LONDON In Britain it is down to the nuts and bolts of Brexit today with the presentation in parliament of the Great Repeal Bill - legislation needed to place large chunks of EU law on the UK statute book but also repeal those laws by which Britain handed over elements of sovereignty to Brussels.
In the words of one parliamentary report, it will be "one of the largest legislative projects ever undertaken in the UK".
One likely area of controversy is that ministers argue the bill gives them the right to make changes to the law as negotiations with Brussels proceed. That is bound to anger some in parliament who will accuse government of selecting which laws are amended without proper consultation. It will busy parliament for months and will come into force only upon Brexit.
The latest data on German inflation will trickle through this morning, starting with read-outs from individual states and ending with nation-wide preliminary data for March. Analysts expect a slight easing of the annual rate to 1.9 percent from 2.1 percent, still enough to stoke debate about when the ECB should start winding up stimulus.
But the big takeaway from a Reuters story yesterday was that policymakers, alarmed that positive-sounding noises on the economy earlier this month were over-interpreted by the markets, will not take action at their next meeting in April.
MARKETS AT 0745 GMT
With all the noise and bluster about Brexit, the big market-moving stories on Wednesday were two Reuters exclusives on the euro zone – one on the European Central Bank cooling speculation about a 2017 interest rate rise and one on an agreement between Greece and its European Union and International Monetary Fund creditors on critical labour reforms and pension cuts.
The ECB story hinged on sources saying markets had “overinterpreted” signals from the March policy meeting, after which rate futures had moved to assign about an 80 percent chance of a rate hike by December. While that pricing had been unwinding again over the past week, yesterday’s story has pushed the chances back to below 50/50.
Euro government bond yields, the euro and European bank stocks all fell after the story. Euro/dollar was dragged back below $1.08 and has settled just above $1.0750 this morning. German and other euro zone March inflation numbers later will further feed that story.
An earlier mover and outperformer yesterday, however, was Greek debt, where two-year yields fell as much as 50 basis points to two-month lows, on the hopes the reported progress would allow EU and IMF mission chiefs to return to Athens in the coming days and finalise details with Greek officials before the April 7 Eurogroup meeting in Malta.
As for the Brexit trigger, there was little new in any of it to shift markets either way and a nervy sterling did little on the day. With substantive negotiations not likely to start for several weeks, some in the market are focusing on whether the talks on withdrawal and post-Brexit arrangements will happen sequentially, as the EU insists, or in parallel, as Britain wants.
If it’s the former, then there is concern the two-year horizon for the talks will not be enough and that will increase the chances of a ‘cliff edge’ withdrawal where Britain simply reverts to World Trade Organisation rules with its biggest trading partners.
Elsewhere, equity markets remained buoyant on the steady stream of upbeat economic data worldwide.
Oil prices and energy stocks helped, with Brent leaping above $52 per barrel on Wednesday to as high as $52.57 this morning on a mix of favourable inventory numbers, supply disruptions in Libya and signs OPEC may extend its agreements on production cuts.
The S&P500 ended marginally higher last night, with the ViX volatility gauge slipping back as low as 11 percent at one point.
U.S. Q4 GDP revisions later will also contain an estimate of economy-wide corporate profits, something to be contrasted with what companies themselves have already reported. The firmer dollar has weighed on regional Asia bourses overnight, with MSCI emerging markets equity index down about 0.3 percent so far today. Japan’s Nikkei also fell, with investors eyeing the end of the Japanese fiscal year on Friday. European stock futures are marked higher.
Markets will also keep one eye on the Czech central bank meeting later, its last meeting before it drops its ‘hard commitment’ to retain a cap on the crown. Mexico’s central bank is expected to raise interest rates by another 50bp later too.
(editing by John Stonestreet)