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Theresa May survives, Second Canadian diplomat apprehended in China - EMEA Brief 13 Dec

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  • Prime Minister Theresa May won a vote of no confidence in her leadership of the Conservative party last night. The results showed that Mrs May won the vote by 200 to 117, securing 63% of the total votes, she is now immune from any further vote's of no confidence for a year.
  • GBP has fallen back from Wednesday's highs despite Theresa May successfully defending her leadership as investors believed she would win by a larger majority, the pound is currently trading at $1.2617 against the dollar.
  • Several reports are suggesting that a second Canadian has been detained in China in what is believed to be a retaliation for the arrest of Huawei's CFO Meng Wanzhou, a spokesman said "we have been unable to make contact since he let us know he was being questioned by Chinese authorities".
  • Asian equity markets ended positive on Thursday, the Hang Seng index was up slightly over 1%, Japan's Nikkei 225 rose 1.06% whist the Shanghai Composite increased by 1.3%.
  • The US stock markets ended up following on from the positive performance in Asia. The Nasdaq rose 1% to 7,098.31, followed by a 0.64% increase in the Dow and the S&P 500 which climbed 0.54%.
  • Gold remained steady, currently being priced at $1,244.46 per ounce.

Asian overnight: Asian markets have enjoyed another positive session off the back of improving relations between the US and China. The pound enjoyed a bullish session after Theresa May managed to fend off the vote of no confidence with 200 votes. However, she still faces the same problem of passing a bill that has little support. 

UK, US and Europe: Whats next for Mrs May after her victory in the vote of no confidence in her leadership last night? Pressure continues to mount as the Prime Minister now heads off to Brussels for an EU summit to seek concessions on the Irish backstop. EU leaders have already indicated that there will be no renegotiation on Brexit, however founder of G+ Economics, Lena Komileva, believes the chance of meaningful concessions "is actually quite strong". Having said this, Brexiteer Jacob Rees-Mogg has said it was a "terrible result for the prime minister" and has called for her resignation, indicating a third of Tory MPs voted against her leadership. 

Looking ahead, the Swiss rate decision from the SNB is joined by the ECB monetary policy decision. The question is whether Mario Draghi will allow the asset purchase programme to end despite ongoing worries about eurozone fiscal and economic stability. 

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

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Source: Daily FX Economic Calendar

12.45pm – ECB rate decision (1.30pm press conference): no change in policy expected, but with increased market volatility and a continuing stand-off with the Italian government dominating the news, the press conference may provide some insight about whether the bank is still confident about moving on rates later next year. Markets to watch: eurozone indices, EUR crosses

11.50pm – Japan Tankan large manufacturers index (Q4): index to rise to 22 from 19. Markets to watch: JPY crosses

Corporate News, Upgrades and Downgrades

  • Ocado said that revenue rose 12% to £390.7 million for the 13 weeks to 2 December, while average orders per week were up 13.1% to 320,000, but the average order size fell 1% to £104.91. 
  • Serco expects earnings per share to be ahead of forecasts by 5-10%, thanks to a lower effective tax rate. Trading profit for 2018 and 2019 is expected to be in line with forecasts.  
  • Bunzl said that it expects full-year revenue growth of between 8% and 9%, but a stronger pound was expected to hit performance. 

Johnson Matthey upgraded to buy at HSBC
Pernod Ricard upgraded to hold at Liberum
WPP upgraded to buy at Shore Capital

Elementis downgraded to hold at HSBC
Sabre Insurance cut to equal-weight at Barclays
Ultra Electronics cut to underweight at Barclay

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