November 19, 2018 / 8:33 AM / a month ago

Daily Briefing: Busy week for May before Brexit summit

LONDON (Reuters) - British PM Theresa May will use a speech at today's annual Confederation of British Industry (CBI) conference to set out the case for her Brexit compromise deal and bat off questions about her own future. She will say that this week will be decisive in finalising the framework of the UK's future relations with the EU ahead of a special summit next Sunday.

Britain's Prime Minister Theresa May holds a news conference at Downing Street in London, Britain November 15, 2018. Ian Vogler/Pool via Reuters

Separately, a report in the Sun suggests that 42 of her lawmakers have submitted letters calling for her resignation, six short of the tally needed to trigger a leadership contest.

If that sounds close, it is worth remembering that her critics would require up to 158 votes to actually defeat her in any vote - a threshold they are far from certain of reaching.

Meanwhile the EU tries to get on with its own business, with France and Germany due to lay out plans on Monday for a modest joint euro zone budget focused for now on financing investment.

While something of a success for Emmanuel Macron, it falls short of his more ambitious early proposals and will steer clear of more controversial ideas such as using it to help euro zone countries in economic downturns.

Such suggestions quickly ran into resistance from some other countries, notably the Netherlands, and the current budget stand-off with Italy makes further ambitions unlikely for now.

The Franco-German plan will be unveiled at a meeting of euro zone finance ministers in Brussels.

Polish authorities have declared they will take any action needed to maintain the country's financial stability after news the financial regulator was quitting amid corruption allegations led to sharp falls in bank share prices.

The committee discussed on Sunday the current situation of Getin Noble Bank and Idea Bank. The lenders are controlled by Polish billionaire Leszek Czarnecki, who said on Tuesday former financial market regulator Marek Chrzanowski had offered to “support” his business in return for hiring a specific lawyer on a big fee.

Chrzanowski resigned his post while denying the allegation, now the subject of a government-commissioned inquiry.

MARKETS AT 0755 GMT

Although knives continue to be sharpened in the Sino-U.S. trade war, world markets have been buoyed by emerging signs than the U.S. Federal Reserve may well pause its monetary tightening next year if the global economy slows markedly.

Hopes that some détente in the trade war is imminent at this month’s G20 meeting in Argentina were dampened at the weekend at the APEC summit in Papua New Guinea, where the U.S. Vice President responded to China’s criticism of U.S. trade policy by saying there would be no movement from Washington unless Beijing made considerable concessions.

This offset some positive noises from President Trump on Friday. But markets have taken heart from relatively dovish Fed comments late last week, with newly-appointed Vice Chair Clarida saying on Friday that central bank now needed to be “especially data-dependent” and citing evidence of global slowing.

Dallas Fed chief Kaplan also noted that world growth was going to be a headwind for the U.S. economy next year.

The latest Fedspeak dragged 10-year U.S. Treasury yields below 3.06 percent first thing Monday – their lowest in more than three weeks – and weighed on the dollar more broadly too.

The DXY dollar index lost about half a percent on Friday even though it steadied first thing Monday and euro/dollar was trying to retain a foothold back above $1.14. The dovish tilt from the Fed helped keep Wall St equity indices in the black on Friday and was enough to put a positive gloss on Asia markets earlier despite the negative weekend trade noise.

Shanghai, HK, Seoul and Tokyo stock market benchmarks were all up about 0.5 percent or more. With the exception of China’s yuan, most emerging markets currencies were firmer against the dollar first thing Monday.

Thailand’s baht stood out, as it weakened after a surprisingly weak third-quarter GDP reading.

After last week’s Brexit drama and pound slide, sterling was higher against the dollar and euro first thing on Monday.

UK PM May promised at the weekend to fight on to secure support for the draft Brexit agreement she negotiated with the European Union last week, despite cabinet resignations and widespread criticism of the text from all sides of the debate in parliament.

Amid speculation she could be ousted as leader of the ruling Conservative party as soon as this week, reports on Monday said there were still insufficient formal requests from within the party to trigger a leadership vote.

Irish government bond yield spreads over Germany nudged close to their widest levels since late May as worries over the economic impact of a potentially messy Brexit dented demand for the country’s debt, and kept safe-haven bond yields compressed.

Leaders pose for a family photo ahead of the retreat session during the APEC Summit in Port Moresby, Papua New Guinea November 18, 2018. REUTERS/David Gray

Italian bond yields were a touch lower after Deputy Prime Minister Luigi Di Maio sounded surprisingly willing to compromise with the EU over budget talks, though the potential kicking off of an excessive deficit procedure this week against Rome limited gains. European stock futures were slightly higher, with U.S. equivalents marginally in the red.

Oil prices rose by around 1 percent on Monday amid expectations that top exporter Saudi Arabia will push producer club OPEC as well as perhaps Russia to cut supply towards year-end.

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 John Stonestreet

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