August 8, 2019 / 7:35 AM / 16 days ago

Daily Briefing: Brexit nerves weigh on UK employers

LONDON (Reuters) - Switzerland's Adecco, which bills itself as world's largest temporary staffing firm, confirms with its Q2 results statement today how much hiring sentiment in Britain is being hit by the Brexit uncertainty. It told Reuters that both temporary and permanent recruitment were falling as companies sought in vain for the clarity needed to push on with their strategies.

FILE PHOTO: Workers cross London Bridge during the morning rush hour

Separately, a Reuters poll out this morning shows that City analyst expectations for a no-deal Brexit are rising: The median odds ascribed to that outcome are now 35%, up from 30% given in July and the highest since Reuters began asking this question two years ago.

Almost as interestingly, the full poll results show how difficult it is proving to see through the fog: overall, no-deal forecasts ranged from as low as 15% to a high of 75%.

The Greek parliament will vote later on abolishing academic sanctuary, a Greek peculiarity that was designed to protect protesting students and freedom of ideas but which the new government says is used as a cover for lawlessness.

The asylum law is a legacy of the crackdown by the then military junta on students on Nov. 17, 1973, when a tank burst through the gates of the Athens Polytechnic, killing dozens. If it passes, expect protests when students comes back from the summer break.

In Geneva, the United Nations' Intergovernmental Panel on Climate Change (IPCC) releases its special report on climate change and its link to desertification, land degradation and food security. It is unlikely to make for comfortable reading.

MARKETS AT 0655 GMT

Markets are swamped on Thursday with “not as bad a feared” lines, bringing stability of sorts in an otherwise super anxious investment world bracing for a trade-war induced recession on the horizon.

Traders work on the floor at the New York Stock Exchange, August 7, 2019. REUTERS/Brendan McDermid

Although China’s trade surplus with the rest of the world continued to expand last month, exports rose unexpectedly. But the trade report asked as many questions as it answered – July generally saw a perk up in industrial activity around the world but pre-dates the latest escalation in Washington’s tariff war.

What’s more, while exports to the United States fell, exports to other regional Asia economies picked up and will likely stoke U.S. accusations that Chinese exports to the U.S. are being re-routed through countries such as Vietnam. Nevertheless, the numbers calmed markets alongside Washington’s slightly softened trade rhetoric.

The People’s Bank of China then set its target midpoint for the yuan weaker than 7 per dollar for the first time ever – underlining this week’s jarring slide in the currency even as the spot and offshore rates stabilised about 7.07/$. Even this was said to be “better than expected” somehow – so aided the more stable environment.

Overnight Wall St stock indices clawed back deep early losses triggered by recession fears and the dash to the "safe haven" bonds. The S&P500 closed marginally in the black and the Vix volatility gauge slipped back below 20%.

Ten-year U.S. Treasury yields also bounced from three-year lows under 1.60% and firmed to 1.745% first thing Thursday. The yield curve between 3 months and 10 years remains deeply inverted at 28 basis points, although off the worst levels of -0.34 on Wednesday.

Bond yields have been sinking around the globe, however, as recession fears mount, central banks easing goes global and investors seek safety in top-rated long-term debt. The yield on the 7-10 year segment of the Bloomberg Barclays multiverse bond index – the widest catchment of global sovereign and corporate bonds of those maturities – fell to its lowest level on Wednesday at 1.44%, below the previous trough set in 2016.

The dollar was broadly stable first thing Thursday, meantime, and Wall St futures are about 0.5% higher. Shanghai, HK, Tokyo and Seoul stock benchmarks added between 0.5% and 1.0% overnight. Brent crude oil prices also bounced from near 7-month lows of $55.88 set on Wednesday, to trade just shy of $58 first thing. Gold prices slipped back from 6-year highs.

In European corporate news, there are lots of earnings to digest as well as some fresh deal making activity. Thyssenkrupp scrapped its outlook for the current business year due to falling demand in the automotive and steel industries, making it the fourth profit warning under current boss Guido Kerkhoff. The warning was expected and its shares, which hit a 16-year low earlier this week, are up 2.8% in early trader with one trader saying quarterly sales were better than expected.

German sportswear company Adidas reported disappointing Q2 sales, sending its shares down 4.8% in early trade, but confirmed it expects a recovery in the H2 after it stemmed a decline in Europe and saw its long-struggling Reebok brand recover.

In dealmaking, German lighting group Osram is down 3.7% in early trade after its biggest shareholder, Allianz Global Investors, rejected a 3.4 billion euro takeover offer from private equity firms Bain and Carlyle.

Other results on the radar include those from Merck KGaA which posted a gain in quarterly earnings that was slightly higher than expected, while Zurich Insurance said it was set to beat its targets amid aggressive cost-cutting, sending its shares up 3.2% in premarket trade.

Disappointing results are expected to weigh heavily on shares in Italian shoemaker Tod's. Adecco revenues fell 3% in Q2 as the staffing company said hiring slowed in Europe's automotive and manufacturing sector. Results fell short of analyst expectations but nevertheless its shares are seen rising.

— 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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