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May Secures 'legally binding changes' to her Brexit Deal; Pound Rallies - EMEA Brief 12 March

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  • Theresa May has announced that she has secured "legally binding changes" to the withdrawal agreement ahead of the pivotal vote on her deal in the House of Commons this evening. Specifically, the changes mean that the Irish backstop would not "become permanent".
  • The pound soared after the news broke rising to a high of $1.3290 before falling back down to its current level of $1.3208, still up over 2% from Monday's low.
  • Boeing shares have fallen over 5% after the fatal plane crash in Ethiopia, which killed all 157 people on board. Multiple airlines have grounded Boeing's 737 MAX 8 aircraft as the disaster on Sunday was the second in five months involving the new Boeing aircraft. 
  • Strong gains within the US technology sector offset the decline in Boeing as the Dow closed 200 points higher. The Nasdaq also rose 2% followed by the S&P which gained 1.45%.
  • Apple has announced an event for the 25th of March where it is widely anticipated that the company will announce a TV streaming and news subscription service to rival Netflix. The event invitation includes the caption "It's show time".
  • Gold added 0.2% to $1,296 per ounce.

Asian overnight: A bullish session overnight saw gains from Chinese, Japanese, and Hong Kong shares, with the Australian ASX 200 index trading marginally lower. Much of the positive sentiment came thanks to a strong US session, as the topic of US-China trade talks came back into play. With Chinese state TV reporting that vice-premier Liu He, Robert Lighthizer, and US trade representative and Steven Mnuchin spoke on the phone, there is hope that talks could soon resume. 

UK, US and Europe: However, it was Brexit that caused the most volatility overnight, with the pound gaining sharply off the back of a seemingly successful last-minute dash to Strasbourg by Theresa May. Legally binding amendments to the withdrawal agreement have raised hopes that her deal could be approved in today’s vote. While the vote is almost certain to be closer than last time, the day will be dominated by commentary across the political spectrum which should highlight what chance it really has. Thus, the pound is the currency to watch today, with UK GDP (monthly), manufacturing production, industrial production, and trade balance data all being released to heighten that focus. Also keep an eye out for US CPI inflation data released later in the day. 

South Africa: Our local bourse looks set to open firmer this morning following firmer US Index Futures and Asian equity markets. There has been suggestion of progress between the US and China in trade negotiations, and in turn markets grow optimistic of news to come. Markets have also been encouraged by Theresa May having adjusted the terms of a Brexit deal with the EU, which will be voted upon this evening by UK parliament. The dollar trades softer and commodities trade higher this morning. The rand has also managed to claw back some of its recent losses on the short term improved risk appetite. Tencent Holdings is up 1.4% in Asia, suggestive of a positive start for major holding company Naspers. BHP Group is up 1% in Australia, suggestive of a positive start for local resource counters.

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

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Source: Daily FX Economic Calendar

UK Parliament votes on Withdrawal Agreement

9.30am – UK GDP (January): growth to rise 0.1% MoM, while the three-month average holds at 0.2%. Market to watch: GBP crosses

12.30pm – US CPI (February): inflation to be 1.6% YoY and 0.2% MoM, while core falls to 2.15 YoY and holds at 0.2% MoM. Market to watch: USD crosses

11.30pm - Australia Westpac consumer confidence: index expected to fall to 102.5 from 103.8. Market to watch: AUD crosses

Corporate News, Upgrades and Downgrades

  • Wood Group has won a ‘multi-million dollar’ construction contract from IR1 group relating to a biofuels facility in Oregon. 
  • Sirius Minerals said that it had been approached by a ‘major global financial institution’ with an alternative funding proposal. Other proposals continue to be pursued. 
  • Domino’s Pizza reported a 1.1% drop in pre-tax profit for 2018, to £93.4 million, while sales rose 9% to £1.26 billion. Weak growth in its international division hurt performance. 
  • Struggling retailer French Connection has said that it has begun"preliminary discussions with several interested parties" regarding the sale of the company.

Befimmo upgraded to buy at ING
Clarkson upgraded to overweight at JPMorgan
Lloyds upgraded to neutral at Goldman
P2P Global Investments upgraded to buy at Canaccord

Antofagasta downgraded to sector perform at RBC
Standard Life Aberdeen cut to underperform at RBC
Munich Re downgraded to hold at Bankhaus Lampe
Standard Chartered downgraded to reduce at AlphaValu

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