December 17, 2018 / 8:28 AM / 6 months ago

Daily Briefing: May tries to snuff out vote re-run talk

LONDON (Reuters) - Theresa May will again today dismiss the idea of a second referendum after a couple of her ministers had to deny media reports they had been quietly testing the ground for one.

An anti-Brexit demonstrator wears a Union flag decorated with the stars of the EU flag opposite the Houses of Parliament in London, Britain, December 12, 2018. REUTERS/Eddie Keogh

She will tell parliament this afternoon that such a move would “break faith” with the British people and damage the country’s politics.

Even the strongest advocates of a vote re-run acknowledge it would most likely only come after all other options have been ruled out.

In that context, momentum is growing for a free parliamentary vote to test whether any Brexit scenario at all could get close to a majority.

Meanwhile opposition Labour - which does not yet think it has the numbers to win an outright vote of no confidence in the May government - wants her to bring her Brexit proposal back to parliament this week so they can at least try and vote that down.

Italy's coalition government has agreed on the "numbers and contents" of the budget it will propose to Brussels as it tries to avoid disciplinary action over its plans to hike deficit spending next year, the League party has confirmed.

The latest budget draft includes measures to raise taxes on luxury cars in order to provide incentives for electric and hybrid models.

Last week Rome already offered to lower the headline deficit to 2.04 percent of GDP from a previous target of 2.4 percent, but it was unclear whether that was enough to avert disciplinary action.

In an altogether separate stand-off, the European Commission is expected later to officially give Switzerland a six-month reprieve that will allow its stock exchanges to maintain access to EU clients until the end of June next year.

It had previously warned that the exchanges faced suspension in a row over a new treaty governing ties between Switzerland and the EU - the pact would bind Switzerland more closely to the EU but faces domestic criticism that it impinges too much on Swiss sovereignty.


World stock markets limped into the new week, with Wednesday’s expected U.S. interest rate rise looming large on the radar and after Wall St’s S&P500 recorded its lowest close in eight months on Friday amid deepening gloom about global growth next year.

Although major Asia bourses were mostly flat, the stream of disappointing economic soundings from the euro zone and China late last week underlines the challenges faced in 2019.

One remarkable statistic being cited by some analysts is that it’s the first time since 1969 that both the S&P500 and the 10-year U.S. Treasury bond have been negative for the year – with just two weeks left.

The Fed meeting will therefore be pivotal less for the likely rate rise but for how the gathering storm clouds change its projections for rate rises through 2019 – its 'dot-plot' of policymakers' projections currently indicates three more rate hikes before 2020 after this week’s move.

Futures markets have already moved and are no longer convinced there’s even one more likely next year.

Shanghai and Hong Kong stocks were mostly flat first thing Monday, with Chinese markets eyeing the government’s annual Central Economic Work Conference later in the week for signs of policy measures to support the weakening economy. The offshore yuan was flat to a touch weaker.

South Korea’s Kospi was little changed also, with Japan’s Nikkei outperforming in the region with gains of 0.6 percent as the dollar firmed generally ahead of the Fed meeting.

As data showed money pouring into cash-like U.S. money market funds in the week to Dec 11, the dollar’s DXY index climbed on Friday to its highest in almost 18 months.

It edged back from that peak first thing Monday.

U.S. Treasury yields were steady and European and S&P500 stock futures were slightly higher.

Sterling was steady to a touch lower after the latest Brexit nods and winks over the weekend about the UK government’s next step to break the parliamentary impasse over PM May’s withdrawal agreement.

May again ruled out the possibility of a 2nd referendum after reports of growing support for another popular vote from within her own cabinet.

Italian and French bonds diverged as political focus shifts from Rome to Paris.

The Italian bond yield gap over benchmark Germany tightened on Monday as chances of a rapprochement with the European Union grew but it was a different story for French bonds as “yellow vest” protests rumbled on in Paris over the weekend.

The first budget presented by Mexico’s new leftist government met with a positive initial response from markets – analysts describing the plans to keep a lid on spending as credible and helpful to investor sentiment – the peso was up 0.5 pct in early European trading.

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 Gareth Jones

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