March 20, 2018 / 8:35 AM / a year ago

Daily Briefing: Brexit reality check

LONDON (Reuters) - Financial markets may have been buoyed by news of yesterday's preliminary deal on a transition period that reduces the chances of a damaging "cliff-edge" Brexit, but the reality is that many companies are pushing ahead with Brexit-proofing contingency plans anyhow.

An anti-Brexit demonstrator waves EU and Union flags opposite the Houses of Parliament, March 19, 2018

A survey released this morning by the Chartered Institute of Procurement and Supply (CIPS) shows that one in seven EU businesses with a presence in Britain have already moved parts of their business out of the country because of concerns about disruption. The survey of supply chain managers also showed that almost one in four British firms with suppliers in the EU was having difficulties in securing contracts that run beyond Britain's scheduled departure from the EU in March 2019. That is all obviously bad for UK jobs; the other main take-away from the survey was that UK firms are raising prices to pass on some of the impact of sterling's fall since the Brexit vote.

Former French President Nicolas Sarkozy is in police custody this morning to be questioned as part of an investigation into suspected irregularities over his election campaign financing. The probe related to alleged Libyan funding for Sarkozy's 2007 campaign, local media report. Sarkozy has long denied wrongdoing in a number of cases against him, which he says are politically motivated.

Norway’s government looks as if it will escape a no-confidence vote now that Justice Minister Sylvi Listhaug has announced her resignation. Listhaug provoked anger earlier this month when she accused the opposition Labour Party of putting terrorists’ rights before national security, a particularly offensive topic for Labour, which was hit in 2011 by a mass shooting by far right militant Anders Behring Breivik.


 A tech attack? This long-running equity bull market has weathered most storms in recent years, largely due to the relentless advance of the technology and internet sector and its leading lights.

That's why Facebook's near 7 percent slide on Monday after reports of U.S. election-related personal data breaches has had big reverberations, dragging lower other tech giants like Google parent Alphabet and Apple amid calls on both sides of the Atlantic for more social media regulation and oversight. Do the mighty FAANG grouping – Facebook, Apple, Amazon, Netflix and Google – have an Achilles heel after all? The tech-heavy Nasdaq lost 1.8 percent last night in its biggest one-day drop in five weeks.

Parallel news that ride services firm Uber has halted self-driving car tests after a fatal accident involving one of its autonomous vehicles only added to the tech anxiety.

The lid is being opened on the black box of Facebook data practices, and the picture is not pretty

Markets are meanwhile braced for details later this week of some $60 billion of U.S. tariffs against Chinese imports, much of which will hit Chinese tech firms even as the big U.S. retailers such as WalMart complain about the risk of a trade war with Beijing. U.S. Treasury officials in Buenos Aires for the G20 finance chiefs meeting this week insisted America still believes in free trade but only "with reciprocal terms".

All this comes in antsy week for world markets anyway, with the Federal Reserve widely expected to execute on Wednesday its first of at least three interest rate rises this year. The backdrop of U.S. trade tariff threats on steel and aluminium adds to the jitters, as does the latest geopolitical standoff between Russia and the West over the alleged involvement of Moscow in the murder of a double-agent in Britain.

Wall St stock indices lost more than 1 percent, with both the S&P500 and the Nasdaq having their worst day in five weeks. The Vix volatility gauge spiked above 20 percent at one point on Monday, but settled just above 19 percent at the close. S&P futures are up a fraction first thing.

The dollar index and dollar/yen were a touch higher, with euro/dollar up a smidgen too. Ten-year Treasury yields pushed above 2.97 percent ahead of the Fed meeting. European stocks look set to open higher, but tech stocks such as SAP were marked down about 2 percent. Sterling continues to push higher against the dollar and euro after a 1 percent surge on Monday on news of an agreement between Britain and the European Union on a Brexit transition period.

— 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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