January 14, 2019 / 8:32 AM / 2 days ago

Daily Briefing: May manoeuvres before Tuesday's crunch Brexit vote

LONDON (Reuters) - British PM Theresa May will make a statement to parliament today at 1530 GMT ahead of tomorrow’s crunch vote on her Brexit deal, according to Sky News. Separately, there are reports the European Union will before that offer a letter setting out assurances on the nature of the Irish backstop – while insisting it cannot be renegotiated.

Anti-Brexit protesters hold signs outside the Houses of Parliament, January 11, 2019

At this stage it looks unlikely that any such manoeuvring will be enough to secure a victory for May on Tuesday but it could limit the damage: any defeat below 100 votes could keep her deal alive and set the stage for a fresh vote with new concessions. As pro-Remain groups in parliament explore options to prepare a second referendum, May’s pitch to her eurosceptic conservative critics is that, in the event her deal is scuppered, Britain is more likely to end up with no Brexit at all than a no-deal Brexit.

    Is Sweden finally about to get a government? September’s election delivered a hung parliament, with the two main political groups unable to form a government and unwilling to enlist the support of the anti-immigrant Sweden Democrats. Now the centre-right Liberal party have voted to back a deal that could return Social Democrat leader Stefan Lofven to office as PM. The Centre Party and the Greens have already pledged support but the new alliance will still need support from the Left Party – which backed Lofven’s coalition from 2014-18. Lofven is due to meet the parliament speaker this morning, with parliament scheduled to vote on Wednesday on a PM candidate.

    Greek Prime Minister Alexis Tsipras’ decision to seek a compromise with neighbouring Macedonia over its official name was always risky, given the emotions it stirs – now it has come back to haunt him. His right-wing defence minister quit in protest at the deal at the weekend, pulling his six other ministers out of Tsipras’ cabinet. That has left Tsipras facing a confidence vote this week in which he will need the backing of fringe independent MPs to stay in power. If he loses it, a snap election beckons.

MARKETS AT 0755 GMT

The fragility of the new year world stock market rally was underlined on Monday by news of shock drop in Chinese exports and imports in December and the ongoing U.S. government shutdown just as a fourth-quarter corporate earnings were set to hit and ahead of Tuesday crunch UK parliamentary vote on Brexit. Even though Japan’s markets were closed for a holiday, the new week started with a gloomy tone elsewhere. Shanghai stock lost 0.7 percent,  Hong Kong was down 1.5 percent and Seoul was off about 0.5 percent.

After six consecutive days of gains – it’s longest winning streak since November – MSCI’s all-country world index turned tail and was on course for its first loss since Jan 3. MSCI’s emerging markets benchmark was down more than 1 percent. China’s offshore yuan recoiled after hitting its best levels since July on Friday, while the commodity and growth sensitive Australian dollar was down 0.4 percent. News that China’s exports unexpectedly dropped an annual 4.4 percent in December and imports dropped 7.6 percent – their biggest drop in more than two years – reinforced fears that evidence of the damage caused by the bitter trade war between Washington and Beijing would hit with a lag once frontloading of activity to beat tariff deadlines fell away.

With little sign of any concrete progress in the trade talks that resumed last week, the numbers upped the pressure for some negotiated breakthrough as well as justifying the ramped-up economic stimulus from Chinese authorities. And while the trade report displayed the hit to economic activity from the tariff war, it still showed China’s bilateral trade surplus with the United States widening by 17 percent last year. Separately, China’s auto manufacturing association said car sales shrank in China last year for the first time since the 1990s.

The dollar was lower against the Japanese yen and on its DXY index, but emerging market currencies were weaker en masse against the greenback. Adding to market nerves was the start later on Monday of the Q4 U.S. earnings season, with Citi first to report. The annual aggregate profit forecast for S&P500 companies for the three month period has been almost halved to 6 percent since October, down from over 20 percent recorded in the third quarter. After the S&P500 closed lower on Friday for the first time in six sessions, S&P futures were down 0.8 percent first thing on Monday and European stocks were down 0.5 percent.

Ten-year U.S. Treasury yields fell to their lowest since Jan 7 and Brent crude oil prices fell back below $60 per barrel. After surging on Friday on reports that the UK may seek a delay of the March 29 Brexit day due to the likely rejection on Tuesday of its negotiated withdrawal agreement with the European Union, sterling gave up some ground first thing Monday as the vote was awaited and further reports surfaced that the EU was willing to consider a three-month delay.  Elsewhere, Turkey’s lira weakened further after U.S. President Donald Trump warned the United States would devastate Turkey economically if Ankara attacks a Washington-backed Kurdish militia in Syria.

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

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