LONDON (Reuters) - As other European leaders still digest Emmanuel Macron's wide-ranging and unashamedly aspirational speech on Europe, the world of industry is presenting the region's economy with facts on the ground.
Britain's efforts to lobby the U.S. failed overnight as Washington imposed steep duties on Canadian Bombardier's CSeries jets, thus putting jobs at Bombardier's Northern Irish plant at risk and perhaps underlining that London can expect no preferential treatment from the U.S. after Brexit.
On the continent, Germany's Siemens and France's Alstom have agreed to merge their rail operations into a new European champion to ward off a big Chinese rival. Separately, French and Italian leaders are expected today to reach a deal over the ownership of the STX shipyards in France. In each case, local jobs are at stake and the politics are fraught. Such deals will, for now at least, affect more Europeans' lives than Macron's longer-term ideas.
Britain's main opposition Labour Party is ready for government, its leader Jeremy Corbyn will tell a party conference later today, urging Theresa May to end her government's "Brexit bungling" and give up power. The call comes as a YouGov poll for The Times found that just 21 percent of people think May's government is doing a good job of negotiating Brexit, down three points since her Florence speech.
One of the dominant world markets stories of the year has been how the air came out of the ‘Trumpflation’ trade as the U.S. President struggled to get any significant new legislation through Congress, let alone the fiscal stimulus of long-promised tax cuts. The flipside of that was the Federal Reserve’s pause in its interest rate rise campaign after June and the evaporation of tightening expectations over the horizon as inflation stayed subdued.
The biggest market casualty was the dollar, whose main index against the world’s most trade currencies fell more than 12 percent from January’s peaks to this month’s troughs. But both U.S. tax cuts and a third U.S. rate hike of 2017 are back on the radar and the dollar is starting to recover – with the DXY index bouncing about 2.5 percent over the past two weeks and up three sessions in a row today.
Late on Tuesday, Fed chair Yellen stoked rising U.S. rate rise expectations by saying it would be “imprudent” to wait until inflation was back to 2 percent to hike rates again and that the Fed should be wary of moving too gradually on rates. Futures markets now put the chances of a December move as high as 70 percent – a giant leap from less than 20 percent only a month ago. U.S. Treasury yields have risen across the curve, with the 2-year yield up to 1.459 percent in early trading on Wednesday – its highest since October 2008.
At the same time, Trump’s detailed tax proposals are expected to be laid out later on Wednesday and are expected to involve steep cuts in corporate tax rates alongside big tax breaks on any repatriation of the trillions of dollars of U.S. corporate cash held overseas.
Euro/dollar, which has also been hit by the messy German election outcome this week and the prospect of several weeks of coalition building there, is testing its lowest levels in more than a month early on Wednesday – itself a likely relief for corporate Europe that was starting to fret about a euro overshoot.
Wall St stocks ended in the black late Tuesday, helped by a recovery of the wobbling tech sector, and the Vix volatility gauge hovered just above 10 percent. Asia stocks were flat to positive, with emerging markets underperforming due to renewed pressure from a rising dollar and Treasury yields. European stocks are expected to open higher.
editing by John Stonestreet