November 8, 2018 / 8:35 AM / 7 months ago

Daily Briefing: Brexit diplomacy - at last, an acceleration

LONDON (Reuters) - After phone calls with the leaders of Ireland, Germany and Austria already this week, British PM Theresa May heads to Brussels tonight for a working dinner with other NATO leaders.

FILE PHOTO: Prime Minister Theresa May stands at the door of 10 Downing Street

Next stop is Paris on Friday and a meeting with Emmanuel Macron. The aim would be to reassure herself she has got a deal that can fly with EU leaders before she puts it to her own extremely wary cabinet - possibly as early as this Saturday.

"We are not there yet. The clock is ticking. The choices need to be made now on the UK side. There are still important issues outstanding"

It remains unclear what such a deal would entail on the heated question of the Irish border "backstop", but a solution under which it would be under review by a joint UK-EU committee looks to be gaining ground.

All this could still be derailed, not least by a dispute over whether May should allow the publication of the full legal advice on the matter which she has commissioned from Attorney General Geoffrey Cox.

There is a theory that next May’s European Parliament elections will enthuse voters like never before, pitting (depending on your view point) the bloc’s core liberal values against dangerous populists or alternatively offering the chance to punish the cosy European establishment.

The European People's Party grouping of national conservative movements - the biggest faction in the EU assembly - elects its lead candidate today, with the choice between the publicity-shy German Manfred Weber and the media-friendly Finn Alexander Stubb.

The winner in theory is then in prime position to be the next president of the European Commission, although it could face a challenge from a national leader such as France’s Macron. With doubts growing about Macron’s ambition to use the elections to launch a new centrist force in European politics, the EPP leadership race will be vital.


World stock markets have continued their rebound since the U.S. midterm election results, partly relieved that there were no major surprises and also quickly refocusing on hopes for some positive movement in the Sino-U.S. trade war at the G20 summit later this month as well as still-impressive U.S. economic and earnings headlines.

The S&P500 clocked up gains of more than 2 percent late Wednesday as Democrats took control of the House of Representatives, a move likely to rein in some of President Trump’s planned legislative agenda over the next years but with still some hopes of compromise on economic policies such as increasing infrastructure spending.

Tech and healthcare stocks led the way higher. With the Federal Reserve’s latest policy decision and statement due later on Thursday, albeit with no expectation of any change of tack, Wednesday’s drop in U.S. Treasury yields also reversed and the 10-year rate jumped back up close to 3.24 percent along with a generalised recovery of the dollar.

While initial speculation was the midterm results may take pressure off further Fed tightening over the medium term, by taking another tax cut off the horizon, futures markets barely budged in the end and consensus continues to see the Fed raising rates again next month and at least twice more next year.

Helped by surprisingly strong Chinese export readings for October, Wall St’s stock rally rippled out around Asia overnight. Although the strong Chinese trade numbers were tempered by suspicion that they merely reflected frontloaded activity to beat U.S. tariff rises, Shanghai stocks were steady, HK slightly higher and both Tokyo and Seoul benchmarks were up strongly.

Manfred Weber and Alexander Stubb attend a debate at the European People's Party congress in Helsinki, November 7, 2018

After its worst month in six years in October, MSCI’s all-country world index has now staged its longest daily winning streak in over 12 months. Digesting another busy day of corporate earnings releases, European stocks opened higher. U.S. stock futures ticked back into the red.

Italy led the move higher in euro zone bond yields on Thursday ahead of key economic projections from the European Commission, which are expected to highlight that the country’s 2019 deficit may be much higher than suggested by Rome. Euro/dollar was higher first thing.

— 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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