December 18, 2017 / 8:25 AM / a year ago

Daily Briefing: To muted protest, a new far-right win

LONDON (Reuters) - This morning's swearing-in of Austria's newly-formed coalition means the far-right now wield power in the national government of a western European state (they already do in one eastern European government, that of Bulgaria).

Head of the People's Party (OeVP) Sebastian Kurz (L) and head of the Freedom Party (FPOe) Heinz-Christian Strache address a news conference in Vienna, Austria, December 16, 2017. REUTERS/Leonhard Foeger

True, conservative chancellor-to-be Sebastian Kurz has stipulated that his alliance with the Freedom Party (FPO) will not seek to leave the European Union outright, and most contacts between Vienna and Brussels will still go through his office. Yet there is no mistaking the tough line the new government will be taking on immigrants and what it sees as the Islamist threat. When the FPO last entered government in 2000, other EU countries imposed sanctions on Vienna in protest. There is unlikely to be a similar outcry this time, given the rise of anti-establishment parties now present in parliaments, town and regional councils across the continent.

British Prime Minister Theresa May will today pitch to parliament her plan for a two-year Brexit transition period with essentially the same access - and obligations - to EU markets. Although this looks to have broadly won the support of most of her Conservative Party, she will have to tread carefully as it can still irk Brexiters. Foreign minister Boris Johnson insisted at the weekend Britain cannot remain a "vassal state" dependent on Brussels even as it leaves the EU.

Even as U.S. President Donald Trump is expected later today to set out a more protectionist world view of the United States in his National Security Strategy (NSS) paper, one of his neighbours has its eye on other markets. Mexican Economy Minister Ildefonso Guajardo is due in Brussels for talks this week on a trade deal which he hopes to wrap up by the end of the year. This comes as efforts to renegotiate the North American Free Trade Agreement (NAFTA) remain hung up and as Mexico seeks to reduce its reliance on U.S. trade. Although differences remain over things like agricultural market access, this is a new sign of Europe's growing trade influence.


The promise of U.S. tax cuts that’s buoyed Wall St all year looks to be close to delivery and could now be voted on and signed into law this week. That was enough to see the major U.S. equity indices add almost 1 percent to record highs on Friday, with mostly positive ripple effects through Asia overnight. MSCI’s all-country world index is up 0.2 percent, within half a point of its all-time high and now on course for the best year since 2009. It’s also set fair for its 14th straight month of gains, the longest such streak in its 30-year history.

Tokyo’s Nikkei225 led the gains in Asia, advancing 1.55 percent as the country recorded a forecast-beating 16.2 percent rise in exports in the year through November. China’s CSI300 was up by a more subdued 0.2 percent as the People’s Bank of China nudged up interest rates on its reserve repurchase agreements by 5 basis points. Euro zone stocks are expected to follow Wall St higher too.

European sovereign bond markets are also buoyant, with Portugal the standout gainer after an unprecedented two-notch credit rating upgrade back into investment grade status by Fitch on Friday. Ten-year Portuguese bonds fell an additional 4 basis points on Monday to as low as 1.79 percent, below Italian equivalents which have backed up over the past week as an early March election came onto the radar there. It’s been a strong month for the smaller, southern European sovereign credits – with Greece’s 10-year debt falling below 4 percent for the first time since 2006 on Friday.  

Elsewhere, South Africa's rand steadied early on Monday, giving up earlier gains as the ruling African National Congress voted to elect a new leader to succeed President Jacob Zuma as party head. ANC delegates began casting their ballots in the early hours of Monday, to select between Deputy President Cyril Ramaphosa and former chair of the Commission of the African Union Nkosazana Dlamini-Zuma as new party leader.  The currency had raced to a 3-1/2-month high of 12.7300 earlier on hopes Ramaphosa, who is favoured by markets, would win the race.  

Bitcoin raced higher again to new records of $19,666 at the weekend surrounding the launch of second major futures contract on the cryptocurrency this month, this time from the CME. It’s slipped back below $19,000 since but is still up about 8 percent from late European levels on Friday.

editing by John Stonestreet

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