LONDON (Reuters) - French President Emmanuel Macron will push on with his speech at the Sorbonne today detailing a major overhaul of the European Union's single currency zone, even as he knows that Angela Merkel might not be in a position to help him deliver on it.
Her conservatives were already resistant to some aspects, notably an idea to give the euro zone a multi-billion-euro budget of its own, administered by Brussels; her likely new coalition partners the FDP are even more hostile to that.
Still, for Macron the advantage of going ahead with his speech is that he will be setting out his ideas before the noise that will be generated by weeks of coalition negotiations in Berlin; it also puts France in the slightly unaccustomed position of seizing the European agenda as Germany drags its feet.
Spanish authorities believe they have done enough to prevent any meaningful independence referendum taking place in Catalonia in two weeks’ time, but at what cost?
The national government has in recent weeks scaled up efforts to prevent the ballot by arresting regional officials and seizing election leaflets - a tough line that has raised concerns in Brussels. Such actions have only whetted the thirst of many Catalans for more freedom from Madrid, sparking mass demonstrations in favour of independence.
Assuming some form of vote does go ahead, the result will probably be a “yes”. Madrid would then promptly reject its validity but, if the past is anything to go by, will ultimately open more talks on granting further autonomy to the region.
In the realm of what constitutes a big move in world markets these days, there’s been a clear step back in equity markets and risk assets overnight as a plethora of political and policy twists conspire to curb investor enthusiasm.
A surge in oil prices, which saw Brent hit its highest in more than two years just below $60 per barrel on Tuesday, was the most eye-catching move of the past 24 hours. The jump was at least partly due to threats by Turkey to cut off an oil pipeline from the Kurdistan region of northern Iraq after the latter held a referendum on independence on Monday - the results of which are due later this week and are likely to favour autonomy.
Higher crude prices might have an ambiguous impact on energy-heavy stock indices, but will feed the monetary policy debate that has seen expectations for another U.S. interest rate rise by the end of this year rise back above 50 percent this week. A speech by Fed chief Yellen in Cleveland later today will be critical to cementing that changed view or not.
Otherwise, there has been some bid for safety again, in Swiss francs, yen, gold and U.S. Treasury bonds as North Korea claimed on Monday that the U.S. had declared war on it over the weekend and reserved the right to react as appropriate.
Euro/dollar staged its biggest one-day drop of 2017 as German Chancellor Merkel’s election win at the weekend was offset by her party’s worst showing since 1949 and an unexpected jump in support for the far-right AfD. With coalition talks expected to last for weeks, the likely return to government of the FDP was seen a tilt to a more hardline stance on further intra-euro zone integration and support for Greece, for example. French President Macron is expected to lay our his proposals on Tuesday on euro zone reform.
Elsewhere, a retreat in tech stocks helped pull Wall St equities lower overnight after reports that Apple told suppliers for its new iPhone X to scale back shipping plans. Asia stocks retreated broadly overnight and Europe is expected to open lower too.
Editing by Robin Pomeroy