November 20, 2018 / 8:26 AM / a month ago

Daily Briefing: DUP fires warning shot to UK's May

LONDON (Reuters) - The Northern Irish party that props up British PM Theresa May's government delivered what looked like a shot across her bow last night by failing to back her in several votes on a finance bill. The government still won the vote despite the DUP abstentions, yet the move was a clear reminder that their backing will be crucial to her in getting any Brexit deal through parliament. Separately, a hard Brexiteer rebellion against May has so far not materialised, with no indication the requisite 48 letters of no-confidence in her from Conservative lawmakers have been delivered.

File phot: Arlene Foster, leader of the DUP, and Nigel Dodds MP, talk to the press outside the Palace of Westminster in London, Britain

The question is now whether she heads to Brussels in coming days to tie up any loose ends before next weekend’s EU summit to rubber-stamp the deal.

Despite evidence that Emmanuel Macron's labour reforms last year have started creating jobs, that has yet to have an impact on the unemployment rate, according to data today showing third-quarter jobless holding at 9.1 percent.

The main reason is likely that French economic activity as a whole has become more sluggish, with output now growing at just 0.4 percent a quarter.

The figures will do little to boost Macron's popularity, which according to a poll on Sunday fell further - only 25 percent of those questioned in the Ifop poll said they were satisfied with him, down from 29 percent in October.

Italian Economy Minister Giovanni Tria insisted to eurozone colleagues in Brussels yesterday that Rome will stick with its 2019 budget plan despite criticism from fiscal watchdog the European Commission.

Brussels is expected to release a report on Italy’s debt on Wednesday, which could be the first step towards a disciplinary procedure that could eventually lead to fines on Rome.

Talks on the stand-off are continuing but debt markets have taken fright - 10-year Italian bond yields reached a one-month high of 3.66 percent this morning.

MARKETS AT 0755 GMT

Heavy selling across the world’s major technology stocks have pummelled global markets, with the tech-loaded Nasdaq down 3.2 percent on Wall St last night amid reports that Apple was cutting production orders for its three main iPhones.

Apple’s latest woes have hit similar tech companies, chipmakers and firms across its supply chain and underlined market concerns that earnings growth is well past its peak and the world economy is rolling over. Apple’s stock is now down more than 20 percent in about 6 weeks - a loss of nearly a quarter of a trillion dollars in market capitalization.

Seen as one of the ‘most crowded trades’ by fund managers for most of the year, NYSE’s FANG+TM index of top world internet and tech stocks - Facebook, Apple, Amazon, Google-parent Alphabet, Netflix, Twitter, Tesla, Baidu, Alibaba and Nvidia – is now down 22 percent in just five months and is now in a technical ‘bear market’.

The volatility on Wall St, which saw the S&P500 lose 1.6 percent and the Vix volatility gauge jump back above 20 percent, was compounded by losses in auto sector stocks after the shock hit to Renault and Nissan shares following the arrest and dismissal of chairman Ghosn over alleged misreporting of his salary.

Disappointing U.S. housing market readings for November added to the gloom.

The selling seeped around the clock into Asia markets, with Japan’s Nikkei down 1 percent, Shanghai and HK down about 2 percent each and Seoul’s Kospi index down 0.9 percent.

The tech woes come as global investors shape up for 2019 amid fears of an ebbing of global growth and amid worries about trade wars, rising interest rates, Brexit and Italy’s budget standoff. The failure of the weekend APEC meeting to agree a joint communique for the first time bode ill for hopes of some trade détente between Washington and Beijing at the G20 summit in Argentina later this month.

There’s still no resolution to domestic rifts over the draft Brexit agreement between the UK and European Union, even if fears of an imminent leadership challenge to UK PM May have ebbed somewhat as rebels within her own party appear shy of the required numbers to trigger a confidence vote.

Italian sovereign bond yields are climbing again and the 10-year yield hit a one-month high of 3.66 percent as Italy’s finance minister insisted at yesterday’s euro group meeting that Rome will not change its budget plans and Brussels prepares to start some form of sanctions procedures as a result.

The market was hit further on Monday by poor demand for the auction of a government bond aimed at households.

European stocks opened about 0.5 percent lower.

U.S. Treasury yields continued to recoil, meantime, as Federal Reserve policymakers warn of headwinds from the global economy next year – prompting markets to speculate that the Fed may well pause its monetary tightening campaign next year.

The dollar was lower across the board.

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. 

Editing by Andrew Heavens

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