September 10, 2018 / 7:30 AM / a year ago

Daily Briefing: Swedish deadlock as far-right gains

LONDON (Reuters) - Sweden's far right may have fallen short of their highest hopes in Sunday's election but broadly they achieved their goal of making the country ungovernable in the normal way without their support.

Sweden Democrats party leader Jimmie Akesson speaks on election evening at Kristallen restaurant in central Stockholm, September 9, 2018

Preliminary results show the Sweden Democrats won around 18 percent, meaning both the incumbent centre-left bloc and its centre-right adversary are well short of a majority with their 40-percent shares of the vote.

The Sweden Democrats have promised to sink any government that refuses to give them a say in policy, particularly on immigration. At this stage, Prime Minister Stefan Lofven can only call for compromises “across the political divide” to find a government. It could be weeks before there is clarity.

Infighting within British PM Theresa May's ruling conservative party over Brexit flared up this morning as Steve Baker, a former junior minister, was quoted as saying no fewer than 80 of her lawmakers would reject her current plan for a compromise with Brussels on future ties.

Assuming opposition Labour also reject the plan as expected, that would mean it is dead in the water. Baker, once quoted as saying the EU should be “wholly torn down”, warned May she could create an all-out split in the party if she persists with the proposals.

The question, as ever, is whether committed Brexiteers are really prepared to go all the way and defy May knowing what unforeseen consequences this could trigger - even jeopardising Brexit itself. The Sept 30-Oct 3 party conference could be decisive.

U.S. Trade Representative Robert Lighthizer holds his first meeting with European Trade Commissioner Cecilia Malmstrom in Brussels today. The discussions are intended to kick off an effort to mend EU-U.S. trade ties and cut tariffs on industrial goods following an easing of a trade dispute agreed in July.


Rising anxiety about the next twist in the U.S.-China trade war and another interest rate rise from the U.S. Federal Reserve later this month has put world markets under pressure again first thing on Monday, with emerging market equities bearing the brunt.

MSCI’s benchmark emerging market equities index plunged almost 1 percent to its lowest in 14 months, some 21 percent down from the peaks of January.

The boost to the dollar and Treasury yields from Friday’s robust report on U.S. jobs and wages for August has heaped pressure back on emerging currencies as it brings the prospect of two more Fed rate hikes this year back onto the radar, starting with a rise on September 26. India’s rupee skidded to record lows of 72.50 per dollar.

After U.S. President Trump upped the ante in the trade war with Beijing on Friday, by threatening duties on another $267 billion of Chinese goods on top of $200 billion in imports primed for levies over the next few days, Chinese August trade numbers released over the weekend showed the bilateral trade surplus with the United States rising again to some $31.05 billion, adding fuel to the standoff.

China’s overall trade surplus eased slightly, however, and export growth was below forecasts. Inflation numbers released this morning were more mixed, with producer price inflation ebbing while consumer inflation was above expectations.

The combination sent Shanghai shares down more than 1 percent earlier, with the Hong Kong benchmark down 1.3 percent. Seoul outperformed with gains of 0.3 percent, but Jakarta’s main bourse was down 0.3 percent.

Elsewhere in emerging markets, Turkey’s lira dropped 1 percent ahead of second-quarter GDP data due in the morning. South Africa’s rand weakened 0.5 percent while Russia’s rouble and China’s yuan slipped 0.2 percent.

U.S. President Donald Trump speaks to reporters aboard Air Force One on his way to Fargo, North Dakota, September 7, 2018

Another Kremlin aide out this morning repeated comments from PM Dmitry Medvedev on Friday, saying higher interest rates would be undesirable, adding to echoes of Turkey where political pressure on interest rate decisions has spooked markets for months.

European stocks were marked slightly higher as euro/dollar eased. Sweden’s crown firmed as the country headed for a hung parliament after national elections. UK political headwinds pressured sterling, which was broadly flat.

— 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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