August 5, 2019 / 7:41 AM / 4 months ago

Daily Briefing: Scottish poll sends message to PM Johnson

LONDON (Reuters) - Scottish voters would vote for independence from the United Kingdom, according to a poll this morning that is the first major published survey to show a lead for independence since March 2017.

'All Under One Banner' pro-independence protesters take part in a march and rally in Edinburgh, Scotland October 6, 2018. REUTERS/Russell Cheyne

Asked in the Ashcroft poll how they would vote in an independence referendum, 46% said they would back independence and 43% against.

Excluding don’t-knows, that amounts to a 52-48 lead.

Whether PM Boris Johnson takes that as a pre-emptive warning about the risks associated with taking the country towards a no-deal Brexit remains to be seen: The headline he will be pushing today is the 1.8 billion-pound cash injection he will announce for Britain’s public health system.

While the Brexit saga goes on, policy and politics in much of Europe will be on hold through August.

The final reading of Markit’s composite PMI figure for the euro zone in July due at 0800 GMT should not create too much excitement - it is seen holding at 51.5.

One read-out that did come as a surprise, however, was Sweden’s manufacturing PMI for last month - up to a strong 52 compared to expectations of just 50.5.


World markets suffered another jolt on Monday as China let its yuan slide beyond 7 per dollar for the first time in 11 years  – dropping almost 1.5% , which was the biggest one-day fall in the offshore yuan at least since 2015.

The slide in the yuan through the psychologically important 7 level is itself another dramatic escalation of the trade war between Washington and Beijing, following U.S. President Donald Trump’s decision to impose tariffs of 10% on all remaining Chinese imports on Sept. 1.

The People’s Bank of China clearly linked the two and even though it pledged to fight speculation showed its power over the exchange rate.

“Under the influence of factors including unilateralism, protectionist trade measures, and expectations of tariffs against China, the yuan has depreciated against the dollar today, breaking through 7 yuan per dollar,” the PBOC said in a statement.

Trump’s constant complaints that the dollar’s strength is caused by other countries stealing a competitive advantage on the United States is heightening fears that trade wars will morph into full-blown currency wars – with the added volatility that may bring to world markets and the global economy.

In a flight to safety, Japan’s yen and Switzerland’s franc surged against the dollar and euro, prompting Japan's top currency diplomat, Yoshiki Takeuchi, to declare Japan was ready to take action in the currency market if excessive yen rises hit the economy.

Economists at Citigroup said at the weekend that the possibility of currency market intervention by the U.S. Treasury was still on the radar if the dollar appreciates a further 5%.

The dollar’s sharp retreat against the yen, however, saw the dollar’s DXY index slip back to July 26 levels and euro/dollar pushed higher as well.

Battered by no-deal Brexit nerves and growing speculation about a snap UK general election, sterling was probing $1.21 first thing and last week’s near-two-year lows against the euro.

The latest trade conflict has whacked emerging markets, with the yuan slide dragging MSCI’s emerging-markets currency index to its lowest since May and sending MSCI’s emerging equity index down for its ninth straight daily loss – its longest losing streak since 2015.

South Korea’s won plunged to its lowest level in more than three years, hit by global trade wars and the country’s disputes with Japan.

Sales of Japanese-branded autos in South Korea slumped in July as a diplomatic row led to consumer boycotts and efforts by Seoul to cut the economy's reliance on imports from Japan.

Industry data out of South Korea on Monday showed Toyota Motor sales in the country tumbled 32% from a year earlier and Honda’s sales 34%.

India’s rupee plunged to a five-month low and bond yields there rose on both the trade war and potential conflict in the disputed region of Kashmir.

Traders said the rising tensions in the northern state of Jammu and Kashmir were being closely monitored, along with a monetary policy committee review on Aug. 7.

World equity markets have been hit been hit by diminishing expectations the Federal Reserve would cut interest rates further, after it lowered rates last week for the first time in 11 years.

Futures markets now foresee less than a 20% chance of another Fed rate cut next month, although they are also wiping away hopes this move will be a successful mid-cycle ease and still have about 100 basis points of cuts priced over the coming year.

The failure of the Fed move to steepen the Treasury yield curve is a real concern among investors.

Partly on trade and recession fears and partly on a safety bid from equities, government bonds rallied across the board.

Ten-year Treasury yields dropped as low as 1.74%, with the yield curve between three months and 10 years falling to its lowest in over a decade at more than 31 basis points.

European government bond yields slumped as well.

The entire German yield curve out to 30 years is now negative, with the 30-year bund yield dropping another 5 bp to 0.033% and the 10-year bund yield setting a record negative low of -0.533%.

The Dutch 30-year yield turned negative on Monday, too.

Wall Street stocks dropped 1% on Friday, with the Vix volatility gauge briefly topping 20%.

In Asia, Shanghai stocks were down  more than 1%, with Hong Kong’s Hang Seng and Seoul’s Kospi dropping almost 3% at one point.

Japan’s Nikkei was down almost 2%.

European stocks opened almost 1% lower, and S&P stock futures were down by a similar amount.

In European corporate news, HSBC CEO John Flint’s departure after just 18 months in the role has pulled its Hong Kong-listed shares 1.5% lower.

The stock opened 0.7% lower in London.

With the offshore yuan hitting the lowest on record, UK miners are expected to slide 3%, according to traders, as it gets expensive to buy dollar-denominated metals.

This follows the STOXX basic resources index’s worst single-day performance since June 2016 on Friday.

As expected, has agreed the terms of an 8.3 billion-pound ($10.1 billion) deal to buy British rival Just Eat to create the world's largest online food delivery company outside China.

Metro is seen falling 5% after Czech businessman Daniel Kretinsky’s investment vehicle denied reports it was considering raising its takeover offer for the German retailer.

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

Editing by Larry King

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below