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Daily Briefing: Merkel credits May with "good start" after summit dinner
June 23, 2017 / 7:37 AM / 5 months ago

Daily Briefing: Merkel credits May with "good start" after summit dinner

LONDON (Reuters) - One year since Britain's Brexit vote, Theresa May took her first tentative step on the EU stage since the UK election, outlining a "fair and serious offer" for EU citizens who choose to stay in Britain after Brexit.

British Prime Minister Theresa May and German Chancellor Angela Merkel attend the EU summit in Brussels, Belgium, June 22, 2017

This was on an informal level over dinner, EU leaders having asked her not to use EU summits as a negotiating chamber for Britain’s departure. The question of mutual residency rights was perhaps one of the less complex that will face EU and UK negotiators, but even here the devil could yet dwell in the detail.

The second day of the summit today should see reactions to May's proposals that would have been discussed by EU leaders after her departure. Angela Merkel saw May's proposals as a good start.

In London, May will be looking for progress in talks with the Northern Irish Democratic Unionist Party to secure their backing for her new government and its programme.

One of the early challenges for French President Emmanuel Macron’s government will be renewed tensions between migrants and residents and officials in the port city of Calais. France last year dismantled the so-called "Jungle" migrant camp, which had come to symbolise Europe's uphill struggle to deal with an influx of migrants - but scores have simply returned since. Interior Minister Collomb is due to make a trip to the city today.

Will Silvio Berlusconi, now 80, soon be back calling the shots in Italian politics? Hard to imagine after all the scandals and legal battles, but his centre-right bloc is poised to make gains against the anti-system 5-Star Movement in local elections on Sunday. He cannot run for office because of a 2013 tax fraud conviction. But he remains head of his Forza Italia party and hopes the European Court of Human Rights will soon rule he can be a candidate.

MARKETS

Oil prices are up slightly but still on track for their weakest half-year since 1997. That’s significant as markets ponder the inflation outlook and how that will influence monetary policy.

In Britain, there is debate among Bank of England policymakers over whether to raise rates, with the number of rate-setters backing an increase growing. In the United States, it’s a question of how many hikes. Given doubts over how resilient developing economies would be to higher interest rates, Friday’s flash manufacturing activity data will be closely watched.

European stocks futures are indicating another lacklustre session for equities, with the STOXX 600 set to end the week roughly flat as depressed oil prices drag on Europe’s oil sector, making it the worst-performing sector year to date, down 9.5 percent. An absence of company updates has also contributed to the muted mood this week.

Other stock movers/company news: Austria's Zumtobel full-year net profit tops expectations; Rio flags $180 million hit to H1 underlying profit after bond buyback; Allianz to cut 700 jobs in Germany in next three years (- Sueddeutsche); GSK's new CEO aims to divest sports nutrition brand; UK Hinkley plant could cost $38 billion in electricity payment top-ups; Strike at Volkswagen's Slovak unit to continue after talks fail; dispute at key German plant could hit Daimler output; Italian prosecutors request trial for UBI Banca, executives; FDA approves more convenient form of Roche blood cancer drug.

Asian stocks eked out modest gains. Tokyo shares closed up 0.1 percent.

The dollar is 0.2 percent weaker versus a basket of currencies. The euro is up 0.2 percent at $1.1172, the yen is up a similar amount at 111.25 per dollar and sterling, which dipped below $1.26 for the first time since Prime Minister Theresa May called a snap election in April, is 0.3 percent stronger at $1.2713.

Brent crude is up just 10 cents a barrel at $45.32.

Emerging market equities were set for a weekly gain of 0.6 percent, their best performance in a month.

Chinese mainland shares rose 0.7 percent and are up 2.8 percent for the week after MSCI said it would include Chinese A-shares in its benchmark emerging markets index, pushing stocks to an 18-month high on Thursday.

But the yuan was set for its biggest weekly fall since early March, down 0.4 percent, and its longest daily losing streak since October 2016. The losses are attributed to corporate demand for dollars and weaker guidance from the central bank.  

Russian stocks are set for another weekly fall, down 1.6 percent to the lowest level since November 2016, with oil on track for its worst first-half performance in 20 years. The rouble was 0.3 percent stronger on Friday as oil prices recovered.

The South African rand had strengthened 0.2 percent after a turbulent week, which has seen it fall 1 percent to a three-week low, hammered by a threat to the central bank’s independence. Parliament said it would launch a court challenge against an anti-graft watchdog’s recommendation of constitutional changes that would alter the mandate of the central bank.

Arab states have sent Qatar 13 demands to end the crisis, including closing Al Jazeera TV and reducing ties with Iran, aimed at ending the worst Gulf Arab crisis in years. Qatar has 10 days to comply, after which the list becomes "void". Turkey has backed Qatar during the crisis, with exports to the country tripling. Turkish manufacturing and confidence numbers due out later.

Mexico’s central bank raised interest rates by a quarter percentage point to 7 percent, as expected, but hinted this could be the last rise. The peso was steady in early trade.

Editing by Larry King

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