March 6, 2017 / 8:35 AM / 5 months ago

Daily Briefing: Fillon - day of reckoning?

Francois Fillon, former French prime minister, member of The Republicans political party and 2017 presidential election candidate of the French centre-right, attends a meeting at the Trocadero square across from the Eiffel Tower in Paris, France, March 5, 2017.Philippe Wojazer

LONDON (Reuters) - Today could determine whether French Republicans presidential candidate Francois Fillon battles on or bows to growing demands from party allies to step down in the wake of a nepotism row.

Former Prime Minister Alain Juppe is now being publicly touted by senior conservatives as the best replacement for him, not least because the latest polls show Juppe -- more centrist than the Thatcherite Fillon -- would win the election as comprehensively as Fillon would lose it.

Yet Juppe, who is due to make a statement this morning, has insisted so far he will not stand against Fillon, who at the weekend insisted he would not step down. The crunch could come tonight when Fillon has a face-to-face meeting with senior Republicans.

Meanwhile, another European government coalition could be about to wobble. Finland's nationalist Finns party, a member of the current ruling alliance, is facing a leadership change after their long-time chairman Timo Soini announced at the weekend that he will step down in June. The rub is that this paves the way for a more hardline, anti-immigrant and anti-EU leader such as Jussi Halla-aho, currently seen as the most likely successor. Such a move would be a major challenge for the future of the country's three-party government.

Talks start this week on a new power-sharing deal in Northern Ireland after the major advances made by Sinn Fein republicans in last week's election. They have three weeks to come up with a deal or there is a risk that power will revert to London. The reasons for Sinn Fein's advance were multiple and complex but one factor was their opposition to Brexit, a factor some see advancing the cause for a united Ireland. Sinn Fein's Mairtin O'Muilleoir, the province's outgoing finance minister, even called Brexit "the gift that keeps on giving".

This is the last thing the UK government want as, on the northern English border, they are also trying to face down Scottish nationalists over their calls for a second independence referendum.

MARKETS AT 0755 GMT

U.S. Federal Reserve chief Janet Yellen on Friday baked in March 15 rate rise expectations and with futures now almost 90 percent priced for a quarter-point hike, markets have already shifted to wondering just how many more moves the Fed will make this year.

Consensus is now for three hikes in 2016, but clearly incoming data takes on a different twist and Friday’s payrolls will kick that off. The comprehensive, if sudden, Fed prep work all last week means there was little by way of major market reaction to Yellen.

Wall Street stocks closed largely flat, even though two-year Treasury yields hit their highest since 2009 and the yield curve continued to steepen from last Monday’s lows. S&P5000 futures are pointing negative for Monday’s open however.

The dollar is steadier after sharp gains early last week, with attention in euro/dollar moving to this week’s ECB meeting to see how it will talk through the latest rise in headline inflation to its target rate. Euro/dollar hovered just under $1.06 this morning. Asian bourses were slightly higher, with the exception of Japan.

There was little obvious reaction to China lowering its growth forecast to 6.5 percent, or to North Korea’s latest missile tests. European equity markets are set to open slightly higher, grappling with a series of M&A breaks as Scotland’s Standard Life and Aberdeen Asset Management agree to merge and Peugeot agrees to buy GM’s Opel. On the other hand, Deutsche Bank shares are down more than 8 percent in pre-market trade after the German banking heavyweight announced a 8 billion euros right issue which will start in about two weeks and will be priced at a 39 percent discount to Friday's closing price.

The political focus will be back on France where the Republican party holds a crisis meeting over its presidential candidate Fillon’s damaged campaign. He is under pressure from some senior party figures to step down and be replaced by former favourite Juppe. Opinion polls show Juppe would do better against the other leading candidates Macron and Le Pen than Fillon. The French/German debt spread remains under 60 basis points after dropping to its lowest in more than a month last week.  

Editing by Richard Lough

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