June 28, 2018 / 7:45 AM / 8 months ago

Daily Briefing: A novel summit for Angela Merkel

LONDON (Reuters) - Through the 13 years of her leadership, Angela Merkel has been more used to dishing out favours and lessons to others at EU summits; at today's gathering in Brussels, it is she who has to seek help from her European peers on migration to shore up her fragile position at home.

German Chancellor Angela Merkel addresses the lower house of parliament in Berlin, June 28, 2018
Europe faces many challenges, but that of migration could become the make-or-break one for the EU

Much will hang on her one-to-one meetings with other leaders, where she will try to persuade them to take back refugees who first registered in their countries but then travelled onto Germany. There are signs, even from Italy's new anti-immigrant government, of a willingness to listen. Back home, her nemesis Horst Seehofer of the Bavarian CSU party has insisted he does not want to bring her government down and said he is "very optimistic" of a good result.

A large part of this whole saga has been grandstanding: the deep irony is that U.N. figures show there have been a mere 44,000 sea arrivals to Europe so far this year compared to over one million in 2015. This is what happens when populist, anti-immigrant voices set the political agenda.

Beyond migration, EU leaders have a fairly packed programme. The other priority is trying to close ranks on trade in the face of U.S. President Donald Trump, who is now considering whether to hit the European auto industry with tariffs; security and the extension of sanctions on Russia will also come up; internal EU matters such as the (now modest) euro zone reform proposals and the wrangling over the next EU budget will all be discussed.

Brexit? It won’t get much of a look-in. British Prime Minister Theresa May will update the summit on her Brexit plans, such as they are; and then the remaining 27 leaders will discuss it over breakfast once she has gone home.


Pressure on world markets from the U.S.-led trade war is mounting - with only brief pause for thought on Wednesday over the tactics being used by Washington before a quick resumption of selling as damaged business confidence gets priced in to equities.

As we approach the half year mark, MSCI’s all-country index of world stocks is now down almost 2.5 percent for 2018 and fell to its lowest level in almost three months on Thursday. MSCI’s emerging markets stock index is down more than 10 percent for the year to date and is at its lowest since August.

After briefly flirting with positive territory on indications the United States may be softening its stance toward restrictions on Chinese investments into its technology companies, White House officials quickly disavowed markets that there was any let up its protectionist push and the S&P500 ended as much 0.8 percent down on the day. 

Shanghai stocks  have shed another 1 percent on Thursday as the yuan, which has now lost more than 3 percent in June alone, slipped further. Tech-heavy and trade-exposed South Korean stocks lost more than 1 percent too, with HK and Tokyo also in the red by lesser amounts.

U.S. Treasury yields remained at Wednesday’s one-month lows first thing, although the 2-10 yield curve steadied after falling to another 11-year low of 31 basis points late on Wednesday. While supply outages kept oil prices buoyed above $77, other commodities were starting to feel the chill of economic worries and copper prices hit their lowest in almost three months overnight too. Ahead of today’s tense European Union summit on migration, Brexit, trade and other thorny issues, European stocks were also expected to open in the red again.

The euro and German bund yields also remained on the back foot, with a close eye on the summit for indications about the survival of the fractious new German coalition. German flash June inflation numbers are due out and will give another clue to European Central Bank projections.

With worries about a ‘no deal’ Brexit rising again and unnerving many foreign and domestic manufacturing and retail companies, sterling fell to its lowest levels of the year against the dollar first thing. Indications on Brexit from today’s summit may now be crucial, but so too will a speech from Bank of England chief economist Haldane – a recent convert to the hawkish wing of the monetary policy committee.

— 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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