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Daily Briefing: Italy, Poland eye ratings review; May on Brexit
January 13, 2017 / 8:46 AM / in 10 months

Daily Briefing: Italy, Poland eye ratings review; May on Brexit

LONDON (Reuters) - Italy and Poland will be among those nervously watching the credit ratings agencies and their regular reviews of sovereign debt on Friday. On Italy, Canadian agency DBRS must decide what to do with Italy’s rating: A cut would deprive it of its only remaining single-A rating and so increase the cost of ECB borrowing for the country’s banks. Separately, Fitch and Moody’s are due to review Poland’s sovereign rating. Last month, S&P unexpectedly raised its outlook on Poland’s sovereign credit rating to stable from negative, saying political and monetary policy uncertainties were easing. While many analysts expect no change to the ratings, some are looking for Moody’s to raise its outlook from negative to stable -- a move that would help the ruling Law and Justice party justify its programme of higher welfare spending.

Police patrol in front of Rome's ancient Colosseum, Italy, March 17, 2016. REUTERS/Stefano Rellandini

Expect much speculation between now and Tuesday on what UK Prime Minister Theresa May will say in a speech on her plans for Brexit. Thus far, the main clue from her spokeswoman is that she will outline how she wants to see a “global Britain” that looks outwards -- a slogan which sounds ominously like an empty soundbite. The problem is that May, naturally enough, does not want to give the details of her negotiating strategy away, so is condemned to stick pretty rigidly to no-brainer lines like “getting the best deal” for Britain and so on. One thing to keep an eye on will be how she phrases the UK readiness for a transitional deal with the EU. That is something she has hinted at before but is wary of using the term “transitional” itself lest ardent Brexiteers in her party and across the country start fretting that Brexit never actually happens. Watch out instead for terms like “interim” to describe any such arrangement.

MARKETS AT 0755 GMT

With U.S. President-elect Donald Trump casting barely any light on his policies at his Wednesday news conference, there is a degree of grasping in the dark in markets on Friday. European shares are headed higher at the open, according to index futures, after slight dips in Asia. The dollar is up a tad against its currency basket but with U.S. markets closed on Monday for a holiday, FX traders are seen unlikely to put on major positions before the long (for some) weekend. Chinese trade data showed that in 2016 the world’s second-largest economy’s exports fell 7.7 percent, their biggest drop since 2009. Imports of commodities soared. For December exports rose more than forecast while imports fell.

Britain’s blue-chip FTSE 100 index is heading for its 14th straight day of gains. European stock index futures are trading 0.3 to 0.5 percent higher. Fiat, which led Thursday’s fallers, again in focus after the U.S. Environmental Protection Agency accused it of illegally using hidden software to allow excess diesel emissions to go undetected, the result of a probe that stemmed from regulators’ investigation of rival Volkswagen AG.

Other possible stock movers: Estate agent Countrywide says London slowdown hits volumes, LSE Boerse chiefs travel to meet top German politician; Vivendi investments in Italy are long-term - CEO; Euro zone finance ministers to discuss legality of Monte Paschi rescue; and British Airways cabin crew to stage second strike next week.

Britain's Prime Minister Theresa May leaves Downing Street in London, Britain January 11, 2017. REUTERS/Stefan Wermuth

In Asia, MSCI’s main Asia-Pacific ex-Japan stocks index fell 0.1 percent, though optimism about the domestic economy and corporate earnings saw Tokyo’s Nikkei rise 0.8 percent.

The dollar index is down 0.1 percent but standing well above a five-week low hit on Thursday, with the “Trump trade” losing steam after the president-elect’s news conference. The euro was up 0.2 percent at $1.0637, the yen up 0.1 percent at 114.60 yen and sterling up 0.1 percent at $1.2174.

German 10-year government bond yields rose, tracking U.S. Treasuries after remarks by Fed officials that Trump’s policies are likely to boost growth. Last up 1.5 basis points at 0.25 percent.

Turkey’s lira weakens more than 1 percent on Friday, taking it to the biggest weekly fall since mid-July 2016 at more than 4 percent despite the central bank not opening repo auctions once again in an effort to tighten lira liquidity.

Other emerging currencies are chiefly treading water against both dollar and euro, also weighed down by trade data from China showing 2016 recorded the worst export fall since 2009 and December exports dropped more than expected.

Oil prices edged down. Brent crude, the international benchmark, was down 8 cents at $55.93. Copper dipped 0.1 percent to $5,837 a tonne but was still on track for its biggest weekly rise in seven weeks. Gold is up about 0.1 percent at about $1,195 an ounce.

Editing by Hugh Lawson

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