Rolling coverage of the latest economic and financial news While investors are bracing for some pain when the European markets open in about 10 minutes, remember that the US markets will be closed today to commemorate Martin Luther King Jr. Day. But US futures for now are pointing to a 1% drop when the market opens on Tuesday. There will be hundreds of different opinions on how this will all pan out but remember that the tariffs announced on Liberation Day were ultimately softened a week later, on the day that long-end US Treasury yields saw a scary Asian session as international investors started to vote with their feet in terms of US funding. So financial markets may play a big part in how this situation resolves itself. The main Achilles Heel of the US is the huge twin deficits. So while in many ways it feels like the US holds the economic cards, it doesn’t hold all the funding cards in a world that will be very disturbed by the weekend’s events. It also remains to be seen what political benefit there would be for President Trump domestically given that the mid-terms are widely believed to likely be about the cost of living. Europe also needs the US in terms of helping with Ukraine. As such expect diplomacy to be going into overdrive over the next 12 days. There has been lots of talk over the weekend around the EU activating its anti-coercion instrument (ACI) which officially came into force at the end of 2023. It has a high bar to be activated but this episode could well pass that threshold. Macron yesterday called on it to be used but he also wanted it used last year on China and talked of its use with the US after Liberation Day. Two years ago, some said the City’s best days were behind it. They were wrong. We have taken a significant step forward today and I look forward to continuing to work closely with everyone here to ensure that our capital markets remain world-leading. Continue reading...