Over in New York, trading is subdued as investors brace for the next deadline in the US-China trade talks.

Washington is due to hike tariffs on $155bn of Chinese goods, including technology products, on 15 December unless a Phase One trade deal is agreed. Many analysts expect a delay, but the uncertainty is worrying Wall Street.

So, the Dow is down 31 points or 0.1% in morning trading at 27,984.

Here’s AP’s take:

Wall Street is particularly focused on developments in the trade war ahead of a new round of tariffs on $160 billion of Chinese imports due to take effect on Sunday. That would raise prices on key products, including cell phones and laptops, and threaten to affect consumers.

A Chinese official said Monday that the nation wants a prompt settlement, but gave no details on progress toward a potential deal. China made a conciliatory gesture last week when it said it would waive tariffs on American soybeans and pork.

Gains from communications companies were offset by losses from energy and health care stocks. Charter Communications rose 1% and Marathon Petroleum fell 2.5%.

Trade war jitters seem to be weighing on European stock markets today.

The main indices are mostly in the red as that 15th December deadline looms.

Data showing that Chinese exports fell again in November has disappointed some investors, as it implies the trade dispute with America is causing more damage.

Duncan Weldon of The Economist points out that Paul Volcker’s long, varied career went beyond simply running the Federal Reserve:

Whoever wins Thursday’s election faces many challenges, including how to fight the climate emergency while still raising living standards.

Nobel Prize-winning economist Joseph Stiglitz reckons this conundrum can be solved, if policymakers focus on the ‘quality’ of growth in the economy:

Back in the UK, another opinion poll has shown that the Conservative’s lead over Labour has narrowed.

It shows that Boris Johnson’s lead over Jeremy Corbyn has dipped to 6 percentage points, from 7.

That’s a tighter race than other polls in recent days, such as YouGov (a ten-point lead) and Survation (14 points).

And it’s weighing on the pound a little - much of this morning’s rally has now fizzled out.

Reuters points out that Paul Volcker was no fan of the rise of the super-rich:

In 2018 he published a memoir, “Keeping at It: The Quest for Sound Money and Good Government,” and expressed concern about the direction of the federal government and the loss of respect for it.

“The central issue is we’re developing into a plutocracy,” he told the New York Times in October 2018. “We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government and they don’t like to pay taxes.”

They also talk about the ‘mystique’ that underpinned his work at the Fed, as he hiked interest rates painfully high:

Volcker stood 6-foot-8 (2.03 meters), smoked cheap cigars, wore old suits and spoke with a rumbling baritone, creating a mystique that intimidated congressmen and even presidents. Part of his aura of power was due to the Fed’s unusual nature - the central bank’s governors, although appointed by the president and overseen by Congress, are effectively answerable to no one.

In 2018 when President Donald Trump regularly attacked the Fed as “crazy” for raising interest rates, Volcker advised Chairman Jerome Powell to simply ignore the criticism.

Volcker, who slammed the economy’s brakes like no other Fed chair, also absorbed his share of barbs from lawmakers in the 1980s. But he faced down both that criticism and, ultimately, inflation that had spiked higher than any point since the 1940s.

Economists, investors and journalists are offering their appreciations for Paul Volcker’s work:

He wasn’t infallible, though....

The recent rally in the pound is a blow to any hedge funds who have bet against the currency.

Speculators have reduced their net short positions on the pound vs the US dollar to $2.44bn in the last week, Reuters is reporting. That’s down from a peak of $7.81bn earlier this year.

Jordan Rochester, Nomura’s currency strategist, has predicted that a Tory triumph could push the pound to $1.35 - not seen since May 2018.

Rochester says:

“Sterling can get to $1.34/$1.35 if there is a Conservative victory, then its appreciation will be capped by what the Conservatives have pledged in terms of the spending offered and renewed Breixt uncertainty.

The FT has spotted that the cost of insuring against a tumble in the value of the pound has risen.

That suggests some investors are nervous about the result of this week’s election, as a hung parliament would probably knock sterling lower.

Rupert Thompson, Head of Research at Kingswood, says smaller UK companies could see their shares rally after a Tory win -- which looks probable, but not certain.

A Conservative victory is still not a done deal given the scope for significant tactical voting and the poor performance of the polls in recent elections. Indeed, UK equities overall have struggled to build on their burst of outperformance in October as the risk of a No-Deal Brexit faded. Within the UK market, by contrast, the prospect of a Conservative victory and an orderly Brexit departure are being embraced rather more enthusiastically.

Mid and small cap stocks have outperformed their large cap counterparts by around 10% and 5% respectively since mid-October, benefiting from their greater exposure to the domestic UK economy. If the Conservatives do end up with a majority, we would see scope for the pound recovering somewhat further to maybe $1.35 and some renewed outperformance by UK equities. Small cap stocks should also outperform further, as valuations continue to look cheap relative to large caps.

In other news, the battle for takeaway company Just Eat rumbles on.

Amsterdam-listed Prosus has hiked its offer for the FTSE 100 firm, to over £5bn, which rival bidder Takeaway.com has dismissed as ‘derisory’. Here’s the latest:

Gambling site Betfair reports that the odds of a Conservative win have narrowed again today, to its lowest levels since 2017.

As chart shows, it’s now a 79% chance (based on wagers) while a hung parliament is roughly 19%.

Betfair spokesperson, Katie Baylis explains:

When the Election was called in October, no overall majority was odds-on and the Tories had a battle on their hands according to punters, but once Nigel Farage announced his Brexit Party candidates would not oppose in Tory seats, Boris Johnson and his party have seen their odds continue to shorten to the point that today they look almost unbeatable.

“But if there’s one thing that the last few years in British politics have taught us, is that nothing is ever certain and we will be watching those exit polls and first seats very closely when they come in on Thursday night.”

Economists are encouraged by the pick-up in eurozone confidence this month:

Some stocks could rally if the Conservatives win Thursday’s election, given Labour’s commitment to nationalise parts of the utilities sector.

But Russ Mould, investment director at AJ Bell, says Brexit uncertainty could still hold the market back:

The pound nudged ahead to $1.3162 as the latest polls showed the Conservative Party extending its lead ahead of the General Election later this week.

“The key question for investors is by how much UK shares could bounce on a Tory majority win. This scenario would remove various negative factors which have been weighing on markets such as Labour renationalising transport companies. Yet there is still Brexit to tackle which sustains some level of uncertainty among investors.”

Elsewhere in the City, shares in oil producer Tullow are in freefall after announcing its CEO and exploration director had both resigned.

The firm also suspended its dividend, and admitted that oil production from two fields in Ghana will be rather lower than expected.

Shares have slumped 60% this morning, a quite staggering slump, to 57p - their lowest since 2001. Back in 2012 they were worth £13, when the firm was reporting solid activity in Ghana, Uganda and Kenya.

Shares in UK focused companies are strengthening this morning too.

Retailers Marks & Spencer (+3%), Next (1%) and Kingfisher (+1.1%) are all among the risers, along with banks such as Lloyds (+0.8%) and RBS (+0.7%).

Supermarket chain Tesco is the top riser, up 5%, after announcing it could sell its Thai and Malaysian stores.

But the pound’s strength is pulling down some big overseas earners, including drinks firm Diageo (-1%).

This means the FTSE 100 has dipped by 10 points in early trading, to 7228.

For all the talk of ‘getting Brexit done’, it’s inevitable that the issue would dominate UK politics in 2020 and beyond.

If the UK does leave the EU by the end of January, a new battle to define the future trading relationship between the two sides will break out.

Mujtaba Rahman, managing director at Eurasia Group, says Johnson will have some “very big decisions to make”, about how close to stick to European rules and regulations in return for less friction at the border.

The size of any Conservative win would be a crucial factor here. A big majority would free Johnson from having to placate the hard-line Brexiteers on the back benches (and now in his cabinet too).

Rahman says there’s little clarity about which way Johnson will pivot (if he remains as PM):

Cabinet ministers admit privately they have barely discussed the future relationship question that would loom large once the UK had left the EU on 31 January. “All the focus has been on the election,” one minister said. “Boris is vague about the EU trade deal.”

Whitehall officials believe Johnson would soon have to confront the dilemma May faced: to secure close to frictionless trade needed to protect UK business, he would have to accept more EU regulation than he has been prepared to admit.

Johnson’s position is deliberately opaque. He is still in the “have cake and eat it” mode he outlined when May was PM. In effect, he has asked voters to take him on trust, and allow him to sort out the detail after “getting Brexit done.” He wants a “no tariffs, no quotas” deal with the EU but has not addressed the quid pro quo of regulatory alignment. He has avoided speaking about possible trade-offs in politically sensitive areas such as fishing rights, an inevitable EU demand. He has raised the prospect of a “buy British” policy and state aid for struggling UK companies, and largely avoided the EU’s demand for a level playing field. If he wins, he will have some very big decisions to make.

Time would be very short. Johnson has argued that after securing a withdrawal agreement in three months, he can be confident of landing an EU trade deal by December 2020. An extension of up to two years, set out in the withdrawal agreement, would have to be approved by EU leaders at their summit next June. Brussels officials say December is an “extremely challenging” deadline and predict a trade agreement would take at least three years. Some UK ministers privately predict (and hope for) a fudge: a bare bones deal in some areas—with the details filled in later. There would be a mechanism to allow the UK to diverge, with consequences for its EU market access.

Another scenario—more likely if Johnson has a small majority—would be that the bare bones deal is as good as it got.

Our morning briefing explains what the parties will be up to today:

Jim Reid of Deutsche Bank has warned clients that the Conservative lead has been slightly whittled away in recent days:

The weekend polls showed a wide spread of Tory leads from 6pts to 15pts but with the average edging back above 10pts after recently dipping below. A reminder that anything below a 6-7 point lead is around hung parliament territory.

The closely-watched MRP opinion poll, released on Sunday, also gives the Conservatives a solid lead of Labour -- with a majority of 38.

But... it comes with a warning that many voters are undecided, so that majority could yet evaporate.

This chart shows how the pound has rallied against the euro in recent weeks, to this morning’s 31-month high.

However, it’s still around 8% weaker than before the EU referendum in 2016.