Gilts have opened modestly higher taking......>

GILTS: Gilts have opened modestly higher taking cue from rally in US Treasuries

overnight on mild risk-off sentiment as concerns on global trade rise and

uncertainty in German politics as Seehofer threatens to resign. UK 10-yr Gilt

yield is 1.1bp lower at 1.268%, and is leading the rest of the curve lower.

- There is great uncertainty in UK politics as well as the cabinet gears up for

crunch talks on Brexit at Chequers at the end of the week. Newswires are already

reporting that a bespoke trade deal with the EU is unlikely, that EU has

abandoned all hope of a deal being struck in October and that there is now a

third customs option on the table.

- It could be that politics might trump the PMI data out this week, however a

decent number could see the, markets price in a higher chance of a rate hike in

August despite cautions of more pain for UK economy.

- BoE Cunliffe said that Escalating trade wars, strains in emerging markets and

a rising possibility of a Chinese credit crisis could combine into a "painful"

experience for the British economy.