December 3, 2018 / 8:31 AM / 13 days ago

Daily Briefing: Spain gets its far-right shock

LONDON (Reuters) - Spain, where memories of the military dictatorship of Francisco Franco abide, long resisted the rise of far-right parties seen elsewhere in Europe. Now the nationalist Vox party has won seats in the local assembly of Andalusia, the southern region that has one of Europe's highest unemployment rates and is the entry point for thousands of Africans reaching Spain by sea.

Spain's far-right VOX party leader Santiago Abascal and regional candidate Francisco Serrano celebrate results after the Andalusian regional elections in Seville, December 2, 2018

Although Vox only won 12 seats out of 109, this could still make forming a regional government there hard. It is also an electoral setback for Prime Minister Pedro Sanchez, whose Socialists have long dominated the region, and raises questions over whether this win will be replicated in subsequent elections to be held across the country.

France's President Emmanuel Macron has ordered his prime minister to hold talks with political leaders and demonstrators to pre-empt further "yellow vest" protests such as those that turned central Paris into a battle zone at the weekend.

Despite the vandalism that has accompanied the protests, public support remains high for demonstrations expressing grievances that resonate for many ordinary French. Macron, already widely perceived as too close to elitist interests and with his own poll ratings low, knows he has to tread carefully.

After pressure from lawmakers, Britain's attorney general is due to make a statement to parliament setting out a summary of the government's legal position on Brexit. That is unlikely to satisfy the opposition Labour party, which has said it would press for contempt proceedings against the government if it fails to produce the legal advice she has on Brexit in full.

With just over a week before the crunch December 11 vote on Theresa May's Brexit deal, Labour also said it would propose a vote of no-confidence in her government if the deal is rejected.

TV naturalist David Attenborough delivers an opening speech at the U.N. climate change conference in the Polish city of Katowice today, before the various participating countries give their "national statements" going into the meeting.

The aim is to produce a rule-book on implementing agreed cuts to carbon emissions, but with climate change sceptics such as Donald Trump and Brazil’s Jair Bolsonaro in power, expectations of progress are low.

MARKETS AT 0755 GMT

Détente or delay? Global stock markets strengthened first thing Monday after the United States and China agreed to postpone the imposition of further trade barriers for 90 days, while both sides step up talks on finding a breakthrough on a range of issues in simmering trade war. The announcement came after the meeting between Presidents Donald Trump and Xi Jinping at the G20 in Buenos Aires on Saturday.

The United States will postpone a plan to raise tariffs on more $200 billion of Chinese goods to 25 percent from 10 percent on January 1 in return for Chinese commitments to buy a range of U.S. goods, including food, while the talks go up a gear.

"Technology is becoming the main battle ground. It’s not just a trade war any more. It’s more like a technology war, in which we just found a temporary lull"

The temporary truce was a positive surprise for investors, who had not expected concrete breakthroughs at the summit. MSCI’s all-country stock index was up 0.5 percent, its sixth consecutive daily gain. Shanghai and Hong Kong stocks rallied more than 2 percent each, with Wall Street and European stock futures up almost 2 percent, too.

Tokyo and Seoul equity benchmarks were up more than 1 percent. In currency markets, China’s offshore yuan and Australia’s dollar surged more 1 percent. The dollar was lower, with Japan’s yen underperforming.

The trade news gave emerging markets a lift, with MSCI’s emerging-market equity index up 2 percent to its highest since early October and MSCI’s emerging currency index rising to its highest in almost four months.

As the trade deal help lift some of the gathering gloom on the global economic outlook for next year, Brent crude oil prices jumped back almost 6 percent to just above $62 ahead of Thursday’s OPEC meeting, brushing aside Monday’s news that Qatar plans to leave the group of oil exporting nations.

Within the major stock indices, automakers stood out with expected gains in the major European such as BMW, Daimler and Volkswagen of between 3 and 5 percent. There has been rising concerns that escalation of the trade war would see U.S. auto tariffs rise as soon as this week, but that is likely to be pushed back now in the light of the Trump-Xi agreement. Ten-year U.S. Treasury yields rose above 3 percent.

Investors will now try to work out whether the 90 days of talks is merely a delaying tactic or the beginnings of a more durable breakthrough on the thornier trade issues surrounding technology and intellectual property rights.

But together with signs the U.S. Federal Reserve may be rethinking its 2019 interest rate rise horizon, the lift to global market sentiment is significant. The key event in that regard this week is Thursday’s congressional testimony from Fed Chair Jerome Powell – postponed from Wednesday for state tributes after the death of former U.S. President George H.W. Bush.

Sterling was higher against a softer dollar as the UK enters an intense week of speculation and politicking before December 11’s parliamentary vote on PM May’s Brexit agreement. Italy's government borrowing costs fell to their lowest level in around two months on Monday after two newspapers reported Italy is negotiating with the European Union to reduce its 2019 target for the budget deficit to 2.0 percent of gross domestic product, or even below.

— 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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