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Are we on the verge of a No-Deal Brexit? - EMEA Brief 21 Mar



  • The EU has indicated that Theresa May needs to get backing from parliament on her Brexit deal before they agree to delay the UK's withdrawal from the EU. The Prime Minister is heading to Brussels today for the European Council meeting to try to force an extension in order to avoid a no-deal scenario.
  • US bank stocks traded lower yesterday after the Fed's announcement that there will be no rate hikes in 2019, Goldman was down 3.4% whilst BoA, J.P. Morgan Chase, Citigroup and Morgan Stanley all fell by 2% or more. In turn, both Dow and S&P traded lower whilst the Nasdaq edged 0.1% higher than its previous close.
  • The Dollar was down against most major pairs due to the announcement, Bloomberg's Dollar Spot Index fell 0.5% to a six-week low.
  • Asian equities closed higher, the MSCI Asia-ex Japan Index was up 0.45% whilst the Shanghai composite was up 0.72%.
  • Gold traded 0.4% higher yesterday to $1,318.05 per troy ounce.

Asian overnight: It was a mixed session in Asia, with falls in Australia offset by small rises in South Korea and Hong Kong, while Japan is closed for a public holiday. A dovish Fed provided an initial boost for US markets, but it was not enough to sustain the rally, and equities lost ground. It is expected that Steve Mnuchin and Robert Lighthizer will travel to China next week for further trade talks, but a lack of progress in these talks is beginning to weigh on markets. 

UK, US and Europe: After dovish turns from the ECB and the Fed, all eyes will be on the Bank of England, while a European Council meeting may discuss the UK’s request to extend Article 50. In addition we have UK retail sales, a Philly Fed reading and eurozone consumer confidence.

Looking at Brexit, news broke yesterday that Macron will veto any delay to the Brexit process to avoid any further uncertainty, according to a French media report. If this is true, it puts the UK on the brink of a no-deal Brexit as Theresa May heads to Brussels today in a bid to desperately avoid this scenario. High profile Brexiteer Jacob Rees-Mogg was delighted to hear this news as he tweeted "If true, then Vive la France". 

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


Source: Daily FX Economic Calendar

9.30am – UK retail sales (February): sales to rise 0.2% MoM and 3.4% YoY. Markets to watch: GBP crosses

12pm – BoE meeting:policy expected to be left unchanged, but Brexit likely to dominate the discussion. Markets to watch: GBP crosses

12.30pm – US Philadelphia Fed index (March): expected to rise to 3.2 from -4.1. Markets to watch: USD crosses

3pm – eurozone consumer confidence (March):confidence to fall to -10.8 from -7.4. Markets to watch: EUR crosses

11.30pm – Japan CPI (February):CPI to be 0.4% YoY and core CPI to hold at0 .8% YoY. Markets to watch: JPY crosses

Corporate News, Upgrades and Downgrades

  • Halma said that it expected annual adjusted pre-tax profits to meet markets forecasts thanks to strong growth in its US and UK divisions. 
  • Next reported a 2.6% rise in total group sales for 2018, while group profit fell 0.4% to £722.9 million. The retailer said that it saw no effect so far from Brexit, and that a no deal Brexit would lead to reductions in prices if the indicative tariffs are brought in.
  • Ted Baker said that group pre-ta profit for 2018 fell 26.1% to £50.9 million, while sales rose 4.2% to £461 million. 
  • Enquest will keep its focus on cutting debt, after earnings in 2018 more than doubled to $716.3 million. 

Bouygues upgraded to outperform at MainFirst
EasyJet upgraded to neutral at MainFirst
ING Groep raised to outperform at RBC
Ryanair upgraded to outperform at MainFirs

Bodycote downgraded to hold at Berenberg
Compass downgraded to sell at Goldman
Lookers downgraded to neutral at JPMorgan
IAG downgraded to neutral at MainFirs

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