MORNING BID EUROPE-UK election swings back onto radar

by Reuters
Wednesday, 23 October 2019 07:35 GMT

LONDON, Oct 23 (Reuters) - With a delay, election and eventual deal now considered the most likely Brexit outcomes - and not necessarily in that order - the past 24 hours delivered all three in one way or another. On Tuesday evening, Parliament voted for UK PM Boris Johnson's negotiated Brexit withdrawal deal in principle. But it then voted down his attempt to rush the legislation through this week, reserving the right to examine and possibly amend swathes of the deal in way that would make it virtually impossible for Johnson to keep his promise to take the UK out of the European Union by next Thursday. The EU side is now considering the requested extension Johnson also swore he would never seek; it is widely expected to agree without a formal summit. The extension is likely to be to January at least, with reports of clauses for an earlier break if the deal can be ratified before then. But with no majority in parliament to work through further votes on amending parts of the standing agreement, Johnson's advisers say the only option is to call a snap election in the event of a substantial delay being granted. Opposition parties are likely to agree to that now that they appear to have ensured a no-deal Brexit is off the agenda.

The upshot for sterling was to knock back some of its recent gains, with the pound losing just over a cent from five-month highs just above $1.30 and settling about $1.2870 first thing. The prospect of an election added some uncertainty that's cooled the pound, but it retained most of its recent move higher as the prospect of a Halloween Brexit crash without a deal has been all but removed. Much like the pound's ebb, risk markets around the world that have traded off Brexit also pulled back.

Adding to the more cautious mood this morning was a drop by shares of U.S. chipmaker Texas Instruments of almost 10% after the bell, when it said it expected 10% to 17% drop in revenue in the current quarter, worse than expected. That rippled through chip and tech stocks, with Asia's main markets all closing lower. Shanghai, Hong Kong and Seoul indices fell 0.4% to 1.0%. Japan's Nikkei bucked the trend as it returned from a one-day break. Wall Street stock futures were lower after closing in the red on Tuesday, with European futures down about half a percent too. Brexit hiccup and UK election speculation, along with below-forecast French industrial confidence for October, offset the upbeat start to the earnings season for European stocks. Euro/dollar was lower along with sterling. Currency markets more broadly were relatively calm. The dollar's DXY index was up and the dollar gained against MSCI's basket of emerging-market currencies.

On the European corporate front, investors also have a lot of earnings news to digest today as the third-quarter reporting season reaches full speed. Europe's corporate recession is expected to accelerate with companies listed on the STOXX 600 now expected to report an annual profit drop of as much as 5.3% in the third quarter, worse than the 3.7% fall expected a week ago. There were some positives among the flurry of updates. Despite the gloomy auto market, Peugeot maker PSA reported higher revenue for the third quarter, benefiting from demand for its pricier SUVs even as its vehicles sales faltered globally. Also likely to support carmakers was an FT report that talks between the United States and the EU could be an alternative to U.S. tariffs on automotive imports. Dutch paints and coatings maker Akzo Nobel announced a 500 million-euro share buyback, after reporting a 23% jump in core profit driven by cost cuts and higher prices. But France's Getlink reported flat revenue amid the Brexit uncertainties. Swedbank third-quarter profit was squeezed by costs and Handelsbanken said it would slash costs as restructuring charges hit its third-quarter profit. France's Casino said it planned to raise 1.5 billion euros to restructure its debt. Finland's Neste beat market expectations with a record third-quarter result. SEB also beat market expectations. * Europe corp events: Swedbank, SEB, Akzo Nobel, ABB, Telenor, Norsk Hydro, Svenska Handelsbanken, Metro Bank Storebrand, Novozymes, Neste, Orion, Kone, Heineken trading, PSA sales

* France Oct business climate

* Turkey Oct consumer confidence

* Euro zone Oct consumer confidence

* Germany sells 10-year bunds

* German SPD party votes for new leader who can decide fate of Chancellor Merkel's coalition government

* Sweden sells government bonds

* South Africa Sept inflation

* Botswana parliamentary elections

* US Q3 earnings: Caterpillar, Boeing, Whirlpool, Nasdaq, Invesco, WW Grainger, Boston Scientific, General Dynamics, Northern Trust

* Chile, Namibia, Georgia central bank policy decisions

* US Treasury sells 5-year notes, 2-year FRNs (Editing by Larry King)

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