October 21, 2019 / 7:42 AM / 2 months ago

Daily Briefing: The never-ending story

LONDON (Reuters) - It’s never over till it’s over.

Britain's Prime Minister Boris Johnson speaks during a debate on Brexit, as parliament sits on a Saturday, in London, Britain October 19, 2019. ©UK Parliament/Jessica Taylor/Handout via REUTERS

What was billed as yet another make-or-break weekend in the seemingly endless Brexit saga has once again failed to deliver – kicking any parliamentary vote on the latest deal thrashed out between London and Brussels from Saturday to Monday, assuming the government is even allowed to ask the question of lawmakers for a second time.

As a result of an amendment passed on Saturday, the UK government is now bound to extend the Brexit date beyond Oct. 31 if the legislation required to ensure Brexit is not passed by then.

UK Prime Minister Boris Johnson was forced into a U-turn by sending a letter to the European Union on Saturday requesting a delay until January.

The EU is said to be considering the delay, pending the outcome of any further attempt by Johnson to pass the latest deal through parliament as soon as Monday.

The political manoeuvring puts the timing of the whole process in question yet again, even though markets seem assured that the parliamentary chicanery now significantly reduces a no-deal Brexit crash - considered by many to be the worst-case scenario for the UK economy.

Goldman Sachs said it sees the chance of no deal reduced to just 5% from 10% previously.

The pound, which had by Friday’s close risen as much as 6.5% over the previous seven trading days to a five-month high just shy of $1.30, has recoiled about half a percent from those peaks but continued to hold $1.29 first thing in London – with traders seemingly comfortable that either a deal or delay is now in the offing.

The latest data on speculative currency positions showed a further reduction in net sterling shorts last week, underscoring the rally.

The timetable for Monday’s vote remains uncertain; parliament’s speaker first must rule on whether the question can be asked again.

Government ministers claims it they get the votes to pass it, but independent observers say it will be tight either way.

FTSE100 stock futures are set to open flat.

With one eye on the UK saga, world stock markets were firmer first thing.

Positive signals on Friday from Chinese Vice Premier Liu He on the need for Washington and Beijing to solve their differences over trade helped sentiment in Asia.

Hong Kong stocks were buoyed by legislation allowing mainland Chinese purchases of dual-listed shares in Hong Kong.

The Hang Seng index was up 0.1%, Japan’s Nikkei rose 0.25% despite news of a big drop in September Japanese exports and Seoul’s Kospi was up 0.2% in the face of poor export data there as well.

Shanghai underperformed with losses of about 0.4%, with the offshore yuan opening a fraction stronger against a generally firm dollar.

Like sterling, euro/dollar was just off Friday’s peaks – opening in London about $1.1150 after ending Friday near its highest in two months.

U.S. tech bellwethers such as Amazon and Microsoft report third-quarter results and European Central Bank chief Mario Draghi chairs his final ECB meeting on Thursday.

In emerging markets, the signs of progress in U.S.-China trade talks outshine some dismal Asian data to see stocks gain and lift developing-world currencies to an 80-day high.

China’s yuan strengthened after the central bank unexpectedly kept its new benchmark lending rate on hold, suggesting Beijing was keen to avoid overly loose monetary policy for fear of fuelling the build up of debt even more. 

South Africa’s rand gained 0.2% after President Cyril Ramaphosa saying he will announce a permanent CEO for embattled state-run utility Eskom soon.

But Turkey’s lira struggled, weakening 0.2% as markets watched the latest movements in Ankara’s military push into northern Syria.

Kurdish-led forces said they had withdrawn from the key border town of Ras al Ain. A ceasefire seemed to hold, and Washington signalled it might revoke sanctions if the pause became permanent.

A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own.

         

by Mike Dolan, editing by Larry King

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