January 10, 2019 / 8:29 AM / 2 months ago

Daily Briefing: Labour moving away from ambiguity on Brexit

LONDON (Reuters) - Britain's opposition leader, Jeremy Corbyn, will use a speech in Wakefield, in northern England, today to call for a general election if PM Theresa May loses a vote in parliament over her Brexit plans on Tuesday.

FILE PHOTO: Jeremy Corbyn, the leader of the Labour Party, speaks in the House of Commons

The rub is that he is unlikely to get one, and many of his own Labour lawmakers don’t really want one anyway. That said, there is an evolution in Labour’s ambiguous position on Brexit that could emerge as highly significant in coming weeks.

Yesterday, two Labour officials confirmed the party would call a vote of confidence in May within days of the likely defeat of her Brexit deal in parliament.

Yet with May expected to win a confidence vote with backing from her party and the Northern Irish DUP, that would rule out a general election and instead put pressure on Labour finally to declare whether it would back a second referendum.

As a new plebiscite could not be organised by the March 29 leaving date, that would in turn require an extension of Article 50 - a measure Labour’s Brexit spokesman separately said now looked inevitable.

All this comes amid a cross-party push for parliament to take back more control of the Brexit process from the government. Despite all this, City analysts still see more than an even-money chance of May's deal eventually going through in some form as this high-stakes game of chicken plays out.

The European Central Bank will at 1230 GMT publish the minutes of the December meeting at which it confirmed the end of its post-crisis asset-buying programme.

Although essentially a backward-looking exercise, the minutes will nonetheless be pored over for insights into Bank thinking in the light of growing signs of a slowdown in the euro zone economy - notably in Germany.

Some pundits are already wondering how long it will be before its policymakers have to change their current guidance that interest rates will rise in late 2019.

MARKETS AT 0755 GMT

World markets are holding up as Chinese stimulus hopes and signs of a more flexible U.S. Federal Reserve support stock markets and subdue the dollar, for now at least, despite few details of the progress supposedly made at this week’s Sino-U.S. trade talks.

Even though economic reports around the world continue to disappoint — including weak Chinese inflation readings for December — markets are now increasingly convinced of significant policy support to offset the slowdown.

Asia’s bourses hesitated again to add to gains on Wall Street, but the big mover over the past 24 hours has been China’s yuan – the offshore yuan gained to its best levels since August as trade talks optimism met promises from Beijing of further fiscal boosts to the slowing economy.

The dollar/yuan offshore rate is back below 6.8 for the first time in almost five months, helping MSCI’s emerging market currency index to its best levels since early July.

Minutes from the Fed’s latest policy meeting showed many officials were prepared to be patient in executing the central bank’s rate rise campaign, or even pause it, as they assessed the health of the underlying economy.

That has been echoed by several Fed speakers through this week. Ten-year Treasury yields fell to 2.68 percent from 2.73 percent overnight and the dollar weakened against the yen, the euro and the emerging market currency index.

Anti-Brexit demonstrators stand outside the Houses of Parliament, January 9, 2019

Euro/dollar topped $1.15 for the first time since October.  ECB policy minutes released later today will be watched closely for a change of tack on its planned interest rate increase this year. Markets have already pushed bets on that first move out as far as 2020.

French industrial data fell more than expected. Elsewhere, Brent crude surged above $60 for the first time in a month. Sterling weakened as Brexit parliamentary confusion grew before the vote on the EU deal next Tuesday.

— 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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