April 30, 2019 / 7:31 AM / 23 days ago

Daily Briefing: Positive noises heard around Brexit talks

LONDON (Reuters) - An unaccustomed whiff of optimism is emanating from the cross-party talks between Britain's ruling Conservatives and opposition Labour on Brexit.

Pro-Brexit graffiti is seen on a fence above a new housing development in Thrapston, April 29, 2019. REUTERS/Phil Noble

It's still not clear whether on substance they are any nearer to a compromise but local media agree the "tone" has improved and now the two sides are, in the words of one Labour official, discussing the "nuts and bolts" of an agreement.

Separately, Labour’s policy-making council will decide today on a draft manifesto for next month’s European Parliament elections on the assumption that the UK does go ahead and hold them.

Pro-EU voices in the party want it to guarantee a second referendum on Brexit in any eventuality; others seek a compromise which would merely demand one in the event of a “Tory Brexit”, i.e one that Labour disagrees with.

Those in favour of the compromise do so in the belief that a fudge is the best way to maintain the spotlight on divisions within the Conservative party over Brexit.

Their hope is that Theresa May would be soon replaced by a hard Brexit-backer such as Boris Johnson who would then call and lose a snap election, so ushering Jeremy Corbyn into 10 Downing Street. Lots of hypotheticals in that one.

Full Coverage: The Road to Brexit

It is a data-heavy day in the euro zone with French GDP numbers showing that household spending in the first quarter recovered somewhat after being frightened off by the “yellow vest” protests at the end of last year; business investment and exports were less buoyant, however, meaning that overall growth remained at 0.3 percent. German inflation and unemployment data for April are due later.

The European Court of Justice is due to rule this morning on whether controversial provisions on investor protection contained within an EU-Canada free trade deal are in line with EU law. Critics argue they give too much power to multinationals by letting them sue public authorities in special tribunals, effectively allowing them to dictate public policy.

However the Court’s Advocate General issued an opinion in January that the provisions were lawful: court judges are not bound by the opinions of advocate generals but tend to follow them in most cases.

MARKETS AT 0655 GMT

Disappointment from April Chinese business surveys and from Google-parent Alphabet’s Q1 results put a brake on the upbeat start to the week for world markets.

Even though the S&P500 clocked up a record intraday high and close late on Monday, Alphabet’s stock dropped more than 7 percent after the bell as its revenue growth fell to a three-year low.

The miss was a rare black mark in an otherwise decent U.S. earnings season so far and eyes now turn to Apple’s update after the close tonight. S&P futures are marginally in the red first thing.

Chinese business surveys, meantime, continued to show growth this month but missed forecasts and asked questions over the strength of the first quarter economic recovery there. A cat-and-mouse game in local markets over whether incoming economic readings mean more or less additional policy stimulus meant Shanghai stocks ticked higher despite the downbeat factory readings.

HK and Seoul equity benchmarks dropped 0.6 percent each however and China’s offshore yuan weakened. Traders have one eye on the latest round of U.S.-China trade talks and U.S. Treasury Secretary Mnuchin arrived in Beijing earlier and said he hoped further progress would be made in the negotiations over the coming days. Tokyo markets are closed all week to mark the emperor’s abdication.

In Europe, it’s a heavy day economic releases and earnings reports before the May 1 holidays across the continent on Wednesday. With the full euro zone Q1 GDP number out later, France reported steady 0.3 percent expansion for the first three months, though separately recorded an unexpected drop in consumer spending for March.

On the corporate front, Standard Chartered bank was up about 5 percent after it announced its first share buyback in 20 years. With Apple results awaited later, Apple-supplier AMS jumped 16 percent after beating guidance for Q1 operating profit and giving upbeat outlook for the Q2. European stock indices opened slightly lower overall.

In currency markets, euro/dollar was also a touch lower and the dollar mixed more broadly. In emerging markets, Turkey’s release of its inflation report and March trade balance will be eyed later as the lira continues to weaken. After steadying on Monday, both MSCI’s main emerging market equity and currency indices were down sharply on Tuesday.

— 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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