Overview: Despite the pre-weekend gains that lifted the S&P 500 above its 200-day moving average, global equities are moving lower today. The main news over the weekend included the US renewing its threat to impose more tariffs on China and Saudi Arabia threatening retaliation for any sanctions relating to the disappearance of the journalist Khashoggi, and the lack of a breakthrough in UK-EU negotiations. Many large Asia equity markets (Japan, China, Hong Kong) were off around 1.5%. The Nikkei and Topix extended last week’s lows, but the Shanghai Composite and Hong Kong’s Hang Seng did not. European bourses are on the downside, with the Dow Jones Stoxx 600 off about 0.5% near midday on the Continent.  It is extending the losing streak to a fourth session, and seven of the past eight, and is at its lowest level since late 2016.  The equity weakness is giving the bonds a bit, and benchmark 10-year yields are off one-to-three basis points. Italians bonds are outperforming a little, and Portugal, which Moody’s upgraded ahead of the weekend, in a catchup move, is also doing better than most today. The dollar is mostly softer. The Swedish krona and sterling are exceptions. Political uncertainty in Sweden and Brexit concerns are the main weights, it appears.

Brexit: Talks broke up over the weekend. The Irish border remains the pivotal issue, and the UK cannot agree to an open-ended transition period. A key meeting among EU government’s today to ostensibly prepare for the summit on Wednesday has been canceled. The summit that might have been called to finalize Brexit may now become a summit to prepare for a UK exit without an agreement. The UK cabinet meets tomorrow. May’s Chequers Plan has vocal critics in the cabinet and within the Tory Party, and, as the weekend developments illustrate, there is no agreement with the EU. We have suggested that May is in a trilemma and is unable to simultaneously appease, the EU, her cabinet, and Parliament. In her attempt to triangulate, May has succeeded in satisfying no one. Sterling came under downside pressure after posting an outside down day ahead of the weekend. It saw a high before the weekend of near $1.3260 and reached almost $1.3080 in early Asia. It has climbed back to test the $1.3050 area. There is a nearly GBP330 mln option struck at $1.3040 that expires today.  The euro has bounced from a four-month low last week near GBP0.8720 to resurface above GBP0.8800 today, where there is an option for 1.6 bln euros that also will be cut today.