June 12, 2018 / 7:21 AM / 9 months ago

Daily Briefing: Brexit - getting meaningful?

LONDON (Reuters) - British Prime Minister Theresa May faces her biggest parliamentary test over Brexit yet from today as lawmakers start to vote on a bundle of legal amendments that could determine Britain's future ties with the EU.

A bus passes as anti-Brexit demonstrators protest opposite the Houses of Parliament in London, June 11, 2018

The most challenging is a requirement that parliament is granted a “meaningful vote” on the outcome of her negotiations with Brussels that would both allow it to throw out any deal and give it powers to set the government’s future direction afterwards.

The vote on that is due to come this evening after six hours or so of debate starting at lunchtime. Other votes today cover the vexed Irish border issue and whether the Brexit departure date should be legally set in stone as March 29 next year.

Aid workers on board the ship Aquarius have requested medical assistance for some of the 600-plus migrants on board before it embarks on the three-day voyage to the Spanish port of Valencia. Yesterday's events were a tale of two governments as Italy's new anti-immigrant Interior Minister Matteo Salvini hailed as a victory the decision by Spain's new Socialist government to accept the migrants.

Rome will be glad the saga is making news headlines ahead of this month's EU summit where it will again complain it is taking an unfair share of arrivals to Europe's shores. Spanish Prime Minister Pedro Sanchez meanwhile has taken advantage of the fact that migration is less of a hot topic in Spain to make a gesture that may help him win back former Socialist voters who went over to the left-wing start-up party Podemos.

In Germany, the ZEW institute publishes its monthly survey of investor morale in Germany - with expectations that it will fall further in June after it reached the lowest level in five and a half years in the previous month. That would reflect growing concerns that Europe’s biggest economy would be hit hard by an escalating trade dispute with the United States.

Speaking in Berlin last night, International Monetary Fund chief Christine Lagarde warned that clouds over the global economy "are getting darker by the day".


For all the warm words and bonhomie from the U.S.-North Korea summit - a notable contrast to Washington’s angry exchanges at the weekend’s G7 meeting - it’s been largely a non-event for world markets and attention now turns squarely to policy decisions from the world’s two biggest central banks later in this week.

As a measure of how markets read the Singapore summit, the South Korean won and Seoul’s benchmark Kospi stock index were both virtually unchanged on the day.  U.S. Treasuries, which have from time to time during the Korean nuclear saga received a ‘flight to safety’ bid, were also little changed and  10-year yields hovering just above 2.96 percent.

Sustaining a generally positive start to the week amid signs of a pickup in global economic leading indicators and further small gains on Wall St, most major Asia bourses outside Seoul edged higher and Shanghai led the gains with a rise 0.9 percent.

The U.S. dollar pushed higher across the board ahead of tomorrow’s widely expected second U.S. interest rate rise of the year – positioning for any signals that the Federal Reserve has one or two more hikes up its sleeve over the remainder of 2018. U.S. May CPI inflation numbers released later today will add to that last minute speculation and the core annual CPI rate is expected to nudge up to 2.2 percent from 2.1 percent in April.

Right now, markets reckon there’s little more than a 1-in-5 chance of a fourth rise by yearend. Barring some major Fed surprise, the dollar’s rise is likely to be limited by quick subsequent switch of focus to Thursday’s European Central Bank meeting, where speculation has risen of some firm guidance for an ending of the ECB’s asset purchase scheme by the end of this year too.

Today’s release of the June German ZEW sentiment index will give markets some glimpse of just how pervasive the recent economic data disappointments have become amid nerves in corporate Germany about a looming trade war with the United States.

European stocks are expected to open higher after strong gains on Monday were led by bank stocks hopeful of rising interest rates and Italian banks relieved at pro-euro signals from the new Italian government.

U.S. President Donald Trump shakes hands with North Korean leader Kim Jong Un at the Capella Hotel on Sentosa island in Singapore, June 12, 2018

Elsewhere, sterling will likely remain on edge as the UK government attempts to deflect new amendments to its Brexit plan to amid the threat of defections from within its own ranks. A vote later on Tuesday on whether parliament should have a ‘meaningful’ vote on the final Brexit deal will act as a lightning rod for party splits and UK media is speculating about whether this could damage UK PM May’s position or even lead to another election.

As if sterling didn’t have enough to worry about, sub-forecast UK trade and manufacturing numbers on Monday will be followed later today by May jobless numbers and April earnings. The pound edged lower against the dollar and euro in early trade, though it remains largely within recent trading ranges so far.

— 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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