March 18, 2019 / 8:43 AM / 3 months ago

Daily Briefing: May sees key to Brexit deal in Belfast

LONDON (Reuters) - Battling to save her Brexit deal, British PM Theresa May calculates that the way to win over sceptical hard Brexiters leads through Belfast.

Prime Minister Theresa May and her husband Philip leave church in Sonning, March 17, 2019

She will be spending much of day seeking to persuade the small Northern Irish DUP party that the province will remain immutably part of the UK even as its post-Brexit border with Ireland stays invisible.

If she can do that, her bet is that she can win over the bulk of the Conservative lawmakers who rejected her deal last time and perhaps some more labour Leavers too. She needs to persuade a total of 75 to change their mind: if she thinks she can do that, expect a vote on Tuesday.

Emmanuel Macron's government has conceded that security arrangements were not up to the job of protecting Champs Elysees shops and restaurants from major ransacking on Saturday as a yellow vest protest once again descended into rioting.

His prime minister is due to present new security measures today aimed at preventing repeat incidents. Paris’s Socialist mayor is furious at the failings of authorities and has demanded the government explain itself. Macron had been looking to put the worst of the yellow vest impact on his poll ratings behind him; he may be on shaky ground again after the weekend.

A protester throws a stone into Fouquet's restaurant during a demonstration by the 'yellow vests' movement in Paris, March 16

Foreign ministers from European Union countries will meet China’s top diplomat, State Councillor Wang Yi, in Brussels today at the start of a critical couple of weeks for EU-China relations. Only last week the European Commission branded Beijing a “systemic rival” and called on European Union leaders to back its ideas to curb Chinese state-owned enterprises.

That call will be on the agenda of this week's EU summit, which in turn will set the tone for the EU-China leaders summit of April 9. All the more inconvenient that Italy has decided to pre-empt much of that diplomacy by pushing itself as a big backer of China's multi-billion-dollar Belt and Road trade and logistics plan.


A warm glow surrounding this week’s Federal Reserve policy meeting already seems to be lifting world markets, with weekend confirmation of the long-mooted merger talks between German banking giants Deutsche and Commerzbank the other big factor first thing Monday.

MSCI’s all-country world stock index nudged up to set another five-month high early on Monday, with Shanghai stocks gaining more than 2 percent to lead the way after major U.S. indices closed out their best week of the year on Friday.

Hong Kong, Tokyo and Seoul were all higher, with gains ranked in that order. Undermined by what last week’s poor U.S. manufacturing numbers imply for Fed decision, the dollar’s DXY index was down 0.2 percent, with euro/dollar pushing to its highest in almost two weeks at $1.1349. Ten-year U.S. Treasury yields steadied after Friday’s drop to two-month lows but remained stuck below 2.60 percent.

The Fed is expected to underline on Wednesday its “patient pause” by reducing its “dot plot” interest rate forecasts to show no change in rates for the rest of this year. Futures markets are already starting to price in the chances of a 2019 rate cut.

The Fed is also expected to detail the end of its balance sheet rundown this year, with many Fed officials uneasy that the impact of this process on financial liquidity may cut across its more dovish policy signals. The CVIX index of currency market volatility was at its lowest level since 2014.

Ailing European banks could get a shot in the arm from the Deutsche-Commerzbank merger talks. While labour unions warn of job cuts of up to 20,000 and some analysts say it may cut across Deutsche Bank’s internal restructuring programme, a combined unit would make it the euro zone’s second-biggest bank by assets, behind BNP Paribas. Deutsche Bank shares were up 3 percent first thing and Commerzbank’s up 4 percent.

More broadly, there’s some rekindled optimism about incoming European economic numbers – euro zone surprises are now less negative than those in the United States for the first time in six months and more than half January’s negative trough in readings.

Morgan Stanley’s weekend strategy note highlighted the potential turn in euro zone business confidence and said bottoms in this series typically presage a 9 percent gain in euro zone equities over the following six months.

It reckoned much of the recent slowdown in Europe was made in China. The rebound in Chinese new export order indices recently was a positive twist, it said, as it often leads the European equivalent by three months.

European stocks opened flat. Another drag on European sentiment, Brexit, comes to a head this week again with UK PM May still trying to get a third vote on her withdrawal agreement through parliament this week before she heads to the European Union summit in Brussels on Thursday to seek an extension of the March 29 Brexit date.

If she fails to get her deal through yet again, which is likely, then EU members might allow only a long extension of a year or more for Britain to sort out its splits and find a coherent way to leave with a deal. Sterling was steady to firmer against the dollar first thing – just shy of $1.33.

— 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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