LONDON (Reuters) - Even before any Brexit deal has been concluded between the UK and Brussels, attention is turning to whether it will get through a delicately balanced UK parliament.
With the support of the Northern Irish DUP, Theresa May has a majority of just 13 but various estimates put at 40 the number of Conservative MPs who are prepared to defy her and vote down any deal.
Set against that are reports in The Times and FT this morning that between 30-40 Labour lawmakers would rebel against their party leadership and back May's deal for fear that the alternative is a dire, no-deal Brexit.
There is still a long way to go on this one: the party whip system under which various forms of pressure and inducements are applied on recalcitrant parliamentarians has yet to make itself fully felt.
What has happened to Emmanuel Macron’s cabinet reshuffle, originally expected on Monday and then put back to yesterday?
Finally a statement emerged from the Elysee yesterday evening to say that it would not be happening just yet; Macron is due to hold a regular cabinet meeting this morning before he heads off on an official trip to Armenia. The opposition is having a field day, accusing him of dithering and making a huge fuss over something which is largely a presentational move.
One of the downsides of having sprung open the established party system with his En Marche movement is that Macron has not got an obvious pool of ministerial candidates to choose from. And as his government looks more and more uncertain in office, some possible names are even ruling themselves out.
Italian government officials have come out this morning to insist there will be no change to the 2019 budget and its growth targets after parliament's fiscal watchdog said the forecasts - for 1.5 percent growth next year, 1.6 percent in 2020 and 1.4 percent in 2021 - were too optimistic. The government can indeed ignore that judgment, but if it does so parliament can call on the economy minister to explain why.
MARKETS AT 0655 GMT
World markets’ volatile start to the week petered out somewhat on Wednesday as key flash points in U.S. Treasuries, emerging markets and Italian debt calmed down and eyes shifted to critical U.S. inflation updates, debt auctions and the start of the Q3 earnings season later this week.
Sterling continued to stand out as it pushed to its strongest levels in four months against the euro and on a trade-weighted basis following a series of reports that a Brexit deal between the European Union and Britain could be reached as soon as next week.
Italian government bond yields and debt spreads versus Germany hovered close to Tuesday’s closing levels and off their highest levels this week after finance minister Tria said the government would act if bond market pricing became excessive and European banking monitors said stepped-up surveillance of Italian banks’ liquidity position showed up no cause for alarm.
After surging to 7-year highs above 3.26 percent yesterday and unnerving world equity markets in the process, 10-year U.S. Treasury yields slipped back to hover just above 3.20 percent first thing Wednesday ahead of a 10-year auction later tonight.
With markets now starting to chime with Fed indications of another four interest rate rises between now and the end of next year, the release later today of U.S. producer price data for September and the consumer price report tomorrow will be important in determining the next twist in the bond market.
Some traders pointed to further criticism of the Fed overnight from U.S. President Trump, who said the central bank was tightening too fast, but the impact of that political pressure could just as easily embolden Fed policymakers to stick to their course.
After cutting world growth forecasts this week by 0.2 percentage points for this year and next, the International Monetary Fund’s Financial Stability Report on Wednesday spotlighted the risks of mounting pressure points on the world economy, not least various financial firestorms across the emerging markets.
Helped by a pause in rising U.S. yields and step-back in the dollar on Wednesday, emerging market equities turned slightly positive for the first time in five sessions. Chinese stock markets and the yuan were flat during the day after a seismic start to the week saw the biggest one-day equity market fall in more than two years.
Tokyo’s Nikkei ended marginally in the black, but South Korea’s Kospi lost more than 1 percent amid some disappointment that the second summit between Trump and North Korea leader Kim Jong Un was delayed to next month.
Emerging Asia currencies steadied too after a torrid start to the week and Tuesday's effective devaluation of Pakistan’s rupee. South Africa’s rand held most of Tuesday’s sharp gains after news that former central bank chief Mboweni would take over the job of finance minister after the resignation of scandal-tainted incumbent Nene.
Turkey’s lira was also steady after the government announced a series of price control measures and discounting to try to control runaway inflation that hit almost 25 percent last month.
— 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 —