LONDON (Reuters) - Depending on what the political lie of the land is from one day to the next, the UK government will insist either that 95 percent of the Brexit deal with the EU is done, or that considerable unresolved issues remain.
Meanwhile, EU negotiator Michel Barnier's comment that the parameters of a deal are now "largely defined" is to be treated with suspicion, according to Downing Street. The word games only consolidate the sense that the main issue now is how Theresa May will present any accord to her cabinet and then the UK parliament. There is a cabinet meeting today; it is not clear that Brexit will feature.
Rome must today present the European Commission with a substantially revised budget or face disciplinary steps later this month. The European Union's executive says the current spending plan flouts a commitment to lower the deficit and does not guarantee a reduction in the country's debt, the second highest in the euro zone as a proportion of gross domestic product.
A government source has told Reuters Italy's economy minister is looking to revise down next year's growth forecast - widely seen as unrealistic - to try to reach a deal. In a new blow to Rome, Italy's parliamentary budget watchdog said it expects the 2019 deficit to come in at 2.6 percent of economic output rather than the 2.4 percent forecast by the government, again largely because it has more downbeat growth projections.
MARKETS AT 0755 GMT
If October’s stock market plunge was considered a one-off, then it’s time to think again. Wall St stocks had their worst day in three weeks on Monday, with anxiety over Apple’s recent year-end sales warning rippling through its supply chain in a series of warnings and knocking U.S. and global tech stocks over like skittles. With Apple’s share price closing down 5 percent, the Nasdaq lost 3 percent and the S&P500 dropped almost 2 percent.
Add to that all the standing concerns about another U.S. interest rate rise next month, the escalating Sino-U.S. trade war, worries over plateauing growth and earnings and the twin risks from Brexit and Italy’s budget row and volatility is back on the rise into year-end. The Vix volatility gauge surged back 20 percent overnight.
The reaction in Asia was a little more mixed, with Tokyo’s Nikkei losing more than 2 percent amid the tech sector retreat but Shanghai bucking the negative trend after reports of early preparations among trade negotiators for a meeting between U.S. President Trump and China’s President Xi at the G20 summit in Argentina later this month.
The reports only just outweighed concerns about another escalation of trade restrictions by Washington related to Chinese breaches of intellectual property rights. Elsewhere in Asia, Seoul’s Kospi and Taiwan’s benchmark stock index both fell about half a percent.
The latest stock market jolt has seen U.S. Treasury bond yields open lower after a day’s absence on Monday for the Veterans Day holiday, with dollar easing off Monday’s highs against the euro and sterling after surging into the new week yesterday. The dollar index and dollar/yen rate have held the bulk of Monday’s gains or even extended them slightly.
In Europe, Italian bonds were broadly steady ahead of a deadline for Italy to resubmit its 2019 budget plans to the European Commission, with some reports of movement from the Rome government on what were seen as over-optimistic growth projections in its expansionary budget. The rescue of ailing Italian bank Carige is also being watched closely.
For sterling, today’s UK cabinet meeting – although not billed to be specifically about Brexit – will be watched closely for any signs of agreement or discord on a draft plan to agree with Brussels as hopes for a special EU summit to seal a deal later this month drained away over the weekend. European stocks opened higher amid another heavy earnings slate, with some heart taken from the continued slide in oil prices.
U.S. crude prices fell for the 12th consecutive day to below $59 per barrel – down 23 percent in a month as Trump continues to call for lower energy prices despite reports Saudi Arabia plans to cut international supplies.
In European earnings, Vodafone's new chief executive said he would reduce operating costs. Germany's Bayer reported flat earnings and Energy firm Innogy cut its outlook for renewables. U.S. stock futures are slightly in the black first thing.
— 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 —