufacturing supply chains to be sourced from across dozens of countries in Europe and North Africa to be used in tariff-free trade.") rather than the EU's customs union.
- Recent opinion polling has shown UK respondents broadly in favour of closer economic links with the EU, even if they voted to leave the Union in 2016. A YouGov poll in Dec 2024 "found that 54 percent of those who backed Brexit in 2016 would accept the full free movement of people to travel, live and work across EU borders in return for access to the bloc's single market."
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US TSY OPTIONS: Jan'25 5Y Call Spread, Mar'25 10Y Vol Play
- 4,000 FVF5 106.25/106.5 call spds, 1 ref 105-31.5
- 2,500 TYH5 106/111 strangles, 38 ref 108-10
MNI: US REDBOOK: DEC STORE SALES +5.0% V YR AGO MO
- MNI: US REDBOOK: DEC STORE SALES +5.0% V YR AGO MO
- US REDBOOK: STORE SALES +5.9% WK ENDED DEC 21 V YR AGO WK
US DATA: Philly Nonmanufacturing Consistent With Moderating Services Activity
The -6.0 reading for December's Philadelphia Fed's Nonmanufacturing current regional activity index (-2.4 expected) represented a steady outturn from -5.9 prior, and suggested a regional services sector that remained "weak", per the report.
- Accordingly, weakness in the report was fairly broad-based on a regional basis, though expectations for activity 6-months ahead rose to a 37-month high of 48.8. Per the report: "The indexes for general activity, sales/revenues, and new orders were little changed from last month and remained low. On balance, the firms continued to report increases in employment; however, the indexes for full- and part-time employment declined. Both price indexes rose and indicate overall increases in prices. The respondents remained optimistic about growth over the next six months both for their firms and in the region."
- The recent spike in expectations (from negative as recently as August) can largely be attributed to optimism following November's elections. But the expectations index has been, at best, a coincident rather than a leading indicator - and even so, the it has consistently misled as to ongoing and future activity performance.
- The Philly Fed survey tends to mirror the national ISM Services survey more closely than the PMI Services. ISM has pulled back from elevated levels while the PMI equivalent has continued to rise (see chart). Like the ISM, the Philly reading is consistent with a softening rather than resurgent services sector, something that we have begun to see reflected from the demand side in national PCE reports.
