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Brexit- could this threaten a UK-US trade deal? EMEA Brief 27 Nov

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  • Trump reported that Brexit could potentially threaten a UK-US trade deal, leaving Britain unable to negotiate a free-trade agreement with the US
  • OPEC to meet in Vienna next week to discuss levels of oil production. It is expected to be cut down by 1million to 1.5million barrels due to worries of the US-China trade war
  • Trump announced a potential introduction of applying a 10% tariff on iPhones imported from China, which could increase to 25% on January 1st
  • Ukraine to bring martial law for 30 days, following the attack from Russian military, wounding several sailors
  • Asian markets trade higher with Nikkei 225 inclining by 0.8%, Shanghai composite rising 0.42%, Shenzhen up 0.62% and ASX 200 by 0.91%
  • Brent crude oil futures rises by 2.9% to $60.48 a barrel
  • Saudi Aramco to invest $100billion globally in chemicals within the next 10 years, as well as a prediction in the next decade of an increase in production to 23billion standard cubic feet a day from 14billion, attracting $150billion worth of investments 
  • Bitcoin declined by 81% from its last year’s peak in addition to its trading volumes, with its 24-hour volume decreasing by 61% on Monday to $19billion
  • Goldman Sachs believes commodities could rise by 17% in the following months as the G-20 summit could be a ‘potential launchpad for raw materials’ 

Asian overnight: A mixed affair overnight saw losses in Chinese and Hong Kong markets, as Donald Trump raised the stakes for the upcoming talks at the G20, stating that their tariffs would be ramped up in the case of no-deal. However, Japanese and Australian markets fared much better, with a rebound in oil prices helping the ASX 200 in particular. On the data-front, Japanese BoJ core CPI rose marginally to 0.6% against expectations.

UK, US and Europe: 

Theresa May continued to face criticism from the opposition and numerous conservative members of Parliament, however, May defends her proposals in relation to the Brexit withdrawal agreement as she believes “there is not a better deal available”, even though she confesses she is not “entirely happy” with the backstop plan to avoid a hard border. It has been confirmed that the final vote will take place around the 11th December.

The US president reported that the Brexit withdrawal agreement is a “great deal for the EU”, however suggested that this could potentially threaten a UK-US trade deal, announcing that “right now, if you look at the deal, the UK may not be able to trade with us. And that wouldn’t be a good thing”. Responding to this, a Downing Street spokesman reported that the Brexit agreement would allow the UK to sign bilateral deals with countries including the US.

Looking ahead, UK markets will likely have a volatile start to the day, given the number of companies releasing their earnings this morning. In the US, keep an eye out for the latest consumer confidence as the one major data release of the day. Besides that, markets are likely to focus on current themes, with Brexit, US-China relations, and the Italian budget remaining prominent.

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


Source: Daily FX Economic Calendar

3pm – US consumer confidence (November): expected to fall to 136.2 from 137.9. Markets to watch: USD crosses

Corporate News, Upgrades and Downgrades

  • Thomas Cook said that underlying earnings for the year to September will fall to £250 million, down from £308 million a year earlier. In addition, it will suspend its full-year dividend. Net debt rose to £389 million, due to delayed bookings and non-cash items. 
  • Pennon reported a 2.9% rise in pre-tax profit for the first half, to £133.6 million, while revenue was up 3.1% at £746.7 million. 
  • Greggs upgraded expectations for the full-year, saying that a good October and November meant that full-year pre-tax profit would be at least £86 million, from a previous expectation of £72 million, in-line with last year. 
  • Shaftesbury reported a 14% rise in investment earnings to £51.7 million, while the total dividend rose 5% to 16.8p per share. 
  • General Motors to cut over 14,000 jobs and close 8 plants, reducing productivity levels in factories in the US and Canada
  • Tesla sales in China tumble by 70% in comparison to the previous year, selling only 211 cars in October
  • Line shares increased as much as 17% following the news of joining with Tencent.

Altri upgraded to market perform at BBVA
Atea upgraded to neutral at SpareBank
Hikma upgraded to buy at Jefferies
Iberdrola upgraded to outperform at RBC

Aurubis downgraded to hold at DZ Bank
NMC Health cut to underperform at Jefferies
Credit Suisse cut to equal-weight at Morgan Stanley

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