November 13, 2017 / 8:27 AM / a year ago

Daily Briefing: May's Brexit - the challenge from within

LONDON (Reuters) - British PM Theresa May says she is no quitter and that assertion is getting sorely tested as the vibes around her leadership get worse and worse.

Britain's Prime Minister Theresa May attends the Remembrance Sunday Cenotaph service in London, Britain, November 12, 2017. REUTERS/Toby Melville

This weekend's media round brought news that Foreign Secretary Boris Johnson and Environment Secretary Michael Gove sent her a letter essentially dictating how she should handle Brexit, while others reported that 40 Conservative MPs have agreed to sign a letter of no-confidence in her - just eight shy of the number needed to trigger a leadership contest.

It comes in the week that parliament will get to work on the Withdrawal Bill enabling Brexit; some are seeing that as a test of cross-party willingness to soften the terms of Brexit.

France, Germany and 20 other EU countries will sign a defence pact today they hope marks a new era of European military integration after Britain’s decision to quit the bloc.

For the first time, the 22 governments will create a formal club intended to give the EU a more coherent role in tackling international crises. Initial proposals for what should be done together are fairly modest: they include work on a European medical command, a network of logistic hubs in Europe and joint training of military officers. Britain may be allowed to join in on one-off projects if it has expertise to share - and is ready to pay.

The day's other defence developments may well come from the Russian town of Sochi: Turkish President Tayyip Erdogan meets with Russian President Vladimir Putin and the two may well discuss Ankara's $2 billion purchase of Russia's S-400 missile defence system - a technology that cannot be integrated into other NATO defences.

Angela Merkel wants to have a draft government coalition deal worked out by the end of this week and again called on other party leaders at the weekend to make more compromises towards what could be an ungainly three-party alliance. Despite some progress last week, the unlikely partnership of CDU conservatives, FDP liberals and leftist Greens still has to overcome differences over climate, energy, transport, immigration and the euro zone.


World stocks remain on the back foot after last week’s sudden stall. After its longest daily run of gains since early 2015, MSCI World is now down for the third straight day for the first time in three months. The recoil was overdue, perhaps, with investor hesitation due partly to U.S. Senate and House Republicans wrangling over the details and timing of U.S. tax cuts.

The S&P500 and the Dow Jones index ended the week lower for the first time in nine weeks, even as angst about withdrawals from U.S. high-yield bond funds eased a touch and the two biggest U.S.-listed junk bond exchange-traded funds rebounded from seven-month lows hit on Thursday.

Asia trading was more mixed to start to the week, with the Nikkei225 down more than 1 percent and Seoul’s Kospi lower as well. Chinese indices bucked that trend, however, and pushed higher amid optimism about Beijing’s move toward greater deregulation of the financial sector last week. European and U.S. stock futures were marginally higher. Ten-year U.S. Treasury yields slipped back below 2.40 percent.

Sterling was the biggest currency mover first thing, falling against the euro and the dollar after the UK’s Sunday Times reported 40 members of parliament from Prime Minister Theresa May’s Conservative Party have agreed to sign a letter of no-confidence in her leadership – just eight short of the number needed to trigger a party leadership contest.

Simultaneously, pressure was also mounting on government advocates of a “no deal” Brexit – foreign minister Johnson and environment minister Gove – over diplomatic missteps surrounding Iran’s detention of a UK citizen. The Brexit bill returns to the House of Commons again this week.

There were few new developments over the weekend in the Saudi corruption crackdown and tensions with Lebanon. The Saudi stock index fell as much as 1.5 percent during Sunday but closed only 0.3 percent lower after state-linked funds once again bought stocks in late trade, a deliberate operation to support the market and prevent a crash, asset managers said. The index was down about 0.5 percent again early on Monday.

Brent crude oil prices were steady about $63.50. Eyes will also be on Venezuelan debt markets on Monday as the country’s debt restructuring proposals are expected to be aired with investors. It is unclear how widespread investor participation in Monday's meeting in Venezuela will be. U.S.-based creditors are not prohibited from attending the meeting but are barred from dealings with officials such as Zerpa and El Aissami.

Huge weekend gyrations in Bitcoin, meantime, have now seen it lose almost 17 percent since Wednesday’s record close. More dramatically, from Wednesday’s intraday peak to the intraday low on Sunday, the crypto-currency lost almost 30 percent – and yet it's still up more than 150 percent from midyear. Rollercoaster.

Editing by Larry King

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