November 15, 2018 / 8:42 AM / a month ago

Daily Briefing: Brexit hard sell for May

LONDON (Reuters) - After winning the begrudging endorsement of a cabinet in which around 10 ministers raised objections to her Brexit deal, British PM Theresa May now encounters the biggest hurdle: parliament.

A still image from video footage showss Prime Minister Theresa May speaking during Prime Minister's Questions in the House of Commons, November 14, 2018

May last night already unveiled the strategy of what will be a hard sell: it’s my deal, a no-deal Brexit or no Brexit at all.

This is designed to give pause for thought for those Tory lawmakers who are inclined either to back a rival leader or vote down her accord with Brussels: essentially, if they do that they must be ready not only for an economically damaging no-deal exit but also the added risk that Brexit might not happen at all.

She has little more than two weeks to make sure the parliamentary arithmetic is more favourable to her than it is now. The EU has this morning set Nov. 25 as the date of a summit to endorse the deal on the table; it is expected that a UK parliament vote would take place days after that.

Another leader with his back to the wall is Czech Prime Minister Andrej Babis. Opposition parties are pushing for a no-confidence motion in his government after a news report that his son had been sent abroad so that he could not testify in a fraud investigation.

Babis, a billionaire with farming, chemicals and media businesses, has long denied allegations that he manipulated the ownership of one of his firms a decade ago so that it would qualify for 2 million euros in European Union development aid. Czech President Milos Zeman meets the head of the ruling Social Democratic Party to discuss the crisis today.

The three candidates to succeed Angela Merkel as head of Germany's Christian Democratic Union will be on display to party members at a regional conference in the northern city of Luebeck tonight.

Friedrich Merz, Annegret Kramp-Karrenbauer and Jens Spahn will set out their pitches ahead of a party congress in December that will decide on the new party chief. The right-wing Merz is seen as the most obvious break with Merkel’s centrism; Kramp-Karrenbauer is the continuity choice.

MARKETS AT 0755 GMT

After all the drama in Westminster on Wednesday over the draft Brexit agreement between the UK and European Union and initial UK cabinet approval, sterling has frozen just shy of $1.30 as traders await further opposition to the deal within the ruling Conservative party and parliament at large.

Although investors increasingly see the pound as cheap at these levels in the event of a relatively smooth Brexit, the range of possibilities is still too large to take positions with conviction – including parliament’s outright rejection of the draft, PM May’s own position, possible snap elections or even a second referendum.

Cabinet resignations are possible through the day, with a junior minister for Northern Ireland exiting first thing today and the Democratic Unionist Party saying it will reject the plan. A special European Union summit has been scheduled for Nov. 25 to underline the agreement. Sterling was slightly lower against the euro compared with early Wednesday levels.  

Elsewhere, clouds continued to gather over global stock markets. The S&P500 fell for the fifth consecutive day and lost 0.75 percent amid a retreat of energy and financial stocks hit by the recent oil price rout and concerns about post-election banking regulation stateside.

Asia stocks perked up earlier, however, with Shanghai, Hong Kong and Seoul advancing more than 1 percent each on reports of ongoing talks between Beijing and Washington over de-escalating the trade war between the world’s two biggest economies.

Some reports said China was tabling concessions ahead of the Donald Trump-Xi Jinping summit later this month, but many analysts were sceptical these amount to breaking new ground.

The dollar was slightly easier across the board, with euro/dollar higher first thing – helped in part by hopes the Brexit endgame is in sight and also reports of some compromise by Rome on Italy’s budget standoff with Brussels.

Italian sovereign bond yields fell first thing after the reports said PM Giuseppe Conte wanted to work with the EU on a resolution to the row. European stock markets opened about 0.3 percent higher.

The European Union's chief Brexit negotiator Michel Barnier and European Council President Donald Tusk pose with the Brexit draft text in Brussels, November 15, 2018

Indonesia’s rupiah rallied almost 1 percent after the central bank there lifted interest rates. Russia’s rouble climbed on media reports that the United States might not have enough time to impose fresh sanctions against Moscow by the end of this year.

Bitcoin stabilised about $5,575 after a 10 percent plunge Wednesday to its lowest in over a year. Oil prices also gained after the week’s withering decline.

— 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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