February 14, 2019 / 8:24 AM / in 2 months

Daily Briefing: Parliament in restive mood over Brexit stalemate

LONDON (Reuters) - Tonight's Brexit voting in the UK parliament will at most serve as a guide to the mood in the restive assembly after PM Theresa May's move to once again delay the real moment of truth until the end of the month.

Pro-Brexit demonstrators protest outside the Houses of Parliament, February 13, 2019

Local media say she faces a symbolic rebellion from hardline Brexiters who will refuse to back an anodyne government-sponsored motion seeking renewed support for her Brexit plan.

Separately, the intermittent speculation about a schism in the opposition Labour Party has risen with reports that pro-EU lawmakers are on the verge of leaving the party if leader Jeremy Corbyn does not come out squarely in favour of a second referendum in a subsequent vote set for Feb 27.

For now at least, that is the date everyone is focusing on, with hints that a number of May’s ministers will also choose that moment to put their jobs on the line and demand no-deal be ruled out.

Full Coverage: The Road to Brexit

For euro-zone watchers, news that France’s Q4 jobless rate fell unexpectedly to its lowest level since the start of 2009 will likely be overshadowed by the glum GDP read-out from Germany.

Growth was flat at 0.0 percent in the final quarter of last year, meaning the region’s largest economy escaped recession by the narrowest of margins after contracting in the July-September period for the first time since 2015. Growing trade tensions and Brexit both mean 2019 could be even more challenging.

A Norwegian Supreme Court ruling this morning on the habits of the snow crab will resonate far beyond the crustacean world. At issue is whether the creature - whose meat is a delicacy for some - is a sedentary species living on the seabed or moves around like fish.

That in turn will influence whether fishing boats from EU countries need permits from Oslo to catch the crabs off Arctic islands north of Norway and could even affect future rights to explore for oil and gas in the area.

MARKETS AT 0755 GMT

The alarming slowdown in the European economy at the end of last year was underlined on Thursday by news the German economy stopped growing in the final quarter and following yesterday’s data showing euro zone industry contracted at its steepest annual rate in almost a decade in December.

Yet, while the German GDP print was below consensus forecasts, it did allay at least some of the worst fears that a technical recession could have been recorded over the final two quarters of 2018 – just like Italy.

And, significantly, Chinese export and import data for January came in well ahead of expectations earlier – some relief for investors who will see it a sign of some recovery in the global economy more generally as we entered 2019. Japan’s Q4 GDP release overnight also showed the economy there expanded 0.3 percent in the final quarter, as forecast.

For world markets eyeing the U.S.-China trade talks and the latest Brexit voting in parliament today, the economic soundings were mildly comforting. Euro/dollar firmed about half a cent from 3-month lows set overnight and was last  at $1.1290.  

Ten-year German bund yields were a fraction lower about 0.122 percent. European stock futures pointed to gains of about 0.2 percent at the open.

Asia’s stock markets were flat to slightly higher, despite the positive Chinese trade surprise  - with Shanghai and Tokyo ending mixed. South Korea’s Kospi seems to have benefited most, ending more than 1 percent higher. China’s yuan was firmer, however, and Australia’s dollar gained about 0.5 percent.

Markets continue to await signs of some concrete progress in high-level trade talks in Beijing, where U.S. Treasury Secretary Mnuchin and Trade Representative Lightizer are part of the U.S. negotiating team.

The latest reports say U.S. President Donald Trump is considering postponing the March 1 deadline for higher tarrifs by 60 days – which indicates some progress in the talks, but leaves the prospect of two more months of uncertainty hanging over business and markets.

MSCI’s emerging equity and currency indices fell for the second day. Russia’s rouble has weakened more than 1 percent over the past two sessions as U.S. Republican and Democratic senators revived a bill from last year seeking to punish Russia for meddling in U.S. elections and its invasion of Ukraine.

"President Trump’s wilful paralysis in the face of Kremlin aggression has reached a boiling point in Congress"

The bill will unnerve foreign investors in Russia as it proposes sanctions on banking, energy and foreign debt – and is even a tougher version than last year’s proposal. Russian shares fell for the second day and were down 1.7 percent. Morgan Stanley said on Wednesday that the renewed sanctions risk meant it advised selling roubles and buying Russian CDS protection.

Sterling was mixed ahead of the latest parliamentary votes on Brexit, though the so-called ‘meaningful vote’ on UK PM May’s withdrawal agreement will now not take place until Feb 27 and the key amendment seeking to prevent a ‘no deal’ Brexit is expected to be delayed until then too.

Markets continue to chew on reports late Tuesday that the UK government is privately resigned to either getting May’s deal through or seeking a postponement of the March deadline.

On the European corporate front, the earnings season continues with Airbus, Astrazeneca, Commerzbank, Credit Agricole, Credit Suisse and Nestle among the big names reporting.

Airbus comforted investors with a better-than-expected set of Q4 results as it confirmed plans to scrap production of the A380 superjumbo, abandoning its dream to challenge Boeing's legendary 747. The shares were seen up as much as 5 percent.

British drugmaker Astrazeneca is expected to be rewarded for stronger-than-expected Q4 product sales on the back of strong demand for newer drugs including cancer medicines. The shares are indicating higher.

— 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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