LONDON (Reuters) - British PM Theresa May’s campaign to sell her Brexit deal over the heads of UK lawmakers to a largely sceptical public has got some way to run before the December 11 vote in parliament: Her whistlestop trip to Glasgow yesterday went largely unheeded by Scots and media alike.
Today the theme is security, with a warning to be issued that a no-deal Brexit would jeopardise future co-operation with the EU. Yesterday's headlines were all about the impact of various scenarios on the economy but a Labour statement on its plans for December 11 may prove just as significant.
It confirmed it would back a motion that would prevent Britain leaving the EU without a deal, something that could prove crucial in the event that May’s deal does not pass. Labour officials are also starting to speak less guardedly about the option of a second referendum to break any deadlock.
Ukraine President Petro Poroshenko has been doing a media blitz in Germany to win support for European action over his country's naval stand-off with Moscow. This morning he has accused Russia's Vladimir Putin of seeking to annex his entire country and called for Chancellor Angela Merkel to come to Kiev's aid in the crisis.
He also called on Germany, the largest buyer of Moscow’s gas exports, to halt the building of the Nord Stream 2 gas pipeline that would allow Russia to supply Germany directly, cutting out Ukraine. Germany’s economy minister, Peter Altmaier, said that was a “separate question” to the naval row.
The next step in Brussels’ action against Rome over its 2019 spending plans comes today, with national governments due to back the European Commission’s disciplinary move against Italy over its debt.
That follows a conciliatory statement by Italian Prime Minister Giuseppe Conte yesterday, stressing there should be room to adjust the final budget numbers after a cost review of the measures in the spending package is completed.
MARKETS AT 0755 GMT
Fed to the rescue? After weeks of anxiety about a slowing world economy and constant criticism of the Federal Reserve’s interest rate policy by U.S. President Donald Trump, Fed chair Jerome Powell gave the slightest dovish nod on future policy on Wednesday by saying U.S. interest rates were already close to the central bank’s idea of a neutral rate – less than two months after he said they were "a long way" from there.
Although Powell’s tilt did little to shift already scaled-back rate rise expectations in the futures market, two-year Treasury yields fell about 5 basis points to 2.78 percent and 10-year yields slid to their lowest since mid-September, close to 3 percent.
U.S. stocks surged more than 2 percent, with the Nasdaq gaining almost 3 percent and the Vix volatility gauge ebbing to almost 18 percent. The dollar was weaker against the euro, yen and sterling, but emerging-market currencies outperformed on the prospect of Fed relief.
Even though world markets remain on edge going into the weekend G20 summit meeting between Trump and China’s President Xi Jinping, the Fed news and Wall Street's rally rippled around the world overnight – helping Tokyo and Seoul benchmarks higher before the open. Chinese stock markets underperformed, however, losing about 1 percent, as hopes ebbed for a breakthrough at the weekend.
If anything, the mood there deteriorated, with U.S. trade representative Robert Lighthizer saying Washington was examining raising U.S. tariffs on Chinese car imports to 40 percent – the duties China currently puts on U.S. auto imports.
Sterling gained despite Wednesday’s warnings from the Bank of England that a no-deal Brexit might see the pound slump as much as 25 percent and UK property values drop 30 percent.
The lack of reaction showed some doubts about BoE modelling but also revealed a market still assuming a deal will be reached with the EU even if UK PM May does not get the backing she needs in December 11’s parliamentary vote.
Speculation about a second referendum is also rising after the opposition Labour Party’s finance spokesman said the party would back a new vote if it could not force a snap election.
In European corporate news, the biggest move is expected to be from Britain's Intu Properties after the Whittaker-led group dropped its buyout plans. Indications show it would lose up to 25 percent. There have been no big moves so far for the British banks who passed the stress tests and are seen 1 to 2 percent higher.
European luxury stocks are seen opening 1 to 2 percent lower as well after Hong Kong jeweller Luk Fook warned of slower sales growth in Hong Kong, Macau and China. Elsewhere, the Unilever and Ashtead CEOs will step down, Rio Tinto approved a $2.6 billion "intelligent" iron ore mine for Australia and Biocartis partnered with AstraZeneca on lung cancer diagnostics.
— 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 —