September 7, 2018 / 7:49 AM / in a month

Daily Briefing: Sweden Democrats - far-right kingmakers

LONDON (Reuters) - The latest chapter in the incursion of the far-right into European politics is set to be written on Sunday as Sweden goes to the polls.

Jimmie Akesson, leader of the right wing party Sweden Democrats, campaigns in Motala, Sweden, September 6, 2018

With neither main political bloc likely to win a majority, the far-right Sweden Democrats could end up with a key role in shaping the next government.

The centre-left bloc, uniting the minority governing Social Democrat and Green parties with the Left Party, is backed by about 40 percent of voters, giving it a slim lead over the centre-right Alliance bloc.

The Sweden Democrats, who oppose immigration and Sweden’s continued membership of the European Union, are polling around 18 percent of the vote and would thus hold the balance of power.

While all the mainstream parties have ruled out cooperating with a party which has roots in the white supremacist fringe, the reality is that the Sweden Democrats will have the power to bring down any minority government they don’t like.

Many in the Balkans will look nervously towards today’s meeting of the leaders of Serbia and Kosovo in Brussels. They will discuss formalising a peace deal, two decades after NATO helped end a Serbian war against insurgents in Kosovo and paved the way for the latter’s independence.

For the first time, leaders will discuss a land swap aimed at rehousing ethnic minorities on both sides in their preferred state. It is hoped that could facilitate a lasting peace and help speed both countries towards EU membership.

It could also open old wounds in a region still scarred by the ethnic conflicts of the 1990s and encourage others to dream of similar arrangements.

The EU has suggested it would not block a swap if both sides want it; the United States — the main sponsor of Kosovo independence in the first place — has made similar comments. Berlin is leading opposition to the proposal.

The Genoa bridge disaster continues to have political repercussions, with Deputy Prime Minister Luigi Di Maio announcing today that all concessions of public services will be put under review. He told the newspaper Il Corriere the Autostrade motorway contract was "only the tip of the iceberg" -- the review will encompass water, TV and telecom provision.

MARKETS AT 0655 GMT

Trade tensions and now tech trouble — in the paradise that was the U.S. equity market.

A man rests in front of the mural with text reading "It's worth dying for this country" in Mitrovica, Kosovo, September 5, 2018

The Nasdaq took a hammering last night, and while shares such as Facebook and Twitter took big hits, chipmakers fared worst after comments from the Micron CEO about the state of the semi-conductor market. That has pushed Asian shares to 14-month lows. World shares are flat but set for their worst week in 5-1/2 months.

While Chinese shares eked out a small 0.3 percent rise, the Nikkei is down almost 1 percent. And with the expiry of the deadline for public comment on additional tariffs on China, Trump now seems set on taking the trade fight to Japan, according to the Wall Street Journal.

That pushed the dollar down almost 1 percent against the yen, its worst daily loss in seven weeks, and while it has now stabilised, the greenback remains 0.10 percent lower versus other major currencies around one-week lows.

With tariffs on an additional $200 billion of Chinese goods likely, forcing Beijing to retaliate, the Australian dollar is caught up in that slipstream, plunging to the lowest since Feb 2016 against the greenback, while against the yen it is at 1-1/2-year lows.

The yuan is set for its 12th weekly loss out of 13 but authorities seem to have capped its losses by clamping down on offshore liquidity — Hong Kong overnight yuan borrowing costs have jumped as Chinese state-run banks swapped dollars for yuan in offshore markets, according to traders.  

NAFTA talks with Canada meanwhile grind on, with issues still “unresolved”. Eyes are now turned to the U.S. payrolls report for August, which is expected to show a robust rise of 191,000. If that is met or exceeded and wages rise more than the 0.2 percent forecast, the dollar and U.S. Treasury yields should go up. 

What of emerging markets? That sell-off had appeared to have taken on a life of its own, with a currency index plumbing 15-month lows and even units such as the Peruvian sol taking a beating. But the dollar’s failure to build on recent gains -- U.S. GDP data helped -- has allowed a bit of respite, and the index is actually up slightly.

Even the Argentine peso rallied 3 percent yesterday and this morning the Turkish lira has firmed 0.2 percent. The rouble is flat after heavy falls yesterday on fear of more sanctions. EM stocks have lost more than 3 percent this week. Payrolls may determine which way things swing in EM.

Is there any good news? Italy has been an unexpected winner this week, as hopes have grown the government will not after all go on a spending binge — sovereign bond yields therefore have seen the biggest weekly fall since mid-June, having declined 40-50 basis points across the curve.

European equity futures are up a modest 0.1-0.2 percent but the STOXX 600 index is set for its worst weekly performance since the end of March, and has registered just one positive week out of the last six. 

Some of the most eye-catching company news stories this morning aren't exactly heart-warming either. British Airways, which is owned by IAG, revealed that its website suffered a data breach, with around 380,000 card payments "compromised". Premarket indications see IAG's shares falling 2 to 3 percent on the back of this.

Legrand, Rexel and Schneider Electric were among French electrical goods firms raided by policy on Thursday in a corruption probe, according to a judicial source.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA deputy markets editor Sujata Rao. The views expressed are their own —

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