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May Battles for Brexit Agreement and Party Backing - EMEA Brief 16 Nov

MichaelaIG

  • Theresa May continues to back her Brexit deal despite deep divisions in her party, 16 members of which have openly called for a vote of no confidence in the Prime Minister
  • Brexit draft agreement led to several resignations including Brexit Secretary Dominic Raab and cabinet minister Esther McVey
  • The GBP fell 1.7% against the dollar and 1.9% against the Euro yesterday, the lowest in over two weeks. However, this morning has seen a slight rally
  • The Trump administration are reported to be planning to set up a controversial side-event promoting fossil fuels at next month’s annual U.N. Climate talks
  • Apple partners with Studio A24 to create original feature-length movies. This follows 4 suppliers of apple elements cutting their revenue forecasts this week due to reduced orders from tech company. Suppliers include  AMS Ag, Qorvo and Lumentum. Lumentum took the biggest resulting market hit as shares fell 30% after Apples update on Monday. 
  • Yesterday the much anticipated hard fork of Bitcoin Cash took place, the uncertainty of which saw BCH fall to $386 down 9.1% to it's lowest in over a year
  • Natural Gas fell a further 2% this morning after suffering a downturn of 19% yesterday, it's worst slide in 14 years. This follows Wednesday's surge as cold weather and low stockpiles saw demand increase

Asian overnight: Chinese stocks were the one outlier overnight, with losses across Japanese, Hong Kong, and Australian markets taking hold after a tumultuous session yesterday. Improved sentiment around the possibility of a US-China breakthrough have helped the outlook for Asian markets, with the FT stating that talks between the two sides have intensified. Sterling stabilised overnight, as Theresa may’s staunch support for her plan helped ease fears over near-term uncertainty in her position. However, it is not over yet.

The killing of Jamal Khashoggi continues to cast a shadow for Saudi Arabia as the Trump administration sanctions 17 people. Consul General Mohammed Alotaibai and senior Saudi official Maher Mutreb are among the individuals sanctioned. This follows the statement from Saudi prosecutors who said they would seek the death penalty for five of those allegedly involved.  However, the Turkish President Recep Tayyip Erdogan and Foreign Minister Mevlut Casvusoglu remain unsatisfied calling for prosecution under Turkish law.

UK, US and Europe: Looking ahead, the Brexit theme is no doubt going to run through into the weekend, with all eyes on the likes of Jacob Rees Mogg who is helping spearhead a movement to force a vote of no confidence against Theresa May. Nonetheless, the Prime Minister stands firm on her proposed Brexit agreement despite this party controversy. The 585 page long agreement addresses several highly contentious issues, the most noteworthy of which include the establishment of the previously discussed 21 month transition period and the so-called "backstop" (whereby until a future relationship has been established Northern Ireland with become part of the single customs territory with Great Britain). Furthermore, under this backstop agreement the UK must observe "level playing field" commitments, meaning that UK businesses are not able to undercut EU industries.  Following the agreement’s announcement yesterday the GBP and FTSE 250 both fell sharply. Despite widespread discontent, Angela Merkel, the German Chancellor stated that there was “no question” of renegotiating the Brexit deal agreed yesterday. With such uncertainty it seems these volatile times may be set to continue. On the data front, watch out for the eurozone inflation data, with CPI expected to fall from 05% to 0.1%.

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

Calender.PNG

 

10am – eurozone CPI (October): prices to rise 0.1% MoM from 0.5%, and increase 2.2% YoY from 2.1%. Core CPI to be 0.9% YoY. Market to watch: EUR crosses

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Halma has agreed a deal to acquire Navtech Radar in a deal worth up to £39m. Halma have spent an initial £21m to acquire Navtech, while a further £18m could be paid dependent on profit growth in the next three financial years. Navtech Radar is a provider of innovative radar surveillance and safety solutions for use in highway monitoring, perimeter security and industrial applications
  • Kier Group has sold its share of the Australian asset KHSA to their joint venture partner Downer Group. The deal sees the firm earn up to $43.7m (£24m), with the proceeds going to pay down debt
  • Nvidia shares closed at $202.39 after plunging 16% after hours and regaining 2.6% during the regular session. This follows a 21.9% decline over the past 3 months
  • Cisco shares gained 5.2% yesterday, reaching $47.10, in an intraday high
  • Nutrien establishes Pedro Farah Walmart executive as its new Executive VP and CFO

Centamin raised to overweight at Morgan Stanley
Aston Martin rated new overweight at JPMorgan
Eiffage upgraded to buy at SocGen
Galp upgraded to buy at Santander

Evonik downgraded to neutral at Citi
Innogy cut to sell at Independent Research
Leoni downgraded to neutral at MainFirst
Nordex downgraded to sell at SocGen

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