Mon, Aug 26, 2019 @ 09:35 GMT

UK PM May to face no-confidence vote after humiliating defeat over her Brexit deal

    UK Prime Minister Theresa May suffered humiliating defeat over her Brexit deal. It’s voted down by 432 to 202, the biggest loss in modern UK history. It’s uncertain what the path will be exactly like after this point. But what’s sure is that opposition Labour Party leader Jeremy Corbyn has swiftly called for a no-confidence vote in the government. And that would be held at 1900GMT on Wednesday, today.

    In a well-prepared statement, May said in the parliament after the defeat that “It is clear that the House does not support this deal. But tonight’s vote tells us nothing about what it does support. Nothing about how – or even if – it intends to honor the decision the British people took in a referendum Parliament decided to hold.”

    She added that the first thing to do is to “confirm whether this government still enjoys the confidence of the House.” Secondly, she will meet with Conservatives, DUP and other senior parliamentarians from across the house to find “ideas that are genuinely negotiable and have sufficient support in this House.” Thirdly, she will go back to EU with those ideas.

    British lawmakers crush Theresa May's Brexit deal by a record margin

    British lawmakers have crushed Theresa May's Brexit deal, handing her the worst parliamentary defeat for a British government in the modern era. Immediately afterwards, opposition Labour leader Jeremy Corbyn put forward a motion of no confidence in May's government. He said the challenge would allow the House of Commons to "give its verdict on the sheer incompetence of this Government." https://cnn.it/2FD445Y

    Gepostet von CNN am Dienstag, 15. Januar 2019

    May’s statement below:

    “Mr Speaker, the House has spoken and the Government will listen.

    It is clear that the House does not support this deal. But tonight’s vote tells us nothing about what it does support. Nothing about how – or even if – it intends to honor the decision the British people took in a referendum Parliament decided to hold.

    People, particularly EU citizens who have made their home here and UK citizens living in the EU, deserve clarity on these questions as soon as possible. Those whose jobs rely on our trade with the EU need that clarity. So with your permission Mr Speaker I would like to set out briefly how the Government intends to proceed.

    First, we need to confirm whether this government still enjoys the confidence of the House. I believe that it does, but given the scale and importance of tonight’s vote it is right that others have the chance to test that question if they wish to do so.

    I can therefore confirm that if the Official Opposition table a confidence motion this evening in the form required by the Fixed Term Parliaments Act, the Government will make time to debate that motion tomorrow. (Wednesday)

    And if, as happened before Christmas, the Official Opposition decline to do so, we will – on this occasion – consider making time tomorrow to debate any motion in the form required from the other opposition parties, should they put one forward.

    Second, if the House confirms its confidence in this government I will then hold meetings with my colleagues, our Confidence & Supply partner the DUP and senior parliamentarians from across the House to identify what would be required to secure the backing of the House.

    The government will approach these meetings in a constructive spirit, but given the urgent need to make progress, we must focus on ideas that are genuinely negotiable and have sufficient support in this House.

    Third, if these meetings yield such ideas, the Government will then explore them with the European Union.

    Mr Speaker I want to end by offering two reassurances.

    The first is to those who fear that the government’s strategy is to run down the clock to 29th March (Britain’s exit date from the EU).

    That is not our strategy. I have always believed that the best way forward is to leave in an orderly way with a good deal and have devoted much of the last two years negotiating such a deal.

    As you confirmed Mr Speaker, the amendment to the business motion tabled last week by my Right Honorable and Learned Friend the Member for Beaconsfield (Dominic Grieve) is not legally binding, but the government respects the will of the House.

    We will therefore make a statement about the way forward and table an amendable motion by Monday.

    The second reassurance is to the British people, who voted to leave the European Union in the referendum two and a half years ago.

    I became Prime Minister immediately after that referendum. I believe it is my duty to deliver on their instruction and I intend to do so.

    Mr Speaker, every day that passes without this issue being resolved means more uncertainty, more bitterness and more rancor.

    The government has heard what the House has said tonight, but I ask Members on all sides of the House to listen to the British people, who want this issue settled, and to work with the government to do just that.”

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    Euro follows Sterling higher on Brexit news. USD, JPY, CHF in misery

      Euro follows Sterling higher on news of Brexit transition agreement. The optimistic development now leaves Dollar, Yen and Swiss Franc in misery going into US session. In particular, it now looks like EUR/USD has defended 1.2251 minor support well. And the correction from 1.2445 might be finished with three waves down to 1.2257. Focus is immediately back on 1.2235 minor resistance now. Break will bring stronger rise to 1.2412/45 resistance zone.

      EUR/CHF looks set to end days of dull trading and have a take on 1.1740.

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      Into US session: Risk aversion eased thanks to Germany and China, Dollar pressured

        Entering into US session, Dollar trades broadly lower for today, Swiss Franc and Japanese Yen followed. Meanwhile, Canadian, Australian and New Zealand Dollar are broadly higher.

        There is notably easing of risk aversion in early European session. One clear development is the strong rebound in German DAX which is trading up 1.3% at the time of writing. DAX is relieved by news that Chancellor Angela Merkel made a last minute deal with the Rebellious Interior Minister Horst Seehofer in immigration. That came after five hours of talks between the leader of Christian Democrats and Christian Social Union. CAC is trading up 0.97% while FTSE is up 0.54%.

        Another factor is the reversal in Chinese Stocks. The Shanghai SSE composite dropped to as low as 2722.45 earlier today but closed up 0.41% at 2786.88. The development propelled Australian Dollar back above 0.7328 key cluster support, with 0.74 back in sight.

        The decline in SSE was so steep, after clearing 3000 psychological, that it’s now close to an important support zone. That is, 100% projection of 3587.03 to 3062.73 from 3129.73 at 2695.44. It’s also now in proximity to 2638.30 (2016 low). Theoretically, downside momentum should slow on oversold condition and this 2638/95 zone should be defended on first attempt. A break above 2848.37 resistance would indicator short term bottoming.

        There is also prospect of more verbal, or even actual intervention by the Chinese government. But even in that case, the medium term outlook remains bearish as trade war with the US is inevitable. It’s just a matter of time when 2638.30 low is taken out firmly.

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        UK Hammond: Extension to Brexit transition has to be proportional

          UK Chancellor of Exchequer Philip Hammond warned again yesterday that it the Brexit deal is not approved by Parliament, “we will have a political chaotic situation”. And, “we don’t know what the outcome of that will be”.

          On extension to the transition period, Hammond emphasized that “it would have to be proportional”. And, ” it certainly wouldn’t be more than that, but it would depend on what we were getting in return.” He added “When we look at the economy and the operation of the economy, getting a smooth exit from the European Union, doing this in an orderly fashion, is worth tens of billions of pounds to our economy.”

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          Japan PMI manufacturing unchanged at 48.9, sustained downturn

            Japan PMI manufacturing was unchanged at 48.9 in March, missed expectation of 48.9. Markit noted there are “further production cutbacks amid weaker new order inflows”. Also, “business confidence remains below long-run average”.

            Commenting on the Japanese Manufacturing PMI survey data, Joe Hayes, Economist at IHS Markit, which compiles the survey, said:

            “Further struggles for Japanese manufacturers were apparent at the end of Q1, with latest flash PMI data showing a sustained downturn. Slack demand from domestic and international markets prompted the sharpest cutback in output volumes for almost three years. With input purchasing falling, firms appear to be anticipating further troubles in the short-term. Indeed, concern of weaker growth in China and prolonged global trade frictions kept business confidence well below its historical average in March.”

            Full release here.

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            ECB research: Significant increase in protectionism could have material impact on global trade and output

              In article titled “Implications of rising trade tensions for the global economy“, ECB researcher Lucia Quaglietti warned of the impact of escalation of trade tensions.

              Based on simulations carried out by ECB staff, in event of a significant increase in protectionism, “the impact on global trade and output could be material.” In particular, if US increases tariffs “markedly” on imported goods from all trading partners that “retaliate symmetrically”, the outcome for the world economy would be “clearly negative. And, “the impact could be particularly severe in the United States”

              For other countries, those with “closest trade relations” with the US would be most negatively affected. And, “only a few open economies with little exposure to the tariff-imposing country may benefit from trade diversion effects, as they would gain competitiveness in third markets.”

              In addition, the impact of trade tension escalation could be “felt via a number of channels. Higher import prices would lead to higher production costs and lower household purchasing power. Consumption, investment and employment will also be affected. Moreover, there will be economic uncertainty that leads to delay and consumer spending and business investment. Credit supply could be reduced with requirement for higher compensation. And there could be broad spill over to the global financial markets.

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              Mexico and US in final hours of bilateral NAFTA talks

                The bilateral US-Mexico NAFTA talk is still dragging on. But Mexican Economy Minister Ildefonso Guajardo said on Sunday that “we’re practically in the final hours of this negotiation.” Nonetheless, at a lunch break of the meeting, Guajardo said he cannot declare victory yet.

                Trump also expressed optimism as he tweeted that “A big Trade Agreement with Mexico could be happening soon!” And, “Our relationship with Mexico is getting closer by the hour. Some really good people within both the new and old government, and all working closely together”.

                Canada is expected to return to the supposed trilateral talks after the US and Mexico complete their negotiations. The three way talks will run well into September and possibly beyond. The US Congress needs 90 days notice to vote on a new NAFTA. The final approval of the deal on Mexico side will be on Lopez Obrador’s hands, as he’s due to take office on December 1.

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                Eurozone economic sentiment dropped sligthly by -0.2

                  Eurozone economic sentiment index (ESI) dropped a mere -0.2 to 112.3 in June, slightly above expectation of 112.1. Among the Eurozone countries, ESI rose 1.2 in Italy and 1.0 in France. however, there was a notable -1.8 decline in the Netherlands and -0.8 in Germany.

                  Eurozone industrial confidence was unchanged at 6.9, above expectation of 6.5. Services confidence was unchanged at 14.4, below expectation of 14.3. Consumer confidence was finalized at -0.5. The business climate indicator dropped -0.05 to 1.39, above expectation of 1.2.

                  EU economic sentiment index dropped -0.6 to 112.2. That’s mainly due to slight deterioration in the UK by -0.5.

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                  South Korean Moon declared era of no war with North Korean Kim

                    South Korean President Moon Jae-in had a rather successful summit, the third one this year, with North Korean Leader Kim Jong-Un. Speaking at a joint news conference in Pyongyang after the meeting, hey pledged to turn Korean peninsula into “land of peace without nuclear weapons and nuclear threats” and take “prompt steps” toward the goal.

                    Kim added that “the world is going to see how this divided nation is going to bring about a new future on its own”. Meanwhile, Moon said “the era of no war has started,” and “today the North and South decided to remove all threats that can cause war from the entire Korean peninsula.”

                    According to Moon, Kim also “expressed its readiness” on permanent dismantlement of its main nuclear facilities in Yongbyon. However, correspondingly measures have to be taken by the US.

                    Trump, as cheerleader on the sideline, tweeted “Kim Jong Un has agreed to allow Nuclear inspections, subject to final negotiations, and to permanently dismantle a test site and launch pad in the presence of international experts. In the meantime there will be no Rocket or Nuclear testing.” But again, there was no well deserved credit given to Moon.

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                    Fed Bullard: Trump moved trade uncertainty to front burner and thus an insurance cut is needed

                      In a CNN interview, St. Louis Fed President James Bullard said trade uncertainty used to be an issue that was on the “back burner”. However, “the president moved it to the front burner”. And now, “trade uncertainty is high and I don’t see that declining anytime soon”.

                      Bullard added that the economy is “slowing down” and warned “what if it slows more than we think, possibly because of a trade war?”. A rate cut would “provide a bit of insurance against that”.

                      Nevertheless, regarding a 50bps cut, Bullard said “I don’t think we need to go that far” adding that “the critical thing here is to get inflation and inflation expectations better centered.”

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                      China official PMI manufacturing rose to 51.9 as part of short-term fluctuation

                        The China official PMI manufacturing rose to 51.9 in May, up from 51.4, and beat expectation of 51.4. PMI non-manufacturing rose to 54.9, up from 54.8 and beat expectation of 54.8.

                        In the release, contributing analyst Zhang Liqun noted that the slight increase in PMI was just “short-term fluctuation” and carries “no trend significance”. The rise in export orders showed there is no chance in the growing trend. Rise in purchase prices and ex-factory prices suggested that the decline in PPI could be coming to an end. In short, the data suggested that the economy continued to grow steadily in May.

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                        Trump announced to indefinitely suspend tariffs on Mexico as agreement reached

                          Trump suddenly announced on late Friday evening that the US has reached agreement with Mexico on migration issue. Hence, the proposed tariffs will be “indefinitely suspended”. He hailed that Mexico has has agreed to take strong measures to stem the tide of Migration through Mexico, and to our Southern Border. This is being done to greatly reduce, or eliminate, Illegal Immigration coming from Mexico and into the United States.”

                          The news should be welcomed by the markets. But at the same time, it might raise a big question. That is, is an “insurance cut” by Fed still needed?

                          US and Mexico also released a joint statement on the agreement. Full text below:

                          U.S.-Mexico Joint Declaration

                          The United States and Mexico met this week to address the shared challenges of irregular migration, to include the entry of migrants into the United States in violation of U.S. law. Given the dramatic increase in migrants moving from Central America through Mexico to the United States, both countries recognize the vital importance of rapidly resolving the humanitarian emergency and security situation. The Governments of the United States and Mexico will work together to immediately implement a durable solution.

                          As a result of these discussions, the United States and Mexico commit to:

                          Mexican Enforcement Surge

                          Mexico will take unprecedented steps to increase enforcement to curb irregular migration, to include the deployment of its National Guard throughout Mexico, giving priority to its southern border. Mexico is also taking decisive action to dismantle human smuggling and trafficking organizations as well as their illicit financial and transportation networks. Additionally, the United States and Mexico commit to strengthen bilateral cooperation, including information sharing and coordinated actions to better protect and secure our common border.

                          Migrant Protection Protocols

                          The United States will immediately expand the implementation of the existing Migrant Protection Protocols across its entire Southern Border. This means that those crossing the U.S. Southern Border to seek asylum will be rapidly returned to Mexico where they may await the adjudication of their asylum claims.

                          In response, Mexico will authorize the entrance of all of those individuals for humanitarian reasons, in compliance with its international obligations, while they await the adjudication of their asylum claims. Mexico will also offer jobs, healthcare and education according to its principles.

                          The United States commits to work to accelerate the adjudication of asylum claims and to conclude removal proceedings as expeditiously as possible.

                          Further Actions

                          Both parties also agree that, in the event the measures adopted do not have the expected results, they will take further actions. Therefore, the United States and Mexico will continue their discussions on the terms of additional understandings to address irregular migrant flows and asylum issues, to be completed and announced within 90 days, if necessary.

                          Ongoing Regional Strategy

                          The United States and Mexico reiterate their previous statement of December 18, 2018, that both countries recognize the strong links between promoting development and economic growth in southern Mexico and the success of promoting prosperity, good governance and security in Central America. The United States and Mexico welcome the Comprehensive Development Plan launched by the Government of Mexico in concert with the Governments of El Salvador, Guatemala and Honduras to promote these goals. The United States and Mexico will lead in working with regional and international partners to build a more prosperous and secure Central America to address the underlying causes of migration, so that citizens of the region can build better lives for themselves and their families at home.

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                          SPD members vote on German grand coalidtion: 66% for, 34% against

                            Angela Merkel secured her fourth term as Chancellor of Germany. Members of the Social Democrats voted for the coalition deal with Merkels’ CDU/CSU. Months of political uncertainty has now ended. The SPD’s vote results were overwhelming, with 66% supporting, and only 34% rejecting.

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                            RBA Preview – Westpac: RBA to hold

                              RBA will announce rate decision tomorrow.

                              Exerpts from the Westpac report:

                              • The Reserve Bank Board meets next week on March 6. Of course we expect there will be no change in the overnight cash rate.
                              • We also do not expect to see any significant change in the Governor’s rhetoric from last month.
                              • Overall, we are expecting a cumulative fall (in USD’s) in Australia’s Commodity Price Index of around 25% between June 2018 and December 2019.
                              • Readers will be aware that Westpac expects a considerable widening in the negative Australia/US interest rate differential as the FEDERAL RESERVE continues to raise rates and the RBA remains on hold.
                              • Readers should be aware that Westpac has reviewed its currency forecasts and, while continuing to see an AUD low of USD 0.70 in 2019, has pushed out the timing to September 2019 from March.

                              Details in Australia & New Zealand Weekly: RBA on Hold, AUD to Weaken through 2018 and 2019

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                              China CASS Zhang: There should be a firewall between trade and finance

                                Talking about the Boao Forum, there is one interesting point to note. On Sunday, head of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences Zhang Yuyan said there is no intention of allowing trade dispute with the US to spill over to finance. Zhang emphasized that there should be a “firewall between trade problems and financial ones”. And, the chance of China selling its massive US Treasury holdings due to a trade war is “very small”.

                                Zhang added that “maybe one or two days before the actual implementation (of the tariffs), the US side will gain its reason and sense.” And, “there are many cases of compromises being reached at the last minute.”

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                                CADJPY on verge of rise resumption

                                  As seen in the D heat map, CAD is the strongest one today while JPY is the weakest one.

                                  A look at the top mover chart also sees CADJPY as the biggest mover. It’s natural to have a look at how CADJPY is performing.

                                  In CADJPY action bias table, H action bias momentum is very apparent, not so in the 6H row.

                                  But the 6H action bias chart clearly shows that CAD/JPY was in a consolidation pattern since hitting 85.75 back in April. And the strong H action bias momentum suggests that it’s possibly completed at 83.88 earlier this week. A long trade in CADJPY should be in place for position trading.

                                  And, recalling a short note here, CAD/JPY formed a bottom at 80.52 in March, after drawing support from 80.55 key support. Rise from 80.52 is seen as at the same degree as fall from 91.56 to 80.52. Pull back from 85.75 was contained above mentioned 83.52 support and thus maintained bullishness.

                                  Hence, for a long trade, one could buy at a dip or break of 85.75 resistance. First target is 61.8% projection of 80.52 to 85.75 from 83.88 at 87.11. Second target is 100% projection at 89.11.

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                                  German Ifo Business Climate dropped to 99.1, lowest since Feb 2016

                                    German Ifo Business Climate dropped to 99.1 in January, down from 101.0 and missed expectation of 100.6. It’s also the lowest level since February 2016. Current situation gauge dropped to 104.3, down from 104.9, slightly above expectation of 104.2. Expectations gauge dropped to 99.4, down from 97.3 and missed expectation of 97.0.

                                    Ifo President Clemens Fuest noted “disquiet is growing among German businesses”, and “the German economy is experiencing a downturn.”

                                    Full release here.

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                                    May could force a second vote with EU concessions, if the Brexit deal is defeated today

                                      The highly anticipated meaningful Brexit vote in the UK Commons will take place today. There is no exact time set, but it’s believed to be somewhere between 1900-2100 GMT.

                                      Facing a lot of criticisms, Prime Minister Theresa May urged “all sides” to give her Brexit deal a “second look” in the Commons yesterday. She added that “No it is not perfect. And yes it is a compromise.” But “I say we should deliver for the British people and get on with building a brighter future for our country by backing this deal tomorrow.”

                                      Separately, it’s reported that May told Tories in a private meeting to focus on two things, “we have to deliver Brexit … and two that we’ve got to keep Jeremy Corbyn as far away from Number 10 as possible.”

                                      While the deal is widely expected to be voted down, May could force a second vote after the defeat. It’s reported that German Chancellor Angela Merkel is offering last-minute help to push for more EU concessions if the current deal is rejected. The concessions could include convincing Irish Prime Minister Leo Varadkar to agree to an end date to the so-called Irish backstop.

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                                      Mid-US update: Sterling strong on Brexit optimism, Swiss Franc weakest

                                        Sterling surges broadly today as lifted by EU chief negotiator Michel Barnier again. He said in a forum in Slovenia that a Brexit deal within 6-8 weeks if both sides are realistic their demand. Also, it’s reported that EU will announce next week to hold a special summit for Brexit in November, possibly on Nov 13. Euro follows Sterling as the second strongest due to easing worries over Italy’s budget. Swiss Franc is the worst performing one for the same reason as Euro. Yen and Dollar follow as the second and third weakest because of receding risk aversion. And, there is no news regarding trade war yet.

                                        European stocks closed generally higher today but it should be noted that major indices pared back much of earlier gains. FTSE hit as high as 7307.85 but closed at 7279.30, up only 0.02%. DAX hit as high as 12039.22 but closed at 11986.34, up 0.22%. CAC hit as high as 5291.21 but closed at 5269.63, up 0.33%. Gold strengthens mildly as Dollar weakens. But it’s staying in consolidation from 1214.

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                                        IMF Lagarde: Sun is still shining but we have to “steer clear of protectionism”

                                          In a speech at the University of Hong Kong, IMF Managing Director Christine Lagarde expressed her optimism on the global economy. She said the “economic picture is “mostly bright” and “the sun is still shining”. Global momentum is driven by “stronger investment”, “rebound in trade” and “favorable financial conditions”. She said the forecast to be release next week will “continue to be optimistic”.

                                          Regarding advanced economies, Lagarde said Eurozone’s upswing is “now more widely spread across the region”. US growth will “likely accelerate further due to expansionary fiscal policy”. In Asian emerging markets, China and India lead by “rising exports and higher domestic consumption. But she also warned of “darker clouds looming”. Momentum in 2018 and 2019 will eventually slow because of “fading fiscal stimulus” in the US China, rising interest rates and tighter financial conditions.

                                          Lagarde emphasized three priorities for the global economy, including 1. Steering clear of Protectionism, 2. Guard against Fiscal and Financial Risk, 3. Foster Long-term Growth that Benefits Everyone.

                                          Here is her full speech.

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