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Brexit speech to be announced to Parliament- EMEA Brief 15th Nov

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  • Brexit draft has been backed up by the cabinet where Theresa May will announce a speech on Thursday to the Parliament, however, there are assumptions that this could end with a vote of no confidence 
  • China delivering a written response to the US demands for wide-ranging trade reforms, which could potentially end the trade war between the two countries
  • Bitcoin market capitalisation declines to its lowest level since October 2017, falling to under $100billion. Ethereum and XRP also decline by 13% and 15% respectively
  • Oil prices fall to its lowest with Brent crude falling almost 7% and US Oil over 7%
  • ASEAN summit starts without Trump in sight, leading to beliefs that Washington may not be as “committed to Asia” as expected, according to Capri, visiting senior fellow at the National University of Singapore
  • GBP rose against the USD by 0.2% as of 2:22pm on Wednesday, from $1.29 earlier in the day
  • Aramco to purchase SABIC, the world’s fourth-biggest petrochemicals company, and to then potentially list downstream oil assets
  • S&P 500 traded lower by 0.3%, the Dow Jones Industrial Average rose by over 200 points early Wednesday, however has now declined by 72 points
  • Germany’s economy declines as initial third-quarter growth shows a fall of 0.2% quarter-on-quarter
  • Italy’s budget deficit to remain at 2.4%

Asian overnight: A mixed session overnight saw gains in Japan counteracted by weakness across most of the other major markets. The Australian ASX 200 was the notable underperformer, falling over 1% thanks to substantial weakness across the energy sector in the wake of the crude decline. That decline was partly down to the OPEC monthly report which saw markets shift focus onto the oversupply that seems likely in 2019. Data-wise, we have seen a whole host of economic releases, with Japan falling into negative growth for Q3 (-0.3%), while Chinese releases fared somewhat better given the rise in fixed asset investment and industrial production.

UK, US and Europe: The main focus of today is likely to be on Brexit concerns, given yesterday’s breakthrough in talks. May believes it was a “decisive step” in the procedure with the UK leaving the EU, and is expected to give a statement to the House of Commons on Thursday morning. The 585 paged draft deal includes a 21-month transition period, including a commitment to protect the rights of the EU nationals in the UK, as well as ensuring physical checks will not be reintroduced between the Irish border. The final agreement is far from assured a safe passage, and thus the market reaction is likely to be heavily impacted by the ability to pass through Parliament. With that in mind, expect sterling volatility, with any signals of how the votes might go likely to play a major role. Also watch out for the latest inflation data, with UK CPI expected to rise to 2.5% today. In mainland Europe, markets will be keenly following the latest eurozone Q3 GDP number, alongside the industrial production figure. Finally, the US follows on from the UK with the inflation theme, where CPI is expected to rise to a nine-month high.

Economic calendar - key events and forecast (times in GMT)

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Source: Daily FX Economic Calendar

9.30am – UK retail sales (October): sales to fall 0.4% MoM and rise 3.6% YoY from -0.8% and 3% respectively. Market to watch: GBP crosses
1.30pm – US Empire state mfg index (November), retail sales (October): index to fall to 20.5 from 21.1. Sales to rise 0.4% MoM from 0.1%. Market to watch: USD crosses
4pm – US EIA crude inventories (w/e 9 November): delayed by a day due to Veterans Day, stockpiles to rise by 1.9 million barrels from an increase of 5.7 million a week earlier. Markets to watch: Brent, WTI

Corporate News, Upgrades and Downgrades

  • 3i Group said that total return increased by 10% in the first half of the year rose 10% to £728 million, and net asset value per share rose 7.2% to 776p. 
  • Aston Martin said that adjusted earnings in Q3 rose to £54 million from £28 million a year earlier. Car sales doubled to 1776 in the period. 
  • Great Portland Estates will buy back £200 million o shares after strong demand for London real estate. Pre-tax profit to 77% to £40.4 million for the first half.
  • Apple’s shares fall by more than 2%, declining to around $886billion from its record high of $1.13trillion
  • House of Fraser to continue to close another four stores
  • Flybe issued a profit warning and is now up for sale
  • Uber figures shows a loss of around $1.07billion in its last three months to September
  • Huawei plans to develop its voice assistant to work outside China, which could potentially cause competition between Google and Amazon

Air France-KLM raised to buy at Kepler Cheuvreux
Wirecard upgraded to buy at DZ Bank
Vivo Energy raised to overweight at Morgan Stanley

Aggreko downgraded to equal-weight at Barclays
Continental downgraded to neutral at Citi
CRH downgraded to neutral at Exane

 

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