February 26, 2018 / 8:28 AM / 10 months ago

Daily Briefing: Corbyn softens on Brexit

LONDON (Reuters) - Things are finally starting to move in Britain's Brexit debate. Today UK Labour leader Jeremy Corbyn will confirm a softening of its Brexit policy by saying Britain will need a customs union with the EU once it leaves.

Britain's opposition Labour Party leader, Jeremy Corbyn, speaks at a conference on alternative models of ownership, in central London, February 10, 2018. REUTERS/Simon Dawson

Assuming its deputies in coming weeks back a parliamentary push by Conservative rebels who want the same, that could blow a big hole in PM Theresa May's entire Brexit plan. Corbyn's position on the single market will for now remain more ambiguous: according to extracts of his speech released to local media, he will call for "full tariff-free access" to it but also "protections, clarifications or exemptions, where necessary".

All this comes before May’s own speech on Friday setting out a harder, more divergent Brexit. The added rub in all this is that neither of the two Brexit visions in their current form are compatible with what the EU says its can accept: final clarity is still a very long way off.

Angela Merkel's Christian Democrats (CDU) meet today to approve a coalition deal with the Social Democrats (SPD). The deal should pass easily in what is just a prelude to the much trickier vote among the SPD membership - results of which are due next Sunday. Merkel has made doubly sure she will get her party's backing by picking a new, younger cabinet that includes one of her most outspoken internal critics, the 37-year-old Jens Spahn. And in a further sign she accepts the need to start handing over the reins of power to others, she has also lined up a possible successor, Annegret Kramp-Karrenbauer, to take over her as CDU secretary-general.

With just six weeks to the country's general election, Hungarian Prime Minister Viktor Orban's ruling Fidesz party has suffered an unexpected setback in a local poll after an opposition-backed independent candidate comfortably beat the Fidesz candidate for mayor. Although Orban is still expected to win on April 8, Sunday's result could change dynamics within the opposition, which had thus far struggled to mount any serious challenge.


A pretty powerful global stock market rally kicks off a week with some considerable event risks in Europe and the United States. The tone was set by a 1.6 percent surge in the S&P500 on Friday, dragging the ViX volatility gauge below 16.50 percent to its lowest since February 2. Led again by the red-hot technology sector, the stock market jump was encouraged by a retreat in 10-year U.S. Treasury yields to as low as 2.85 percent as evidence of brisk foreign demand emerged after a heavy week of new U.S. bond sales.

The mood was also improved by the Federal Reserve’s Board of Governors, whose semiannual report to Congress on monetary policy appeared to confirm market expectations of three interest rate rises this year, beginning next month, and showed little additional alarm about future inflation prospects. New Fed chief Powell testifies to the House committee tomorrow and few now expect him to rock the boat unduly.

European Central Bank chief Draghi testifies later on Monday to the European Parliament, meantime, and is similarly not expected to deviate greatly from existing guidance – not least with a nervy time for European politics due next weekend at Italy’s general election and Germany’s SPD vote on joining a grand coalition.

European and Wall St futures were up smartly on Monday, with 10-year German bund yields down to a 1-month low of 0.64 percent and euro/dollar firmer at $1.2330. The dollar index was down about 0.25 percent so far on Monday. Sterling traded 0.5 percent higher at $1.4034 ahead of several crucial speeches on Brexit by leading politicians, including Labour party leader Jeremy Corbyn on Monday. Asia bourses were higher across the board, with Shanghai and Tokyo benchmark stock indices both up more 1 percent.

Russia’s rouble-based MOEX index hit an all-time high and the rouble firmed in early trade on Monday after S&P raised Russia’s foreign currency long-term and short-term sovereign credit ratings to investment grade. Brent crude hit its highest level in more than 2 weeks, above $67.    

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