LONDON (Reuters) - British Prime Minister Theresa May sets out plans today for a 1.6 billion-pound fund to help boost economic growth in Brexit-supporting communities, particularly in the north of England.
Critics describe the move as a bare-faced bribe to the mainly opposition Labour lawmakers elected in these so-called “left behind” regions of the UK, encouraging them to get behind her Brexit deal when it comes back to parliament sometime before March 12.
If that wasn’t enough, Finance Minister Philip Hammond will be able to offer an enhanced “deal dividend” of extra public spending in his spring budget statement set for March 13. That will come from the 15 billion-euro cushion which Hammond announced already in October, now boosted by better-than-expected tax receipts since the start of the year.
It remains to be seen whether such enticements make May's deal any more popular: hard Brexiters have meanwhile set out what they call three "tests" for whether they can back any tweaked agreement, still essentially stipulating that the temporary nature of the Irish backstop be set in stone.
Estonia's opposition centre-right Reform party pulled off a surprise win over the centre-left incumbents at this weekend's elections, but as expected, no party came anywhere near a majority, meaning that coalition-forming will be tricky.
The other headline was the rise of the far-right EKRE party with 17.8 percent of the score, more than doubling its vote from the previous election. With all mainstream parties ruling out working with EKRE, that could push Reform towards a coalition with the party of outgoing premier Juri Ratas after all - the first time the two would have governed together in 15 years.
MARKETS AT 0755 GMT
More positive nods and winks about an imminent U.S.-China trade deal have lifted world equity markets first thing. Shanghai and Tokyo benchmarks outperformed with gains of more than 1 percent following a Wall Street Journal article saying the agreement could be signed around a summit on March 27.
But U.S. President Donald Trump's latest broadside on Saturday against the Federal Reserve Chair Jerome Powell and an overly strong dollar will get as much attention on Monday, even though the dollar held firm against the yen and euro first thing.
“We have a gentleman that likes a very strong dollar at the Fed,” Trump told a Conservative Political Action Conference. “I want a strong dollar, but I want a dollar that’s great for our country, not a dollar that is so strong that it is prohibitive for us to deal with other nations.”
Dollar/yen tested its highest levels of the year just above 112 before backing off and euro/dollar was lower about $1.1355. China’s offshore yuan was a fraction stronger, with U.S. demands that China not devalue the yuan reportedly part of the trade agreement in train.
China’s annual National People’s Congress also takes place this week and will be watched closely for signs of economy-supporting measures. MSCI’s emerging-market currency index was slightly lower, with MSCI’s emerging equity index a shade higher.
Sterling was about a quarter-percent higher against the dollar, with the latest weekend Brexit reports showing some possible softening of the UK’s demands on Brussels to change provisions for the Irish border backstop and also a softening of objections to UK PM Theresa May’s deal among pro-Brexit factions within her own ruling party. Ten-year U.S. Treasury yields were firm above 2.75 percent and close to their highest since January.
Brent crude oil was just above $65. European and U.S. stock futures were about 0.4 percent higher. Optimism about the trade deal comes at an important time as global economic readings are still largely coming in below forecast. Citi’s economic surprise index for the G10 major world economies fell on Monday to its most negative reading in almost 7 years.
Elsewhere, Greece’s benchmark 10-year government bond yields dropped to their lowest level in over a year on Monday, close to a 12-year low, following a two-notch ratings upgrade from Moody’s late last week.
Turkey’s lira continued to weaken after annual Turkish consumer price inflation fell to a below-forecast 19.67 percent in February, dropping below 20 percent for the first time since August. Markets now feel pressure on the central bank to ease interest rates will be intense.
— 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 —