* 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.
LONDON, Feb 21 (Reuters) - There was a barely perceptible sense of movement coming out of British PM Theresa May's dash to Brussels last night, which yielded a joint statement with the EU speaking of the need for "appropriate legal assurance to both sides". The immediate focus now will be on persuading UK attorney general Geoffrey Cox - who will be in Brussels today - that any such assurance would mean Britain will not be locked in permanent alignment with the EU due to the Irish backstop. That, May hopes, would in turn allow him to change his legal advice to parliament accordingly and thus persuade enough lawmakers to back her deal after all. All that said, it still does not look as though May will be ready to call a fresh vote on it before next Thursday, when parliamentarians have promised to make a new attempt at excluding the outcome of a no-deal Brexit. That will depend partly on whether May's own ministers are ready this time to defy her and back such an effort: reports this morning suggest up to 15 of them will put their job on the line over it.
The European Central Bank today publishes the account of its Jan 23-24 policy meeting at which it left rates and guidance unchanged but where President Mario Draghi overtly stressed downside risks to the region's economy from a host of factors. One of the big themes at the moment is whether the central bank will push ahead with a new round of multi-year loans to banks known as known as Targeted Long-Term Refinancing Operations (TLTRO). That option, Draghi confirmed, was raised by several policymakers at the January meeting but no decision had been taken. Since then, the ECB chief economist has said it will soon discuss plans but hinted any new round of credit may not be as generous as a previous facility. The latest TLTRO was offered at a zero percent interest rate.
MARKETS AT 0755 GMT World markets retained much of their recent gains overnight, with the two big influences of the trade talks and central bank settings still supporting factors. As formal U.S.-China trade talks get underway later today in Washington, the signals remain positive and Reuters reported overnight details of the ‘memorandums of understanding’ both sides are prepared to sign up to even if the formal March 1 deadline is pushed back. However, big gaps apparently remain on the U.S. administration’s demand for ‘structural’ moves from Beijing on intellectual property protection. The minutes of the Federal Reserve’s latest policy meeting offered little new to the market, but confirmed the dovish tilt toward being ‘patient’ on further interest rate rises – even if some on the committee still see further rate hikes as possible. European Central Bank policy minutes out later on Thursday will likely chime with that overall dovish message. Wall St stocks nudged higher late Wednesday, with Asia bourses steady to firmer. Shanghai underperformed slightly as the yuan continued to surge – sending the offshore rate to its strongest since July at one point after reports earlier in the week that a Beijing commitment not to sharply weaken the currency was part of Washington’s demands in the trade talks.
The dollar was firmer elsewhere, however, with the DXY index up 0.13 percent and euro/dollar a shade lower ahead of the ECB minutes and critical flash business surveys for February due out later. Underscoring the ongoing weakness in the world economy this year, however, Japanese manufacturing activity shrank this month for the first time in 2-1/2 years, according to PMI business surveys there. European and U.S. stock futures were marked slightly higher first thing. , US President Trump said overnight the US would impose tariffs on European car imports if it cannot reach a trade deal with the European Union. Even (Taiwan OTC: 6436.TWO - news) though the remarks could weigh on autos, especially German carmakers Daimler (IOB: 0NXX.IL - news) , BMW (EUREX: BMWE.EX - news) and VW which are highly exposed to the US, the threat is not new and a recent bounce in auto stocks indicates that investors remain hopeful a worst-case scenario of a 25 percent import tariff could be avoided.
In emerging markets, meantime, the price picture in what’s been dubbed as the year’s ‘most crowded trade’ remains upbeat. MSCI’s emerging market equity index was up for the fourth straight day and within a whisker of its highs for the year. South Africa’s rand firmed after a brief wobble on Wednesday’s 2019 government budget and bailout of electricity company Eskom. While a deteriorating fiscal situation is expected to add to pressure for credit rating firms such as Moody’s to downgrade the sovereign debt to junk status, the details of the bailout at least ensured an Eskom restructuring plan was in place and the government would not assume the company’s debt on its own balance sheet.
In the UK, sterling was a shade firmer. Although there was little new from UK PM May’s meeting with EU Commission chief Juncker late Wednesday, UK finance minister Hammond continued to talk up the prospects of changes that could get the Brexit withdrawal deal through parliament in a ‘meaningful vote’ as soon as next week. On the flipside, credit rating firm Fitch lost patience and put UK sovereign debt on a formal downgrade warning late Wednesday. In a heavy day for European earnings, Barclays (LSE: BARC.L - news) reported a lower-than-forecast attributable profit for 2018, as it took a 150 million pound provision against Brexit losses and its under-pressure investment bank weathered a difficult fourth quarter. Capital (Other OTC: CGHC - news) however beat expectations and Barclays shares were seen rising at the open. * Flash Feb business surveys from around the world
* Europe corp events: Accor (EUREX: 485822.EX - news) , AP Moller-Maersk, ASM, Atos (Paris: FR0000051732 - news) , AXA (Paris: FR0000120628 - news) , BAE Systems (LSE: BA.L - news) , BCP, Barclays, Bouygues (LSE: 0HAN.L - news) , Centrica (Frankfurt: A0DK6K - news) , Saint Gobain (LSE: 490580.L - news) , Deutsche Telekom (IOB: 0MPH.IL - news) , Galapagos (LSE: 0JXZ.L - news) , Getlink, Hays (LSE: HAS.L - news) , Henkel (LSE: 0IZ8.L - news) , Heathrow, HOCHTIEF (IOB: 0EPW.IL - news) , Millenium bcp, Orange (LSE: 0OQV.L - news) , Playtech (Frankfurt: A1J0S4 - news) , RELX (Frankfurt: RDEB.F - news) , Serco, Swiss Re, Telecom Italia (Amsterdam: TI6.AS - news) , Telefonica (LSE: 826858.L - news) , Tomra Systems (LSE: 0KV7.L - news) , Valeo (LSE: 0RH5.L - news) , Veolia
* France Feb business climate, final inflation
* Germany, Italy Jan final inflation
* Spain Dec trade balance
* Spain auctions government bonds
* European Central Bank policy meeting minutes
* EU Commission chief Juncker speaks in Brussels
* European Central Bank chief economist Praet and Bank of Austria chief and ECB policymaker Nowotny speak in Brussels and Luxembourg; Bank of Finland chief and ECB policymaker Rehn speaks in Paris
* Bank of England chief economist Haldane speaks in
* German and Russian economy ministers speak in Berlin
* UK auctions 2057 gilts, Jan public sector borrowing data
* Poland central bank policy decision
* US Q4 earnings: Hormel Foods, Newmont Mining (Swiss: NEM-USD.SW - news) , Norwegian Cruise Line, Patterson. Alliant Energy, Con Edison, Fluor, Hewlett Packard, Intuit (NasdaqGS: INTU - news) , Zillow
* US Dec durable goods orders, Feb Philadelphia Fed index of business conditions, Jan existing home sales
* Bank of Canada chief Poloz speaks in Montreal
* Atlanta Fed chief Bostic speaks in Atlanta (Editing by Gareth Jones)
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