December 20, 2017 / 8:38 AM / a month ago

Daily Briefing: Uber's day in court - app or cab?

LONDON (Reuters) - In a regulatory ruling with wider implications for Europe's increasingly digital economies, the EU's top court today rules on whether ride-hailing app Uber is merely a digital company or should be classed as providing transport services.

While the latter would be unlikely to immediately change the way it operates, it would allow local authorities to regulate the U.S. start-up more like a traditional taxi company, with obligations ranging from licensing to insurance. Uber’s argument is that it is simply a digital app that acts as an intermediary between drivers and customers looking for a ride.

After party rebels last week forced British PM Theresa May to grant parliament a separate vote on any final Brexit deal, her government faces a new test in the house today, this time over whether to enshrine the Brexit date in law. That would reassure Brexiteers that Britain is definitely on its way out of the club, but critics argue it could increase the chances of a damaging cliff-edge Brexit if negotiations aren't complete. At the time of writing it looks as if a compromise will be reached under which an extension can be granted if talks overrun.

Sweden's central bank is expected this morning to leave its benchmark interest rate unchanged and will not add to its bond purchase programme as it grows increasingly confident that inflation is back on track. Nevertheless, despite strong growth and inflation running at or close to the 2 percent target for most of the year, the Riksbank is expected to strike a dovish tone and will still reinvest coupons and cash from maturing bonds through next year into 2019. Some analysts expect moreover that it will push back its plans for when it will start hiking rates from the current forecast of mid-2018.

MARKETS

As the final procedural throes of the U.S. tax cut legislation plays out, bond markets stole the show on Tuesday and long-term sovereign debt yields climbed in Europe and the United States. While some of the action has been put down to year-end fund adjustments in the final full trading week of 2017, 10-year U.S. Treasury yields jumped about 8 basis points to more than 2.47 percent and their highest since late October. The 2-10 year U.S. yield curve also steepened back above 60 basis points for the first time in about two weeks. 

Although it can hardly be news to the market at this late stage, the U.S. tax cut plans are expected to add an additional $1 trillion to the $20 trillion U.S. national debt over the next 10 years. The House of Representatives is set for one final vote on the bill later on Wednesday before President Trump signs it into law. More immediately for Treasuries, the economic numbers continue to come in ahead of forecast and November home construction beat estimates to rise to a 13 month high – adding to the argument that U.S. tax cuts are merely throwing more fuel on to an already briskly expanding economy. 

Long-dated European government bond yields also jumped higher on Tuesday, with a variety of reasons being cited for the selloff from hefty German 30-year bond sale plans to murmurs from ECB officials about the need to review monetary policy settings next year. Euro/dollar was slightly firmer above $1.18. Wall St stocks edged back from this week’s record highs as the earnings lift from the tax cuts has already been well priced and the Vix hovered about 10 percent. Asia bourses were mixed to a touch weaker overnight and European stock markets are expected to open flat.

Sweden’s Riksbank policy decision tops the morning’s diary, with traders watching closely for signals about a future shift in its super-easy monetary policy that has deeply negative Swedish interest rates the second lowest in the world despite a growing economy and red-hot real estate market.

Elsewhere, Bank of England Governor Mark Carney testifies to parliament on banking and Brexit as the IMF releases its annual review of the UK economy. In the crypto-world, bitcoin’s recoil this week extended back below $16,000 at one point overnight as regulators and central banks around the world continue to warn the public about the risk of a bubble. The peak to trough downmove since Sunday was a whopping 20 percent.

Editing by Toby Chopra

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