November 9, 2017 / 8:31 AM / in a year

Daily Briefing: A Priti mess - May's post-Patel dilemma

LONDON (Reuters) - British aid minister Priti Patel resigned last night, offering what she called a "fulsome apology" for unauthorised contacts with Israeli officials, but that is unlikely the last that PM Theresa May will hear of her.

FILE PHOTO: Priti Patel arrives for a cabinet meeting at 10 Downing Street

A true-believer Brexiteer, Patel will now return to the back benches of parliament with full freedom to attack any concessions May will have to make to reach a Brexit deal. Moreover, to keep the right wing of the Conservative Party happy, the premier may also feel obliged to replace Patel with an equally ardent pro-Brexit advocate rather than someone who is actually qualified for what in normal times would be considered a role crucial for Britain’s standing in the world. So much for Global Britain.

All this comes as the UK kicks off the latest round of Brexit negotiations in Brussels and things are not looking good, frankly. There has been little sign of progress since the last meeting: the European Parliament made it clear yesterday that even in the area of expat rights - on which UK officials have insisted that a deal is close - there is still much to be done.

The murmurings from Brussels now are that next month’s summit will not be able to mandate the start of discussions on a post-Brexit transit deal. If that is the case, that will only add to business and investor fears of a cliff-edge Brexit in 16 months time.

The Catalan parliament's speaker and five lawmakers appear before Spain's Supreme Court in Madrid today to answer charges of rebellion and sedition for their roles in staging a banned referendum on Catalonia's independence last month. The court will decide whether to remand the speaker, Carme Forcadell, and the lawmakers while the investigation continues.

With eight ex-members of the Catalan government and the leaders of the two main pro-independence grassroots groups already in custody, the irony is that many in Madrid would prefer the court to have them released before Catalonia’s Dec. 21 regional election: the optics of a European country staging a vote in which most of the natural candidates are behind bars aren’t great. The snag is that the separation of powers means that justice will now take its course regardless of what the politics would dictate.


Another day, another record for global equities. MSCI’s index of world stocks rose to its latest high early on Thursday, on course for its 11th straight daily gain – the longest winning run in almost 14 years and reflecting new highs on Wall St, near 26-year highs in Tokyo and 10-year highs in Asia bourses outside Japan.

Madame Tussauds unveil their new wax models of Theresa May and Boris Johnson in London

The all-country equity index is now clocking year-to-date gains of almost 19 percent. But as a measure of relative calm of this bull market and a reflection of the low-volatility environment we’ve been in all year, none of those 11 daily gains exceeded half a percent and more than half of them were less than 0.1 percent. This is a slow if relentless grind higher rather than some runaway train, and perhaps that’s helping sustain it.

There was little by way of fresh developments to feed off overnight. The progress of the U.S. tax cut bill continues to be slow and messy. Some focused on the fallout from Democrat wins in state and local U.S. elections this week as a signal for next year’s mid-term Congressional elections.

U.S. President Donald Trump’s visit to Beijing has been relatively uneventful so far. China's producer prices were surprisingly strong in October, climbing 6.9 percent year-on-year, while consumer inflation picked up pace to 1.9 percent in a sign the domestic economy remains robust.

Shanghai and HK stocks pushed higher. Japan’s Nikkei 225, up nearly 20 percent in just two months, ended slightly in the red on Thursday after giving up early gains by the close. The New Zealand dollar recovered some of its recent losses after the central bank there kept interest rates on hold but warned of tightening to come.

Sterling recovered some of Wednesday’s lost ground on upheavals within the UK government. A second cabinet minister in a week has resigned after diplomatic missteps, while sexual harassment claims and infighting over Brexit continue to dog the minority Conservative administration.

Brexit negotiators from the UK and European Union meet again in Brussels later on Thursday, with doubts growing that progress can be made toward trade talks by the end of the year.

European stocks are expected to open flat to slightly lower in another heavy day for German and UK corporate earnings, including the big industrials like Siemens and a host of UK retailers. The dollar index and Treasury yields were slightly lower overnight, with euro/dollar reclaiming $1.16 in early trade. There’s a host of top ECB speakers due out later, with new EU economic forecasts from the EU Commission, too.

German imports fell more than exports in September to widen the trade surplus slightly, data showed on Thursday. Brent crude was steady at about $63.60, with little fresh news from the Saudi upheavals.

Elsewhere, the near 20 percent gain in world equities pales with the 660 percent gains in Bitcoin this year. It surged late Wednesday to a new high of $7,888 on reports a software upgrade called a "fork", which would in effect clone Bitcoin into two, has been suspended, but it later gave up most of those intraday gains.

Editing by Larry King

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