September 4, 2018 / 7:31 AM / 17 days ago

Daily Briefing: May faces Brexit foes

LONDON (Reuters) - A Reuters poll conducted in the past few days shows economists and analysts now estimate there is an uncomfortably high 25 percent chance of Britain leaving the European Union next March without a deal.

FILE PHOTO: Prime Minister Theresa May kicks a ball made of recycled plastic as former Norwegian politician and Executive Director of the UN Environment Programme Erik Solheim looks on during her visit to the United Nations complex within Gigiri in Nairobi, Kenya, August 30, 2018

That was unchanged from a previous estimate in August but a growing number of the regular contributors to the survey are now gradually raising their odds.

"In adopting the Chequers proposals, we have gone into battle with the white flag fluttering over our leading tank. If we continue on this basis we will throw away most of the advantages of Brexit"

Brexit-watchers will keep a close eye on today's cabinet meeting - a first chance since the summer break for PM Theresa May to confront her internal critics face-to-face - and on Bank of England chief Mark Carney's appearance before a parliamentary committee.

Carney is due to be asked whether he is ready and willing to stay on beyond his current June 2019 leaving date. Local media reports suggest that some close to May argue that Carney's high profile will be helpful to Britain in the aftermath of Brexit.

France’s Emmanuel Macron is set to reshuffle his government team today after the surprise resignation of environment minister Nicolas Hulot.

The aim of the reshuffle is twofold: to restore some credibility on issues important to left-leaning voters after the departure of the ecologist Hulot; and to breathe new life into a reform drive that has been derailed by economic headwinds.

The Catalonian independence story went off the boil during the summer months but there will be a lot of interest in a speech tonight by the region’s new leader, Quim Torra.

Entitled “Our Moment”, the address is due to outline his strategy in the coming months. On Monday, Prime Minster Pedro Sanchez ruled out allowing any vote on outright independence but proposed holding a referendum on greater autonomy.

MARKETS AT 0655 GMT

A late rally in Chinese stocks helped improve the global markets mood in Asia on Tuesday with Monday’s U.S. holiday thinning overnight trade.

Although the U.S. dollar continued to push higher and emerging market currencies remained on the defensive, the CSI300 cut early losses to end more than 1 percent higher and the offshore yuan held steady as state bank activity tightened liquidity in the local currency market.

French President Emmanuel Macron sits next to a pupil in a classroom during a visit to a secondary school in Laval, France, September 3, 2018

Trade tensions remain high amid concern that Washington will impose 25 percent tariffs on another $200 billion of Chinese goods when a public consultation period ends on Thursday.

While the yuan held firm, Indonesia’s rupiah lost another 0.5 percent to new 20-year lows and India’s rupee set another record low on Tuesday before bouncing slightly. Both currencies have lost about 10 percent in 2018 so far.

The stock market picture elsewhere in Asia was more mixed, with Tokyo’s Nikkei little changed, Seoul’s Kospi higher and Jakarta’s main benchmark underperforming with losses of 0.6 percent. After four consecutive daily losses, MSCI’s main emerging markets index has eked out gains of 0.1 percent so far today.

The focus on hotspots Argentina and Turkey, where the peso and lira have fallen more than 40 percent and 50 percent respectively this year, remains intense.

Argentina’s President Macri on Monday unveiled a series of emergency government spending cuts and tax rises to try and get ahead of the mounting financial crisis and speed up disbursements from a $50 billion IMF programme. But the peso weakened yet again, losing another 3 percent.

In Turkey, signals from the central bank on Monday that it may finally act next week to raise interest rates to shore up the lira similarly had little effect on the currency.

At 17.5 percent, the central bank’s main policy rate is now lower than the rate of inflation in August at 17.90 percent and less than a third of Argentina’s draconian 60 percent interest rate. After slipping again on Monday, the lira continued to weaken marginally on Tuesday above 6.6 per dollar.

In developed markets, eyes return to Wall St later on Tuesday to see the first pulse of the week there as investors await the release of the August U.S. employment report on Friday. S&P500 futures were up 0.25 percent first thing, with European futures up by a similar amount.

The euro slipped back below $1.16 against a broadly stronger dollar. Sterling continued to nudge lower amid heightened Brexit jitters, meantime, but attention turns to Bank of England governor Carney’s testimony to the Treasury parliamentary committee later on Tuesday.

There’s been intense press speculation over the past week that Carney will agree to extend his time at the helm of the BoE beyond a previously agreed departure date of next June and he will be expected to address the issue later today. UK August retail sales will be eyed closely too.

Italian government bond yields dropped further on Tuesday away from the elevated levels of last week, encouraged by deputy PM Salvini’s seeming commitment to stick to EU rules when formulating the budget. Leaders of Salvini’s League party are due to meet later on Tuesday to discuss the budget.

Elsewhere, Australia’s dollar was steady after the Reserve Bank left interest rates unchanged earlier.

— 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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