July 30, 2018 / 7:43 AM / 2 months ago

Daily Briefing: Brexit - buyers' remorse setting in?

LONDON (Reuters) - There is some uncomfortable reading for the UK government in a new poll released by Sky this morning which the broadcaster presents as showing a sharp shift in British public opinion against Brexit.

EU supporters, calling on the government to give Britons a vote on the final Brexit deal, participate in the 'People's Vote' march in central London, Britain June 23, 2018. REUTERS/Henry Nicholls

Two-thirds of the public - including a majority of Leave voters - now think the outcome of Brexit negotiations will be bad for Britain.

A full 78 percent conclude that the government’s handling of the Brexit process has been bad and a majority would like to see a three-option referendum asking them to choose between the deal suggested by the government, no deal, and remaining in the EU.

While all this may give some hope to the Remain camp that the process can still be reversed, the conditions for a UK government of any hue to entertain such a vote are still a long way off.

Still, it does suggest that public perceptions about Brexit are now evolving, particularly on the Leave side, and that could yet have political repercussions.

MARKETS AT 0655 GMT

1. In the words of one bank, “Tech began cracking last Tuesday before the floodgates opened on Friday”.

In other words, bumper profits from Amazon, U.S. Q2 GDP posting the fastest growth rate in four years and calm on the trade war front did not prevent Wall Street’s Nasdaq index from falling heavily on Friday, hurt by a 20 percent fall in Twitter and 8 percent in Intel, which rekindled fears for the sector.

World stocks enjoyed their fourth week of gains last week but markets are clearly nervous – bond yields did not rise much on the U.S. growth numbers and nor did the dollar.

Japanese yields today are up 10 bps at 1-1/2 year highs as the BOJ starts its two-day meeting and, while the bank is a while off making any significant policy changes, many reckon there could be some change in its language, and tweaks to its stocks buying strategy.

Accordingly, world stocks have opened lower today, with tech weighing heavily.

Chinese and Hong Kong shares are down 0.5-0.8 percent and the Nikkei has shed 0.7 percent.

Wall Street futures are down a quarter percent this morning.

In terms of results, the one to watch today is Caterpillar – remember it had seen its Q1 boost as “the high-water mark” – the heavy equipment maker is considered a bellwether for global activity but is suffering from cost pressures and protectionism. Apple, the last of the FAANGs, reports tomorrow.

Overall, 140 U.S. firms report this week and while earnings growth is a scintillating 20 percent, that’s a function partly of tax cuts, and a slowdown in growth should begin to take a toll.

U.S. dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto, Ontario, Canada June 13, 2018. REUTERS/Chris Helgren

2. On currency markets, the dollar has failed to make headway and the euro is still licking its wounds after suffering its biggest selloff in a month following Draghi’s reaffirmation of the ECB pledge to keep rates low through summer 2019.

It could get some traction from preliminary German and Spanish inflation as well as euro zone sentiment surveys.

Sterling, which suffered its third week of losses following more travails on the Brexit front, is awaiting consumer credit and mortgage lending data but is flat on the day.

Most interesting is the yuan, which has weakened past 6.84 per dollar for the first time since last June, with little sign that authorities are overly concerned.

BOJ, Fed and BOE meetings due this week - only the BOE expected to hike.

Emerging currencies are broadly weaker, following the yuan’s cue, but Turkish lira taking a beating on prospects of a fresh standoff between Ankara and Washington: President Trump has threatened sanctions unless Turkey frees an American pastor.

3. European shares: Sliding Asian stocks and Wall Street futures have dragged European shares along with them at the start of another packed earnings week.

Earnings are forecast to rise on average by 9 percent.

European stocks are down 0.4 percent, after the index enjoyed its strongest week in nearly five months. Britain’s FTSE down 0.5 percent.

4. Earnings: Heineken down 5 percent at the open after the world’s second biggest beer maker cut its full-year margin guidance.

British construction materials firm Ibstock is down 10 percent after warning on earnings.

Bookmaker GVC, the owner of Coral and Ladbrokes, is up 5 percent after agreeing on a joint venture with MGM Resorts to set up an online betting platform in the United States, the latest inroad of British betting companies into a market where individual states can now decide to legalise sports gambling. 

And a Sunday Times report that travel company Thomas Cook is looking to sell part of its airline has boosted the stock 3 percent.

5. Other company news and potential stock movers: Heineken cuts FY margin guidance after profit falls short; GEA sees operating 2018 EBITDA margin at lower end of corridor; Oerlikon sells drive systems segment to Dana in 600 mln sfr deal; Healthineers confirms guidance as Atellica shipments gain pace, shares down 3.5 percent; French insurer CNP's H1 net profit rose 2.3 percent; Altice Europe sells Dominican Republic assets to Phoenix Tower, shares down 2 percent; HSBC appoints Surendra Rosha as India CEO; GVC, MGM Resorts to jointly set up online betting platform in U.S.; Lender CYBG says third-quarter trading in line with expectations; UK estate agent Foxtons posts half-year pre-tax loss.

6. Emerging Markets – A drop in China’s yuan and its main bourses meant it was a groggy start to the week for emerging markets, while Pakistan’s rupee was knocked back by talk of yet another IMF programme being drawn up. Most emerging currencies are weaker, led by a 0.8 percent fall in the Turkish lira.

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

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