The U.K. will suffer shortages of fuel, food and medicine if it leaves the European Union without a transition deal, leaked official documents showed after they were immediately contested by ministers. The document prepared by the Cabinet forecasts jammed ports, public protests and widespread disruption as most likely aftershocks of a no-deal Brexit. Michael Gove, the minister in charge of coordinating “no-deal” preparations, challenged that interpretation, saying the documents set out a worst-case scenario and that planning had been accelerated in the last three weeks. Up to 85% of lorries using the main Channel crossings may not be ready for French customs, meaning disruption may last up to three months. A hard border between the British province of Northern Ireland and the Republic of Ireland, an EU member, will also be likely as plans to avoid widespread checks will prove unsustainable. Prime Minister Boris Johnson’s office said it did not comment on leaked documents. The United Kingdom is heading towards a constitutional crisis and a showdown with the EU as Johnson has repeatedly vowed to leave the bloc on Oct. 31 with or without a deal. The EU on the other hand has repeatedly refused to reopen the Withdrawal Agreement.
Crude oil prices rose this morning following an attack on the weekend on a Saudi oil facility by Yemeni separatists. Price gains were capped by an unusually bearish OPEC report that stoked concerns about growth in oil demand. Brent crude was up 64 cents, at $59.28 a barrel. U.S. crude was up 55 cents at $55.42 a barrel. OPEC cut its forecast for global oil demand growth in 2019 to 1.10 million bpd and indicated the market would be in slight surplus in 2020.
Japan’s exports contracted for an eighth month in July, while manufacturers’ confidence turned negative for the first time in over six years as China-bound sales slumped again in a fresh sign the Sino-U.S. trade war could tip the economy into recession. Exports in July decreased 1.6% from a year earlier dragged down by China-bound shipments of car parts and semiconductor production equipment. It marked the longest fall in exports since a 14-month stretch from October 2015 to November 2016. Export volume rose 1.5% in July year-on-year - the first positive reading in nine months. Exports to China, Japan’s biggest trading partner, shrank 9.3% year-on-year in July, down for a fifth month. The contraction was led by sizable declines of 31.5% in semiconductor production equipment, 35% in car parts and 19% in electronics parts but service-sector activity remains firm. Japan has also been embroiled in an intensifying trade row with South Korea, further threatening to hurt the outlook for its manufacturers. Japan’s exports to the United States rose 8.4% in the year to July, driven by a jump in semiconductor production equipment, construction and mining machinery and airplanes. Imports from the United States climbed 3.5% in July, sending Japan’s trade surplus with the world’s biggest economy up 15.6% from a year earlier.
U.S. and European stocks surged on Friday on expectations the European Central Bank will cut interest rates but the dollar gained against the euro after a report said the German government was prepared to take on new debt to lift the economy. The dollar hit a two-week high against the euro as bullish data showing a jump in U.S. homebuilding permits to a seven-month high also helped lift the greenback. The Dow Jones Industrial Average gained 306.62 points to 25,886.01. The S&P 500 rose 41.08 points to 2,888.68 and the Nasdaq climbed 129.38 points to 7,895.99. The euro earlier slid to $1.1090 just short of a two-year low it set two weeks ago, on reports the ECB's Olli Rehn had suggested a significant easing package was needed in September. The dollar index rose 0.06%, with the euro down 0.15% to $1.1089. The Japanese yen lost 0.23% versus the greenback at 106.35 per dollar. U.S. gold settled at $1,523.60 an ounce.