LONDON (Reuters) - A photograph released by Downing Street last night shows a solitary Theresa May signing Britain's Article 50 Brexit letter to the EU, just a Union Jack and a clock behind her.
The image is fitting: for from today May has given herself two years to conclude an exit deal that will seek to preserve commercial ties with Britain’s main trading partner while satisfying the yearnings of ardent Brexiteers for something that looks like a clean break with Europe.
Today she will tell parliament she will make Brexit work for all Britons “rich or poor” and European officials will reaffirm that Britain cannot cherry-pick what it wants from the EU while ignoring the rules it doesn’t like. Reconciling those two positions will be May’s work for the foreseeable future – and her political career will likely depend on it.
French Socialist former PM Manuel Valls has just declared he will support the centrist independent Emmanuel Macron in the presidential election. That is in itself a breath-taking disavowal of the Socialist Party's official candidate, hard leftist Benoit Hamon. It's hard to say what electoral benefit Macron will get from it - Valls is not wildly popular with voters in France. But it speaks volumes about the catastrophic state of the ruling Socialist Party and may hint at Valls' plans to tighten his grip on it when Hamon is seen to fail.
The resilience of equity markets to the stuttering legislative agenda of U.S. President Trump and against today’s formal request by Britain to start some two years of negotiations to leave the European Union is down to sheer strength of incoming economic activity.
The question for many investors is just how much momentum has now built up in the underlying economy regardless of Trump or Brexit or even the outside risks associated with the French and German elections this year.
U.S. consumer confidence readings shooting to their highest since 2000 this month was yet another startling example of the pickup in sentiment at least, but February U.S. trade numbers also showed the deficit falling by almost 6 percent – something that will lift Q1 GDP forecasts in lockstep. Barclays upped its first-quarter growth estimate by four tenths of a percentage point to 1.6 percent after the trade numbers and Morgan Stanley upped its call to 1.5 percent from 1.0 percent.
More broadly across the world, Citi’s economic surprises indices for the United States, the euro zone, Britain and emerging markets in aggregate are still impressively positive and have been so since December – showing a mix of accelerating activity and a persistent underestimation of its strength by forecasters.
The S&P500 closed up 0.7 percent late Tuesday, the Dow Jones broke an 8-day losing streak and futures markets are pointing to another positive open later. Asia bourses were mostly positive, although the rebound in the dollar and U.S. Treasury yields may put a brake on emerging markets in general. Euro/dollar slipped back below $1.08 against a revived dollar, with sterling taking a hit too as PM May signed the formal letter that will trigger Article 50 of the EU’s Lisbon Treaty on Brexit.
While the Article 50 request sets the clock ticking on EU exit negotiations, it’s likely to be just procedural today and the first detailed response may not arrive until after the EU summit on the issue late next month and talks may not get going in earnest until after the French elections are over in May.
Scotland’s parliament, meanwhile, voted to request a new referendum on independence as a result of Brexit, but the UK government’s initial response was that it wanted to complete the Brexit process first. Sterling slipped below $1.24 in early trading, back to Friday’s levels. Euro/sterling was also higher.
Editing by Alison Williams