October 24, 2018 / 7:30 AM / in 6 months

Daily Briefing: Brexit leaks - eternal Norway vs relief flotilla

LONDON (Reuters) - In the end it was Theresa May who asked to address her restive Conservative Party lawmakers at a private meeting today rather than being “summoned” to hear their complaints about her Brexit handling.

Britain's Prime Minister Theresa May arrives for a news conference at the European Union leaders summit in Brussels, Belgium October 18, 2018. REUTERS/Toby Melville

That would suggest the meeting is likely to be less awkward for her than first imagined - even possibly allowing her to argue afterwards there was an expression of loyalty towards her.

The encounter comes amid local media leaks of government planning for some of the most extreme Brexit outcomes.

On the one hand, The Times cites documents drawn up by her chief Europe adviser which speak of a “long-running implementation period” (i.e transition phase) that could be rolled over on an annual basis if needed - effectively leaving the UK in an open-ended Norway-style relationship with the EU.

At the other extreme, the FT reports that plans were discussed at a stormy cabinet meeting for Britain to charter ships to ferry in critical food and medicines in the event of a “no-deal” Brexit.

NATO Secretary General Jens Stoltenberg will be pushed at a briefing this morning to respond to Donald Trump’s plans to withdraw from a 1987 treaty limiting arms in Europe.

The move, which came largely out of the blue but was confirmed by his adviser John Bolton in Moscow last night, has created much anxiety within NATO.

Some in the alliance see it as the latest example of the split between the Trump White House and the rest of the US administration.

More widely it is evidence of Trump abandoning a core piece of NATO policy in a unilateral fashion.

Germany has said it will fight the proposal using all diplomatic channels possible: the battle starts when Washington’s NATO ambassador presents the plan to fellow alliance envoys in Brussels on Thursday.

European capitals will be closely watching Italian PM Giuseppe Conte’s talks with Vladimir Putin in Moscow today.

Rome is a firm critic of existing EU sanctions on Russia put in place after its Crimea annexation but has not yet stated whether it would veto fresh ones over, for example, the Skripal poisoning.

How or whether Rome uses that issue in leverage over its budget stand-off with Brussels remains to be seen.


A late rally for Wall St stock indices on Tuesday has helped take the edge off an increasingly anxious mood on world markets but the S&P still ended down for the 5th straight day, losing more than half a percent.

Although the rally from five-month lows eased some nerves, the index failed to recapture its 200-day moving average and remains on course for its worst month since at least August 2015.

Peak-to-trough losses in October were as much as 8.5 percent at one point yesterday.

Earnings season angst and worries about deteriorating corporate guidance despite decent third quarter bottom lines has been one of main drivers of the selloff this week, with markets wary of outlooks from big industrial stocks such as Halliburton and Caterpillar and fearful that rising trade tensions between the United States and China will start to hit the big tech firms too.

Caterpillar stock dropped almost 8 percent on Tuesday after just failing to lift its full-year 2018 steer for the first time in three quarters.

Microsoft will be the mostly closely watched update later on Wednesday after the market closes.

Global markets were steadier overnight, with Chinese and Japanese equity benchmarks eking out small gains and the MSCI all-country index flat for the day so far, but at risk of recording its 6th straight daily loss after hitting its lowest in more than year on Tuesday.

European stocks futures opened up about half a percent amid a deluge of earnings on this side of the pond and with the banks in focus.

But S&P futures were still in the red overnight and 10-year U.S. Treasury yields slipped to 3.14 percent, with the 2-10-year yield curve flattening to its lowest in about three weeks.

Apart from earnings jitters, more general fears of ebbing world growth amid escalating trade wars and economically-sensitive political tensions from Saudi Arabia to Italy and Brexit are enough to keep investors worried. Global flash manufacturing business surveys for October out through the day will be another key sounding on confidence.

French industrial confidence fell to its lowest reading in almost two years this month, early PMI readings showed.

A combination of global demand concerns and Saudi commitments to keep supplies buoyed enough to offset the loss of embargoed Iranian crude has dragged Brent crude oil prices to its lowest in a month this week but it hovered just above $76 per barrel first thing.

In currency markets, the safe-haven yen gave up much of Tuesday’s gains against the dollar and the greenback was a touch firmer more broadly.

Sterling was off a fraction as markets eye UK PM May’s meeting with backbenchers from her own ruling Conservative party later today amid concerns about a leadership challenge.

Italian 10-year government bond yields were steady below the week’s highs, with markets eyeing the next steps after the European Commission on Tuesday asked Italy to resubmit its draft budget with lower deficit targets.  

Deputy PM Salvini insisted again early on Wednesday that there would be no changes, but also stressed Italy did not want to leave the euro or European Union.

In European corporate news, it’s a big days for banking shares with the sector deep in bear territory in Europe.

Deutsche Bank stock lost almost 3 percent after announced a steep decline in third quarter profit but said it was on track to swing to a profit this year.

Nordea also had a weak quarter and reported a steeper-than-expected fall profit, citing difficult market conditions and lower corporate activity.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 23, 2018. REUTERS/Brendan McDermid

Sweden’s Handelsbanken said it planned to cut at least 1,600 jobs over the coming four years as it reported third-quarter operating profit slightly above market expectations.

In the UK, Barclays reported a profit before tax of 1.6 billion pounds as its under-pressure investment banking division booked increased trading revenues despite difficult market conditions.

Still in financials, reinsurer Scor’s Q3 profit rose.

Editing by Andrew Heavens

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