October 25, 2019 / 7:56 AM / a month ago

Daily Briefing: Here we go again

(Reuters) - Brexit deadlock again?

Britain's Prime Minister Boris Johnson attends a news conference at the European Union leaders summit dominated by Brexit, in Brussels, Belgium October 17, 2019. REUTERS/Toby Melville

British PM Boris Johnson wants to call an election, but opposition leader Jeremy Corbyn wants to wait until the European Union’s extension decision; the EU would like to see the outcome of the election wrangle.

Sterling remained near a one-week low against the dollar.

Today we await the outcome of the EU ambassadors’ meeting to see whether the extension will be granted.

That could give some support to the pound as investors do seem keen to put money to work in the UK.

Another thing to look out for will be the ratings review for Britain from S&P Global

World stocks are up for the third week in a row, though they pulled back today amid the Brexit uncertainty and some disappointing earnings – Barclays warned that a worsening economic outlook may mean it misses its profit targets in the coming year, and last night Amazon posted its first decline in profit in two years, pushing its shares some 9% lower in after-hours trade.

German flash PMIs came in weaker than expected as did US capital goods orders.

The jobs component of its (mostly upbeat) PMI slipped to a decade low.

Finally, there is again some noise on the US-China trade front as US Vice President Mike Pence criticised China over Hong Kong and the treatment of its Muslim minority.

No wonder markets are a touch wobbly.

World stocks have pulled off near three-month highs, European markets are opening near flat and U.S. futures are mostly unchanged.

Most G10 currencies are flatlining, although the euro is down half a percent on the week and the dollar looks set for its first weekly gain after three weeks of losses.

It could get some direction from Germany’s IFO survey, which is due out soon.

Focus is now likely to move to the Federal Reserve and the Bank of Japan meetings next week.

A rate cut is almost certain in the United States, but the Japanese decision looks more finely balanced.

Tentative equity gains mean bond yields are inching higher in Germany and the United States.

In emerging markets, the main focus will be on Russia’s central bank decision.

It’s expected to cut interest rates by 50 basis points, joining the wave of policy easing across the developing world – this week alone we have seen rate cuts in Turkey, Chile, Indonesia and Ukraine.

Emerging-market currencies look undeterred; MSCI’s EM FX index rose this week.

European stock markets opened sideways.

An EU decision to grant another Brexit delay may affect the session, which for the moment is mostly about third-quarter earnings.

Amazon’s gloomy forecast for the holiday season isn’t doing much to cheer things up for investors worried about earnings and the global macro picture.

Among the top movers triggered from this morning’s Q3 results batch is Kering, which might rise as much as 10% after another strong quarter.

WPP is seen 2.5 percent higher after returning to quarterly net sales growth.

Inbev is seen falling 4% on a dimmer view of 2019 and Ubisoft is likely to be hit, too, as much as 10% at the open.

UK polymer maker Synthomer could also get punished after a retreat in profits.

In emerging markets, Turkey’s lira weakened for a second straight day against the dollar, still smarting from Thursday’s 250-basis-point rate cut and comments by President Tayyip Erdogan that inflation will fall once interest rates are cut further.

Russia’s rouble is treading water on lower oil prices and expectations for a rate cut.

South Africa’s rand gained 0.5% though markets were eying the country’s medium-term budget speech and Moody’s credit rating review, both due next week.

A look at the day ahead from EMEA Deputy Markets Editor Sujata Rao. The views expressed are her own. 

Reporting by Sujata Rao

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