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Is a second referendum on the table? - EMEA Brief 17 Dec

DanielaIG

  • Theresa May is coming under increasing pressure from MPs to stop the gridlock on Brexit negotiations.
  • The pound is expected to see further volatility until at least mid-January as the unknown future of Brexit continues.
  • The Dollar continued to trade at a 19-month high on Monday as concerns over slowing economic growth have reduced the appetite for riskier stocks and currencies and have backed the greenback as a safe-haven.
  • The price of bitcoin has fallen below the cost to mine hitting a new low for the year of $3,126, loosing more than 80% since its ”tulip mania” phase at the end of last year. Without mining, bitcoin would cease to exist as it has no financial institution of Federal Reserve backing it up.
  • The climate change talks held in Poland over the weekend have been said to end in success as the Paris accord of 2015 seems to have been reinforced.
  • After China released lower than expected economic data on Friday, the Asian markets seem to be recovering as they enter the afternoon trading session, despite the Shanghai trading largely flat and the Shenzhen declining by 0.5%. The Nikkei 225 was up 0.8%, the Topix was up 0.3% and the ASX 200 was up almost 1%.
  • Dow Jones futures indicate a slight recovery on the opening on Monday after all three major US indexes closed in correction territory on Friday.

Asian overnight: A somewhat muted session overnight saw mixed fortunes within Asian, where the biggest outperformer came from the Australian ASX 200 index. The improved outlook for US-China relations helped drive mining firms higher yet in Australia, yet for the most part traders are somewhat cautious ahead of a critical week of central bank meetings. A quiet day ahead from an economic front sees a focus on elements such as the final eurozone CPI reading, alongside the US Empire state manufacturing survey.

UK, US and Europe: As the British PM Theresa May seems to stand with her denial to allow for a second referendum on Brexit, MPs are now calling for a free vote in Parliament to allow them to decide on how they believe the Brexit gridlock should end. International trade secretary Liam Fox was the first Brexiter to publicly call for MPs to be allowed to vote on the future of Brexit after talks with the EU at the end of last week did not go as planned for Theresa May when EU leaders refused to amend the withdrawal agreement. The PM is expected to update MPs today regarding the outcome of her EU meetings last week. A cabinet meeting is expected to be held on Tuesday and ministers are likely to step up contingency plans for a no-deal Brexit.

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

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Source: Daily FX Economic Calendar

1.30pm – US NY Empire state mfg index (December): expected to fall to 21.5 from 23.3. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • ASOS has issued a profit warning, saying that it had seen ‘significant deterioration’ in its trading in November, despite 14% sales growth in the September to November period. The firm has reduced its expectations as a result. 
  • SSE has abandoned the proposed merger of its retail energy business with Innogy’s npower unit. Other options including demerger or outright sale are being considered. 
  • Croda International has agreed to acquire Brenntag Biosector for €72 million. The firm serves the human and veterinary vaccine market. 

Moncler upgraded to overweight at Morgan Stanley
Senvion upgraded to overweight at JPMorgan

Dometic downgraded to hold at Kepler Cheuvreux
Zealand Pharma downgraded to neutral at Goldman
Salvatore Ferragamo downgraded to underweight at Morgan Stanley
Worldline cut to underweight at Morgan Stanley

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