LONDON (Reuters) – The last time Theresa May made an emergency dash to see Angela Merkel in Berlin in December, the door of her official car famously jammed shut as she tried to step out – causing much joking about her inability to exit.
FILE PHOTO: Prime Minister Theresa May leaves after a meeting with German Chancellor Angela Merkel at the Chancellery in Berlin, December 11, 2018. REUTERS/Fabrizio Bensch
Few would have guessed that so many questions would still be hanging over Brexit today as she goes back to see Merkel on the eve of a European Union summit to determine whether to allow the UK to delay Brexit again.
After a working lunch with the German chancellor, May then heads to Paris for talks with Emmanuel Macron, who in public at least has been tougher on what Britain must do to deserve such a delay.
Back at home, her aides are due to encounter opposition Labour officials again on efforts to reach a cross-party compromise; previous meetings have achieved little.
More important on a global scale than Brexit are the shifting dynamics between the world’s big trading powers, China, the United States and Europe.
Today, EU officials lock horns with Chinese Premier Li Keqiang at an annual EU-China summit that’s likely to be overshadowed by their differences. Europe’s gripe is that China does not reciprocate on the free access it has to European markets and is testing out a tougher stance with Beijing.
“China aims to have a feel-good summit, whereas we aim to have a meaningful summit, with a meaningful outcome,” one of the EU’s top trade officials said. That will be seen when the final joint communique emerges.
Separately, Washington proposed overnight a list of EU products ranging from large commercial aircraft to dairy products and wine on which to impose tariffs as retaliation for European aircraft subsidies.
The EU and the United States have been battling for more than a decade over mutual claims of illegal aid to Boeing and Airbus, with parallel cases at the WTO. Both sides have been caught paying billions of dollars of subsidies to try and gain an advantage; the United States is due to announce a final product list in a few months after a WTO arbiter evaluates the claims.
MARKETS AT 0655 GMT
Hesitation abounds, but world markets continue to eke out highs as they assess the murky political and policy landscape while betting central banks will once again keep asset prices afloat.
All the big sagas remain unclear, however. The White House said it’s “still not satisfied yet” with the U.S.-China trade talks and is upping the heat in its trade rows with Europe.
With Boeing ailing after two 737 crashes, U.S. trade representative Robert Lighthizer on Monday proposed a list of European Union products from aircraft to cheeses that the United States would impose tariffs on in retaliation for over $11 billion worth of damage from EU subsidies to Airbus that the World Trade Organization found caused “adverse effects” to the U.S.
The Brexit show moves to Paris and Berlin, meantime, as UK PM Theresa May– still without a clear idea of how Britain is going to leave the EU – meets German and French leaders before this week’s EU summit to decide on another extension to the Brexit date.
Helped partly by buoyant oil prices and energy stocks caused by fighting in Libya and fresh U.S. pressure on Iran, the S&P500 ended up 0.1 percent in its eighth straight daily gain. Brent crude hit a five-month high of $71.34 overnight before slipping back this morning. Commodity-linked currencies were higher on the oil price gains.
MSCI’s all-country world index nudged up to another six-month high – with nine straight daily gains marking its longest winning streak since 2017. Mirroring those gains, MSCI’s emerging markets index rose to its highest since August.
Wary of the new trade threats from Washington, the Brexit impasse and another poor set of German trade numbers this week, European stock futures were lower before the open here. Airbus’s stock price was down more than 1 percent, with eyes on Safran shares, too. Dairy companies in Europe might also be affected by the proposed U.S. tariffs.
Later on Tuesday, the International Monetary Fund is expected to release its latest World Economic Outlook after a series of recent forecast downgrades, largely related to trade wars. European traders were also careful before the European Central Bank’s latest policy meeting, on Wednesday.
Euro/dollar was above $1.1250 first thing, with the dollar weaker against the developed as well as the emerging-market currencies. Sterling was higher at just under $1.31 as traders assumed another Brexit extension would be forthcoming and after the UK parliament last night voted again against a no-deal Brexit happening by default this week.
— 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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