January 8, 2019 / 8:29 AM / 6 months ago

Daily Briefing: Knock-down for Brexit delay report

LONDON (Reuters) - The main Brexit headline this morning is a Telegraph story suggesting UK officials have put out feelers on the possibility of extending Article 50 over concerns that a Brexit deal will not be in place by March 29.

While the sense from Brussels has always been that there would be readiness on the EU's side to accommodate a slight delay, the last thing the UK government can do ahead of next week's parliament vote is to acknowledge any such planning: Accordingly, the Brexit minister has gone on TV to deny it.

Separately, the assembly may vote today on an attempt by lawmakers to cut off funding to the government in the event of a no-deal Brexit. That amendment would not in itself exclude the possibility of a no-deal outcome, but its backers hope it would make it less likely by preventing the government from executing damage-limitation measures.

There is yet more bad news for the German economy this morning as industrial output unexpectedly fell in November for the third consecutive month. Data from the Federal Statistics Office showed industrial output was down by 1.9 percent, confounding a Reuters forecast for an increase of 0.3 percent.

That came after yesterday's worse-than-expected orders data. Economy Minister Peter Altmaier has come out strongly arguing that things aren't as bad as all that, promising that this year will see an upswing and that order books remain full.


After two weeks of wild swings, world markets appear to be looking at the glass half full again.

Even though huge question marks remain over the extent of the global economic slowdown this year, the outcome of the Sino-U.S. trade talks, the length of the U.S. government shutdown, the Federal Reserve’s policy trajectory, Brexit, French street violence and a host of other issues, markets are recalibrating after an ugly end to 2018.

The net moves over the past month may be minimal, but the volatility has eased back and many are happy to focus on the bumper U.S. December employment report as one reason not to fear the worst for economic activity at least.

Wall St stock indices added to Friday’s surge overnight, with the S&P500 up 0.7 percent. Battered technology stocks led the ongoing rebound and S&P futures were up again first thing Tuesday.

Ten-year U.S. Treasury yields have recovered to New Year’s Eve levels close to 2.70 percent and the dollar has firmed up again too after swooning on Friday and Monday on signals the Fed was open to at least pausing its rate rise campaign.

The DXY dollar index rallied from near 3 month lows set on Monday, with dollar/yen attempting to reclaim levels above 109 and euro/dollar slipping back to $1.1430. MSCI’s emerging market currency index backed off five month highs set yesterday. Asia’s stock markets were more hesitant earlier despite constructive soundings from U.S. Commerce Secretary Ross on the progress of this week’s trade talks in Beijing.

Shanghai and HK shares were little changed and South Korea’s Kospi was down 0.6 percent as Samsung warned earnings will be “well below” expectations due to weak chip demand. China’s offshore yuan gave up most of yesterday’s gains. The easier yen and tech rebound helped Japan’s Nikkei outperform with gains of 0.8 percent.

European stock futures pointed to a positive open here even after German industrial output numbers showing the third straight month of declines in November. Brent crude oil prices were firmer after a Wall Street Journal report that Saudi Arabia planned to cut exports to 7.1 million barrels per day by the end of this month – but they were well off the three-week high close to $59 set late on Monday.

Sterling nudged higher overnight after a UK newspaper report that the UK government had made soundings in Brussels about extending the March 29 deadline for Brexit if its withdrawal agreement wasn’t sealed and ratified in time. But it gave back some of those gains as UK Brexit minister Stephen Barclay said no plans for an extension were in place and there would be real difficulties in doing so.

Canada’s dollar was the other big currency mover – strengthening to it best levels in almost a month ahead of a possible interest rate rise from the Bank of Canada on Wednesday.

— 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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