LONDON (Reuters) – British ex-foreign secretary Boris Johnson launches his campaign for the Conservative Party leadership today, breaking his relative silence in the race thus far.
He has been criticised by rivals for avoiding detailed scrutiny of his programme but the tactic appears to have done him little harm and he is still regarded as the front-runner.
“Delay means defeat. Delay means Corbyn. Kick the can and we kick the bucket”
His insistence on leaving the EU on Oct 31 at any cost, plus a threat to withhold payment of the UK’s agreed exit bill and a proposal to cut income taxes for high-earners, have all raised concerns among party moderates and in business. But they resonate with grass roots Tories who are firmly right-wing and anti-EU – and who ultimately make the decision.
In a separate development, opposition Labour lawmakers will launch a move today to try to prevent a no-deal Brexit by taking control of the parliamentary agenda. There are signs, however, that they may struggle to get enough Conservative parliamentarians to back it.
French President Emmanuel Macron will hope to build on the momentum from a recent turnaround in his fortunes today when his prime minister unveils a second raft of reforms expected to cover changes to the pension system and unemployment benefits.
The measures had been postponed by six months of “yellow vest” demonstrations which have gradually dwindled. Sources suggest his government is looking to push back by two years to 64 the age at which French workers can draw a full pension, while conditions to get unemployment benefits could be made stricter.
Macron is currently benefiting from evidence of a strengthening economy; yet both measures, if confirmed, have the potential to reignite protests.
Hard to say how serious he is about it, but Italy’s Matteo Salvini has apparently got his eye on possible taxes of cash and other valuables locked away in safety deposit boxes held with banks.
The League leader was quoted by local media as saying he had been advised that safety deposit boxes in Italy held assets worth hundreds of billions of euros – in other words, quite a useful revenue source in Rome’s bid to show the EU it is getting its finances in order.
Those savers who voluntarily declared their deposit-box holdings would be taxed at a low rate of about 15 percent, he added.
MARKETS AT 0655 GMT
World markets look to have stalled after a roaring start to June that’s already seen the best month for MSCI’s all-country stock index since January.
The dramatic surge in Federal Reserve easing speculation that’s largely fuelled the rally has probably run its course and, some say, may have gone too far.
And relief that the United States and Mexico agreed a deal on migration checks to avoid U.S. tariff rises has been offset by President Trump’s less conciliatory rhetoric toward China, upping the ante for this month’s G20 summit in Tokyo as he insists Beijing still needs to move on four or five key issues to avoid tariff rises.
The S&P500 ended a sliver in the red overnight, with the MSCI world index breaking a 7-day winning streak on Wednesday to trade almost 0.1% lower.
In a big week for Chinese economic releases, May inflation numbers there came in line with forecasts and showed an acceleration of consumer inflation while factory gate price rises eased. A deepening contraction of annual vehicle sales was a more worrying signal.
Shanghai stocks dropped 0.5% and Hong Kong’s Hang Seng recoiled almost 2%, as tens of thousands of demonstrators surrounded the city’s legislature in protest at an extradition bill that would allow people to be sent to mainland China for trial.
Japan and South Korea’s main benchmarks were in the red too, as were U.S. and European stock futures.
The big economic set-piece later on Wednesday is the U.S. consumer price inflation report, which will be examined closely to see whether the Fed has a green light to start cutting interest rates.
Futures markets have at least two cuts priced by year-end and speculation about the first move will start as soon as next week’s policy meeting, with Trump lambasting the Fed yet again on Tuesday for not easing sooner and claiming it had ‘no clue’ what it was doing.
Ten-year Treasury yields slipped back to 2.12% overnight, with a 10-year auction due later today. Recession warnings from the yield curve continue to flash, with the curve from 3-months to 10-years inverted now for almost a month and negative to the tune of 16 basis points on Wednesday.
The dollar’s DXY index slipped back lower too, with euro/dollar pushing higher above $1.13 after Trump’s broadside on Tuesday against what he described as ‘devalued’ currencies, including the euro, that show other countries taking advantage of the United States.
Elsewhere, oil prices skidded almost 2% overnight as the EIA cut its 2019 global oil demand forecast and U.S. crude inventories unexpectedly jumped last week. Turkey’s lira was steady ahead of a central bank meeting there, amid speculation of dovish noises on future rate cuts there as the local recession deepens.
Sterling was mixed after gains on Tuesday following a robust UK jobs and wages report and as Bank of England comments continue to say the market is underestimating the chance of a UK interest rate rise over the year ahead.
On the corporate news front, French tech company Dassault Systemes was expected to slip 1% after agreeing to buy Medidata Solutions, a U.S. software company dealing in clinical trials, in a move to bolster its life sciences business. It marks the French firm’s biggest takeover yet, at $5.8 billion – though the offer is at a slight discount to Medidata Solutions’ closing price.
Private equity firm KKR has offered 63 euros a share to buy out minority shareholders in Axel Springer, in a deal agreed with the German publishing company’s main shareholders. Axel Springer shares were seen jumping 12%.
Results from Inditex, British American Tobacco, and Getlink were also in focus.
Zara owner Inditex reported a 10% rise in first-quarter profit, helped by a weaker euro. Inditex generates more than half its sales in other currencies that have to be converted back into euro for its financial reports. Its shares were seen up 2%.
British American Tobacco was seen rising 1% after the tobacco company affirmed its full-year targets, saying it expects revenue growth in vaping and e-cigarette products to accelerate in the second half of the year.
Shares in British car dealership chain Pendragon were seen falling 15% after it issued its latest profit warning, forecasting a small loss for the full year.
LafargeHolcim shares fell 1.6% in pre-market trading after a placing of a 3.7% stake in the Swiss cement maker by its largest shareholder, Thomas Schmidheiny. The placing is being done by UBS and Goldman Sachs, at a price of 48.70 euros – 3% down from Tuesday’s close.
Emerging market shares snapped a three-day winning streak on Wednesday while Turkey’s lira drifted lower as traders bet the country’s central bank would keep rates at 24% later.
Turkey’s lira is down 0.4% and one of the weakest currencies in EM. The country’s central bank is widely expected to keep the one-week repo rate unchanged at 24% later though the recent slowdown in inflation may make the CBRT at least think about a cut. Less than two weeks to go until the re-staged Istanbul mayoral election.
Auto sales in China fell 16.4% in May from the same month a year earlier, the 11th consecutive month of decline and following 14.6% and 5.2% falls in April and March. The Yuan edged down and Shanghai bluechips dropped 0.6% after a 3% jump on Tuesday.
Hong Kong shares dropped 1.9% – their biggest drop in a month – as tens of thousands of demonstrators surrounded the city’s legislature in protest at an extradition bill that would allow people to be sent to mainland China for trial.
Korea is planning a dual-tranche U.S. dollar-denominated bond offering, including a senior unsecured bond and green and sustainability bonds.
— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own —
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