U.K.’s Future Just Got a Little More Uncertain

(Bloomberg) --

The U.K's constitutional future swung back into focus yesterday.

In London, Michael Gove, the U.K. minister charged with planning for a no-deal Brexit, complained that the European Union seemed unwilling to negotiate, calling it “sad.” Foreign Secretary Dominic Raab was in Canada, where he expressed a determination to “fire up” Britain's economic ties with non-EU partners.

But the most significant intervention of the day came in Scotland. John McDonnell, the shadow chancellor, used an appearance at the Edinburgh Fringe Festival to say the Labour Party would not stand in the way of a second referendum on Scottish independence.

Assuming he has Labor leader Jeremy Corbyn's backing, that's not just a challenge to Prime Minister Boris Johnson, who refuses to countenance another vote. It turns Labour Party policy in Scotland on its head.

The political calculus seems clear. Labour may well need Scottish National Party votes to form a coalition government if, as is widely speculated, Johnson calls early elections. A Labour-SNP pact could keep the Conservatives out of power and, just possibly, defy a no-deal Brexit.

But the cost is another Scottish referendum, which a poll this week suggested would yield a “Yes” vote to independence.

Many hurdles remain to a referendum, let alone an independent Scotland. But when it comes to countries breaking free, Brexit might just be the start.

Global Headlines

Big bets | The relationship between their countries is at its lowest point in decades, but neither U.S. President Donald Trump nor his Chinese counterpart, Xi Jinping, has a domestic incentive to reach a compromise. Instead, they've unleashed tit-for-tat trade and currency moves that risk exacerbating a wider geopolitical fight between the world's two biggest economies. The latest Chinese goods slapped with U.S. levies: $4.4 billion in cabinets.

• Subscribe to Bloomberg's Terms of Trade newsletter to receive all the big developments in your inbox each weekday.

Empty promises? | Democratic presidential candidates are vowing bold executive action as they respond to two mass shootings in 24 hours last weekend. But, as Gregory Korte reports, they may only manage timid steps. No president can unilaterally ban assault weapons and high-capacity magazines or require universal background checks — the most sought after changes. Both would require action by Congress, where gun measures have stalled.

• Trump will seek to console the grief-stricken residents of El Paso and Dayton today — a presidential duty he's never quite mastered and that is made harder by local reticence about his visit.

Democrats' opportunity | An early wave of Republican retirements from the U.S. House is bolstering Democrats' chances of holding -- or perhaps even expanding -- their majority in 2020. Texas Representative Kenny Marchant yesterday became the 11th Republican to announce he's not running for re-election. His district is one of several in the state where demographic and political shifts are favoring Democrats, Billy House reports. 

• The fossil fuel industry is squarely in the crosshairs of 2020 Democratic presidential hopefuls, evoking growing alarm from a sector that's found a cheerleader in the Trump administration.

Missile message | North Korean leader Kim Jong Un fired off his fourth volley of a new short-range ballistic missile in two weeks and delivered a message through his official state media to Trump, telling him to halt joint military drills with South Korea or risk seeing his efforts at nuclear diplomacy fall apart. U.S. Defense Secretary Mark Esper justified the exercises, saying: “We need to maintain our readiness.”

Argentine crossroads | Argentina faces a momentous choice in this fall's presidential election: Stay on the current market-friendly path or reverse course. The first act plays out on Sunday, when Argentines vote in a mandatory primary that is effectively a nationwide poll, with the result indicating potential support ahead of October's first round. The performance of the incumbent — investors' favorite, Mauricio Macri — will be key to gauging his chances of re-election. 

What to Watch

• Chinese authorities meeting in Shenzhen acknowledged the historic unrest across the border in Hong Kong is the worst since they took control in 1997. But they ruled out a key demand that could help halt the protest movement's momentum.
• Mozambique President Filipe Nyusi signed a peace deal with the biggest opposition party in a third attempt to end more than four decades of fighting as the nation prepares for elections.

And finally...A quarter of the world's population is facing a water crisis, with the potential of severe shortages looming, according to a new report by the Washington-based World Resources Institute. As Hannah Dormido shows, drought knows no geographical bounds, with countries from Portugal to Chile at high risk of water stress. India is of most concern: Its population of 1.4 billion is more than three times that of the other 16 countries in the extremely high-risk category combined.

--With assistance from Kathleen Hunter, Karen Leigh, Jon Herskovitz and Juan Pablo Spinetto.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net

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