MORNING BID EUROPE-UK's Corbyn moves on Brexit

by Reuters
Tuesday, 22 January 2019 08:21 GMT

* 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.

LONDON, Jan 22 (Reuters) - In the end, Jeremy Corbyn put his name to an opposition Labour amendment last night demanding the government give parliament time to consider and vote on options to prevent a no-deal Brexit. Among the options is a second referendum, something May has ruled out and which Corbyn himself is not wild about. How significant this is remains to be seen. The amendment will be studied along with others and may well gather traction before next Tuesday's parliament vote. But May will meanwhile use it as leverage to persuade hardline Brexiters and the DUP that her deal is better than any alternatives - including no Brexit.

Germany's Angela Merkel and France's Emmanuel Macron head to the German border city of Aachen today to sign a new treaty for Franco-German cooperation intended to deepen the historic 1963 one that marked their post-war reconciliation. The Aachen Treaty will outline closer cooperation between national intelligence services and police in fighting terrorism and organised crime, plus offer a commitment to moving towards economic convergence. Franco-German treaties are supposed to be milestones in the process of European Union integration, paving the way for the bloc as a whole to deepen cooperation. But its signatories, both of whom have struggled to maintain their authority over their own domestic politics, have failed this time to produce the wide-ranging vision to really enthuse Europhiles. "Relaunching" Europe is going to have to wait until after Brexit is settled and this year's hard-fought European Parliament elections.

Spain's far-left Podemos should be celebrating the five-year anniversary of its launch right now. But instead, the party that was one of the first anti-establishment movements to be born from the debris of the 2008/09 economic crisis risks ripping itself apart. One of its founders, Inigo Errejon, has given up his seat in parliament and announced he will campaign for a rival formation in upcoming local elections. The move looked to signal a complete break-up with Podemos leader and Errejon's once close friend Pablo Iglesias and comes after tense debate over the policy direction of the movement. More widely, the internal divisions in Podemos could spell problems for Prime Minister Pedro Sanchez - he needs their support for the survival of his minority centre-left Socialist government.

MARKETS AT 0755 GMT

Another downgrade of world growth forecasts by the International Monetary Fund, worrying signals on January trade activity, fresh tension between Washington and Beijing over Chinese telco giant Huawei and the unresolved Brexit impasse have all conspired to knock global stock markets back on Tuesday, with the dollar strengthening sharply as U.S. markets return from Monday's public holiday and ahead of Thursday's European Central Bank meeting. MSCI's index of world stocks fell for the first time in five trading days, with Shanghai's benchmark off more than 1 percent, HK down almost 1 percent and Tokyo and Seoul about 0.3/0.4 percent lower. The dollar's DXY index rose to its highest since January 4, while MSCI's emerging markets currency index was on course for its biggest one-day decline of the year – down 0.5 percent to its lowest level since Jan. 9. China's offshore yuan weakened back through 6.81 per dollar. With anxiety over the global economy still high, Japan's yen outperformed and Australia's dollar fell about 0.4 percent. The IMF's downgrade of its 2019 world growth forecast on Monday to 3.5 percent from 3.7 percent underlined the trepidation about China's slowest annual growth rate since 1990. While some of the Chinese GDP and December industrial headline readings earlier in the day were an initial relief to markets fearing even worse, the impact of the Sino-U.S. trade war is clear and details of the GDP report were more worrying. South Korean statistics, meantime, showed another sharp drop in exports and imports in the first three weeks of January – an unnerving start to the year for an economy seen as a global trade bellwether. Hopes of a significant breakthrough on the trade talks have been disappointed so far, with reports of little progress on intellectual property rights. News that Washington intends to proceed with the formal extradition from Canada of a recently-arrested Huawei executive drew an angry response from Chinese government officials first thing Tuesday.

Euro/dollar declined to its lowest level since Jan 3, meantime, as European stocks were set for a second straight day in the red. The ECB on Thursday is expected to register its concern about the sharp slowdown in the euro zone economy at the back end of 2018 and send dovish signals about its flexibility in the timing of its planning monetary tightening. Germany's ZEW sentiment index for January is due for release later. Reports that the United States has been pressing China to target a removal of its bilateral trade surplus with the U.S. has also unnerved European markets, which could suffer if Beijing switched import destinations to the States. Sterling dialled back further from recent highs as UK PM May failed to deliver any real ‘Plan B' on Monday on what happens next on the stalled Brexit deal. May again ruled out a second referendum or Brexit postponement and instead insisted she would seek to get further European Union assurances on her withdrawal deal that was rejected heavily by parliament last week. EU officials continue to insist there will be no renegotiation of the deal on the table. * Europe corp events: UBS, Cairn Energy sales, Carrefour sales, Dixons Carphone trading, easyJet sales, Galenica sales, Getlink sales, IG, Logitech, Remy Cointreau sales, SGS, Close Bros trading * Germany Jan ZEW sentiment * Franco-German summit between Macron and Merkel in Aachen * World Economic Forum in Davos starts – Brazil President Bolsonaro speaks * ECOFIN meeting in Brussels * UK Dec jobless, Nov earnings * UK auctions 2037 gilts * Nigeria central bank policy decision * US Q4 earnings: IBM, J&J, Prologis, Halliburton, Travelers, Fifth Bancorp, Capital One * Mexico Dec jobless * Argentina Dec trade (Editing by Andrew Heavens)

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