Market movers today
Tonight at 20.00 CET, the House of Commons will vote on Prime Minister Theresa May’s Brexit Plan B (and amendments). See Brexit Monitor: Pressure is mounting , 28 January. The vote is not legally binding but it is set to shed light on what the House of Commons wants. While there are many suggested amendments (see the BBC’s overview here ), it is up to the speaker to decide which ones the Commons will get a vote on. At the moment, the two most important are the Cooper and Brady amendments.
In the US, consumer confidence from the Conference Board is due out in the afternoon. Although still at a high level, it has dropped over the past two months – possibly due to the government shutdown.
Otherwise, markets will be looking ahead to the start of the high level trade talks in Washington tomorrow between the US and China.
Selected market news
Overnight, the US filed criminal charges against Huawei and its CFO Meng Wanzhou, accusing the Chinese telecom company of stealing American technology and breaking US sanctions against Iran. The allegations weighed on Asian markets this morning, with technology stocks taking a hit, and it might complicate a pivotal round of trade talks scheduled to take place between the US and China from tomorrow.
The Congressional Budget Office (CBO) released its 10-year budget outlook for the US yesterday in which it projects US deficits to remain between 4-5% of GDP and public debt in 2029 to reach 93% of GDP (from 78% currently). The CBO also stated that the government shutdown delayed approximately USD18bn in discretionary spending and has lowered (annualised) Q1 GDP growth by 0.4pp (i.e. 0.1pp in ‘European terms’).
Brexit comes into the limelight again today and yesterday proved to be another hectic day in the UK ahead of today’s important vote. First, PM May did a U-turn and now supports the so-called Brady amendment, which says that the UK can accept the Withdrawal Agreement if the backstop is replaced by ‘alternative agreements’ (without specifying what that may be). It is still unknown whether hard Brexiteers will support it (if not, the amendment will fail) but they will meet an hour before the vote scheduled for 20:00 CET. We do not know the DUP’s position yet. Even if it passes, both the EU and Ireland have refused to reopen the Withdrawal Agreement several times, although it may be easier if they know it has backing from a majority in the UK House of Commons. The Cooper amendment, which we thought would pass with a small majority, is also under pressure, as Conservative MPs are being whipped against voting in favour of it and Labour has not officially said it supports it. There is a risk is that none of the amendments nor May’s statement will pass later tonight, meaning we would remain in uncharted territory (see Brexit Monitor: Pressure is mounting , 28 January). After last week’s rally, EUR/GBP retreated somewhat on the latest headlines, trading at 0.869 at the time of writing.
