LONDON (Reuters) - Even as the Brexit saga rolls on, there is a wider and potentially more significant battle going on for power and influence in the European Union in coming years.
Today, Italy's far-right Deputy Prime Minister Matteo Salvini will meet the leader of Poland's ruling party, Jaroslaw Kaczynski, in Warsaw to discuss forming a eurosceptic alliance for European Parliament elections in May.
If Brexit can be seen as a major step backwards from the gradual process of European unity since World War Two, then the European elections will show whether eurosceptics such as Salvini and Kaczynski can together wind back that process of EU integration even further. A news conference is expected after their meeting this afternoon.
After pro-EU UK lawmakers last night managed to notch up at least a symbolic victory against the prospect of a no-deal Brexit with a finance bill amendment, the main debate on Prime Minister Theresa May's Brexit deal resumes today ahead of Tuesday's vote.
Precious little has changed since May decided to postpone the vote originally scheduled before Christmas after concluding that she would have lost it: May still stands no chance of winning it this time around unless she can convince Northern Ireland’s DUP to drop its opposition to the Irish border backstop arrangements in the plan.
The government said this morning it would publish proposals that would give the Northern Ireland assembly a veto over any expansion of the scope of the backstop - it’s not clear that would be enough to convert the DUP into backers.
Macedonia's parliament is expected to pass an amendment to the constitution changing the country's name to Republic of North Macedonia as agreed with Greece last year to end a decades-long name dispute. Passions are still running high: Opposition lawmakers are boycotting the vote and will hold a rally with their supporters outside parliament.
MARKETS AT 0755 GMT
The glass remains half full for world markets as the week unfolds, with the focus on Wednesday on an unscheduled third day of trade talks between the United States and China in Beijing that both sides say are making progress even if big gaps on intellectual property rights and other issues remain.
After Wall St’s main stock indices added another 1 percent overnight to return to Mid-December levels, led by the big technology bellwethers, Asian markets latched onto the trade talks progress to extend the global rally and point to a fourth straight day of gains for the MSCI all-country index.
China’s foreign ministry said this week’s Beijing talks have now concluded and details would be released soon on the progress made. Adding to the rally were details of further economic support measures from China’s state planning agency, which pointed to moves to lift consumption in items such as autos and home appliances this year.
These come on the back of last Friday’s monetary easing by the People’s Bank of China. China’s offshore yuan strengthened to its highest against the dollar in a month. Shanghai stocks gained almost 1 percent and HK’s Hang Seng was up more than 2 percent. Seoul’s Kospi was up about 2 percent too, with Tokyo’s Nikkei advancing 1 percent. S&P500 futures added to Tuesday’s Wall St gains, while European futures were up 0.7 percent.
U.S. 10-year Treasury yields were firmer above 2.70 percent, as the above-forecast December U.S. employment and this week’s stock market recovery have dissuaded futures markets from starting to price in a Federal Reserve interest rate cut this year and back marginally toward the chances of further hikes. The 2-10-year yield curve has flattened again this week as a result and is hovering just about 13 basis points again.
The dollar’s DXY index gave back some of Tuesday’s gains, however, despite the ongoing retreat of Japan’s ‘safe haven’ yen. Euro/dollar was firmer at $1.1475, helped by the Italian government’s support for ailing lender Carige and indications of plans for a merger with another of the country’s troubled banks, Monte dei Paschi.
Signals from Germany’s economy continued to jar, however. Germany’s November trade report showed another decline in exports and imports and the overall surplus, adding to dire industrial output figures for the month released on Tuesday.
French consumer confidence readings for December fell to their lowest in more than four years, hampered no doubt by the spate of violent anti-government protests across the country during the month. Euro futures markets, meantime, have pushed out the horizon for the first European Central Bank interest rate rise to the middle of 2020 despite the standing ECB guidance for a move later this year.
Elsewhere, emerging market and commodity linked currencies were firmer on the positive trade talks signals. Sterling was steady, taking little new direction from the overnight defeat of a government finance bill in parliament that displayed a majority of lawmakers opposing a ‘no deal’ Brexit. There were few signs of any major shift in voting intentions ahead of PM May’s rescheduled vote on her Brexit agreement with the EU on Tuesday next week.
In European stocks, Apple suppliers such as AMS, Dialog, STMicro and Infineon will be back into the spotlight after the Nikkei Asian Review said the U.S. tech giant has cut planned production for its three new iPhone models by about 10 percent for the first quarter.
The latest update from Sainsbury's showed Britain's No. 2 supermarket reporting a worse-than-expected fall in underlying sales in the key Christmas quarter, hurt by poor demand for general merchandise. Sainsbury shares are down 2-3 percent in premarket trade.
— 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 —