Sterling still performing well

Despite the stalling of the Brexit talks sterling is continuing to perform well, helped by the latest labour market report in the UK, trading at around 87.5p against the euro. The latter, meanwhile, continues to hover just below the $1.16 level against the dollar

Equities recovered ground yesterday with European stocks gaining more than 1% and US indices closing 2-3% higher, but bond yields in the core markets were surprisingly steady despite this, ending little changed on the day. Any further recovery in stocks though may see yields resume their upward trend

Employment in the UK was broadly flat in the three months to August (versus the March-May period), but with the unemployment rate (4%) at multi-decade lows, the tight labour market is pushing up earnings, which excluding bonuses rose at the fastest year-on-year rate (3.1%) since 2008

While the Brexit talks  have paused ahead of this week’s European Council meeting, the FT is reporting that Michel Barnier has put forward the idea of extending the two-year transition period by one year to give more time to develop a temporary customs arrangement between the EU and UK, providing the basis for discussion between the two sides over the next few weeks

Data due today include September CPI inflation in the Euro area (final reading) and the UK, while housing starts are due in the US. The Fed also releases the minutes of its recent monetary policy meeting.