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MPs Vote to Take Control of Brexit Process - EMEA Brief 26 Mar

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  •  In the latest round of voting in the House of Commons, MP’s voted to set up a series of votes on Wednesday to see which approach to Brexit has the most support. Later, am amendment on whether another extension could be requested if no progress is made on a deal by the 5th of April.
  • European indices finished the main session down with the FTSE losing 0.42% and the DAX losing 0.15%, 17 points down from the previous day. Meanwhile, US indices traded relatively flat with less that 0.1% change across the three major US indices.
  • The Nikkei 225 was gains 2.15% gaining back some of what was lost in the previous session as investors reacted to global growth worries, fuelled by the US yield curve inversion.
  • Gold has continued to rise with a 0.63% gain yesterday as investors move towards the safe-haven yellow metal due to these concerns on the global economic outlook.
  • In the US, the Pentagon have authorised a $1bn transfer to be used to build Trump’s border wall. These funds are expected to build approximately 57 miles of fencing along the border which spans almost 2000 miles.
  • China has ordered 300 jets from Airbus, a deal reportedly worth approximately $35 billion.

UK, US and Europe: Growth fears appear to have eased for the time being, with sharp gains in Japan highlighting the more positive rhetoric evident in US markets overnight. The one area of weakness remained the Chinese markets, where a continued slowdown and little signs of an impending trade breakthrough continue to dent confidence. However, with US-China trade talks resuming on Thursday, we could soon see the optimists return. The big focus remains on the UK, where yesterday’s Letwin amendment saw MPs vote to take control of the Brexit process. This now pushes all the focus on tomorrow's series of votes, where a failure to find a common solution could bring a more extreme alternative. For today, keep an eye out for US housing data, along with the US consumer confidence figure.

South Africa: Global equity markets are staging a partial rebound this morning following the recent decline we have seen, triggered by the inverted yield curve of US bonds, which is said to be a precursor to a recessionary environment. The dollar softened late yesterday to push commodity prices back up and help emerging market currencies, such as the rand, renew some strength. Tencent Holdings continues to trade softer in Asia, suggestive of a soft start for major holding company Naspers. The BHP Group is up 1.1% in Australia, suggestive of a positive start for local resource counters. A slightly firmer rand, should it manage to hold onto gains, is supportive of local banking and retail counters.

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

Economic Calendar 26.03.19.PNG

Source: Daily FX Economic Calendar

12.30pm – US housing starts & building permits (February): starts to fall 6.7% MoM and permits to decrease 1.2% MoM. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • United Utilities said that it expects rising annual sales to be offset by £52 million of exceptional costs.
  • Ocado has signed a partnership deal involving its technology platform with Australian grocery chain Coles.
  • Fevertree reported a 38% rise in pre-tax profit to £61.8 million for 2018, while revenue rose 40% to £237.4 million.
  • Ferguson said that it expects profits towards the lower end of forecasts due to a slowdown in growth after a strong first half. For the half year to 31 January, pre-tax profit rose 13.5% to $679 million and revenue rose 8.2% to $10.85 billion.

Bovis Homes upgraded to buy at HSBC
Fresnillo raised to equal-weight at Morgan Stanley
Persimmon upgraded to buy at HSBC

Antofagasta cut to underweight at Barclays
Kingfisher downgraded to reduce at HSBC
Spectris downgraded to sell at Goldman

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