LONDON (Reuters) - European Commission President Jean-Claude Juncker may temper some of the optimism in financial markets about a Brexit deal when he gives his annual State of the Union speech today.
His aides say he will insist that Britain should not expect a softening of the EU's stance in the final weeks of negotiations, nor that Brexit negotiator Michel Barnier will get a new, more permissive mandate at next week's Salzburg summit. The bottom line remains that the EU wants a close relationship with the UK as long as it adheres to its club rules.
Back in the UK, there is more talk of a rebellion in ruling Conservative ranks, with the BBC reporting that 50 lawmakers met on Tuesday night to discuss how to force Theresa May out of her job.
Under party rules, a leadership election is triggered if 15 percent of Conservative lawmakers, currently 48, demand a vote of no confidence. The obvious but nonetheless telling observation is that, despite months of grumbling about May, they have still not dared do that.
Separately, the EU parliament vote on whether to sanction Hungary for undermining democracy and rule of law is going down to the wire. Given that such a sanction needs a two-thirds majority in the assembly, it all depends on how many of Viktor Orban's allies in the parliament's right-leaning caucus vote against him.
Austrian and Greek members of the grouping have said they will do so, whereas MEPs from Italy’s League will back him. With lawmakers ultimately being allowed to vote freely, the outcome is still too close to call.
MARKETS AT 0655 GMT
Pressure mounted on Asia’s stocks and currencies overnight as the U.S.-China trade war continued to simmer – with China intent on using WTO sanctions against the United States over a long-running dispute while Washington threatens tariffs on practically all Chinese imports.
In stark contrast to another rally on Wall St stocks overnight, MSCI’s Asia ex Japan equity index fell for the 10th consecutive session earlier – its longest losing streak since 2000 and down another 0.3 percent on the day to its lowest since July last year.
MSCI’s broader emerging markets index also set a fresh 14-month low early on Wednesday after breaking below 1000 points yesterday for the first time in more than a year.
Emerging Asia currencies were also weaker. China’s offshore yuan hit its weakest in almost three weeks, Malaysia’s ringgit fell to its lowest level of the year and India’s rupee set another record low at 72.91 per dollar.
Turkey’s lira and Russia’s rouble were steadier ahead of key policy meetings by the respective central banks later this week although Argentina’s peso fell again overnight after its central bank kept rates steady at a punitive 60 percent.
South Africa’s outperformed over the past 24 hours after an above-forecast manufacturing reading offset some of gloom surrounding the country’s official return to recession in the second quarter.
The focus is already shifting to the likely U.S. Federal Reserve interest rate rise later this month, with 10-year Treasury yields pushing to their highest in over a month last night and stalking 3 percent again on a mix of Fed speculation and lukewarm demand at the latest debt auctions.
U.S. inflation readings top the data slate this week and August producer price numbers are released later on Wednesday. European stocks too their lead from New York rather than Asia and futures were about 0.3 percent higher before the open.
Euro/dollar slipped below $1.16 in early trade. Sterling edged back off the week’s highs as optimism about a Brexit deal emerging over the next couple of months was partly offset by domestic political infighting and reports of challenges to PM May’s leadership from within her own party.
— 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 —