June 13, 2019 / 7:45 AM / 2 months ago

Daily Briefing: Round one - race to replace May starts

LONDON (Reuters) - UK Conservative lawmakers begin voting today in the contest to replace Prime Minister Theresa May. Under the rules, any candidate with 16 votes or fewer in the first round will be eliminated; if all candidates have more than 16 votes, the person with the fewest votes must bow out.

Prime Minister Theresa May visits Imperial College in London where she sees machinery which converts carbon dioxide into oxygen after her announcement that the UK is to set a legally binding target to end its contribution to climate change by 2050, June 12, 2019

The process is then repeated until the field is whittled down to two front-runners who then go head-to-head in a vote of the party membership. Results of today’s first round are due around 1200 GMT.

Switzerland has slightly raised its 2019 economic growth forecast to 1.2% but warned of risks to the global economy, including the trade dispute between the United States and China, uncertainty over Brexit and Italy’s financial situation.

The move came before the Swiss National Bank’s quarterly policy meeting later today at which the central bank was expected to keep its ultra-loose monetary policy unchanged.

Tensions are growing around Cyprus and an offshore gas field being developed southeast of the divided island.

Last week, officials of the internationally recognised Cypriot government said they had agreed a production-sharing deal with U.S.-based Noble Energy and partners over commercial exploitation of the Aphrodite field.

But that deal made no reference to the Turkish Cypriots on the north of the island who are not being offered a share of the revenues, Turkey complained.

The stakes are high: the deal is estimated to have potential to bring the island more than $9 billion in revenue over the estimated 18-year lifespan of the reservoir. The United States and European Union have both expressed concern about the risk of a further escalation of tensions.


Global stock markets stayed under a cloud on Thursday, with Hong Kong’s Hang Seng index dropping for a second day as tensions surrounding this week’s street protests simmered and oil prices rebounded.

With growing doubts about any improvement in what U.S. President Donald Trump called "testy" trade relations between Washington and Beijing before this month’s G20 summit and some market anxiety that Federal Reserve easing speculation may have been overdone, stocks ticked lower across the world.

Wall Street indices ended in the red again overnight, even after U.S. inflation numbers for May proved no obstacle to Fed rate cuts over the month ahead.

Also encouraging Fed easing hopes had been a slide in global energy prices earlier this week – but Brent crude futures more than reversed Wednesday drop and jumped up to 4% first thing on Thursday after reports of an attack on oil tankers in the Gulf of Oman.

The UK’s Maritime Trade Operations said it was aware of the incident and was investigating. Earlier in the Asian markets, Hong Kong’s stocks dropped almost 1 percent after losses of more than 2 percent the previous session.

A protester holds a shield during a demonstration against a proposed extradition bill in Hong Kong, June 12, 2019

The selling pressure in Hong Kong came after a mass demonstration against legislation that would allow citizens to be extradited to China triggered a mass protest and some of the worst unrest seen in the territory since Britain handed it back to Chinese rule in 1997.

Shanghai stocks were steadier and eked out small gains by the close after Chinese Vice Premier Liu He said that Chinese regulators should step up support for the economy and keep ample liquidity in the financial system. But Tokyo and Seoul benchmarks fell and U.S. and European futures were lower, too.

Ten-year U.S. Treasury yields were lower despite a lukewarm auction late Wednesday, with the three-month-to-10-year yield curve staying inverted at more than 10 basis points. The dollar’s DXY index was lower after strengthening on Wednesday, with euro/dollar regaining some ground.

Some traders said the euro was hurt after Trump said he was considering sanctions over Russia’s Nord Stream 2 natural gas pipeline and warned Germany against depending on Russia for energy.

Long-dated Japanese government yields fell to their lowest since 2016 before next week’s Bank of Japan policy meeting, with Italy’s debt yields backing up after it surprised on Wednesday by selling a syndicated 20-year sovereign bond that drew orders of more than 20 billion euros.

Euro Group finance ministers meet in Luxembourg today, with a focus on Italy’s excessive debt and deficit. Sterling was lower after the UK parliament voted against a plan by the opposition Labour Party to prevent a no- deal Brexit under a new prime minister.

— 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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