MORNING BID EUROPE-Blame-shifting? PM May puts onus on EU

by Reuters
Friday, 8 March 2019 08:26 GMT

* A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Sujata Rao. The views expressed are their own.

LONDON, March 8 (Reuters) - British PM Theresa May will travel to the northern town of Grimsby, a Leave area whose once-thriving fishing fleet suffered under European Union quotas, for a speech in which she will once again put the onus on the EU to make concessions to avert a no-deal Brexit. Given that EU capitals have made it patently clear that they cannot compromise the core rules on which the EU is based, you have to wonder whether the speech is largely for domestic consumption: essentially an attempt to shift blame in the event her deal is defeated in parliament again next week. Her Foreign Secretary Jeremy Hunt is meanwhile citing unspecified signs of progress in talks with Brussels and warns that both the UK and EU will be judged badly by history if the outcome is no deal.

Today's Women's Day events have an overtly party political edge in Spain, where gender equality and women's rights have become a pivotal topic in campaigning for national elections due on April 28. Whereas Prime Minister Pedro Sanchez's outgoing Socialist government has long sought to portray itself as a promoter of gender equality policies, the upstart far-right Vox party is seeking to win votes on a backlash ticket. Notably, the grouping - 70 percent of whose supporters are men - opposes a landmark law on gender violence that Spain passed in 2004 on the spurious grounds that it denigrates women as weak and defenceless. The leader of the mainstream conservative PP party meanwhile has decided not to take part in Women's Day protests, arguing that far-left parties are seeking to use them to stir confrontation between the sexes. The issue could even emerge as a factor in coalition negotiations after the elections.

German industrial orders posted their biggest drop in seven months in January, data showed earlier, in the latest sign that Europe's largest economy had a subdued start to 2019. Orders were down a steep 2.6 percent, confounding forecasts for a 0.5 percent increase. The government said the decline was related to the strong upward revision of the December figure but that alone is unlikely to reassure analysts: Bookings for a wide range of goods fell in January, with both foreign and domestic orders declining.

MARKETS AT 7:55GMT Shockingly weak export and import readings from China, the world's largest trading nation, have whacked Chinese shares 4.5 percent lower today, stalling a rally that took the market to 20-month highs earlier in the week. The selling spread across Asia, taking Japanese equities down 2 percent and a pan-Asian index down 1.5 percent. Europe is opening around half a percent weaker and Wall Street futures are down half percent. Coming a day after the European Central Bank cut growth forecasts and announced more stimulus, it just confirms the world economy is in trouble. China's February exports fell 20.7 percent from a year earlier, the largest decline since February 2016, and imports fell 5.2 percent. The day ahead will bring more signals on the state of world growth - the U.S. labour market report at 1330 GMT (these May show whether employment and hourly wage growth are plateauing) German factory orders have already shown an unexpected drop and Norwegian gross domestic product slowed in February from January. Meanwhile, Cecilia Malmstrom, the European Union trade commissioner, said the EU is preparing a list of US-manufactured products worth 22 billion euros against which it will retaliate should President Donald Trump move on with tariffs. The risk now is that ECB-induced euro depreciation will spark Trump's ire.

The euro fell overnight to 21-month lows and has strengthened only marginally this morning. Euro zone government bond yields are down again after dropping to multi-year lows following the ECB announcement. The German 10-year yield was at the lowest since October 2016 – receiving fresh downward impetus from the industrial orders numbers. This week has confirmed a shift back towards the dollar – the Federal Reserv may have paused in its rate increases and growth may be plateauing, but everywhere else looks worse. Central banks from Australia to Canada and Sweden have turned tail on policy tightening and emerging markets are in rate-cutting mode. The Swedish crown has matched seven-month lows against the euro. The dollar has inched down 0.2 percent this morning after rising overnight to the highest since mid-December. MSCI's emerging currency index is down 0.3 percent. A strong jobs report later in the day would cement the dollar's dominance.

European stocks were expected to fall 0.4 to 0.7 percent, heading for their first weekly drop in a month. Bank shares fell 3.3 percent yesterday. With Europe largely out the other side of an underwhelming earnings season, big movers on Friday could include Germany's two largest banks, Deutsche Bank and Commerzbank, after Focus magazine reported, citing sources, that their chief executives had resumed talks on a potential merger. The prospect of low rates for longer heightens the pressure on banks and highlights the potential benefits of merging to protect margins.

In other M&A news, British packager RPC said it had agreed to be acquired by plastics maker Berry Group, ditching an earlier – and lesser - offer by Apollo Global Management. RPC shares were seen down 2 to 3 percent, deflating as an end to bidding war excitement was in sight.

News that Sports Direct CEO Mike Ashley is dropping his role at the retailer and stepping off the board to concentrate on running Debenhams may move the ailing department store – now a penny stock – up as much as 15 percent, traders said, while Sports Direct shares might fall slightly. Airbus could fall 2 percent, traders said, after the company announced after hours on Thursday that it won four aircraft orders in January-February. Swiss industrial machinery firm VAT Group was indicated down 3 to 3.5 percent after its 2018 EBITDA missed estimates and it struck a cautious tone about this year.

Swedbank says it was informed about complaint by anti-corruption investor Browder; Rio Tinto says Amrun bauxite mine set for full production; Roche gets European approval for Tecentriq combo for lung cancer; Air France KLM's February passenger figures rose 4.1 percent; Non-Standard Finance still looking to buy rival Provident.

In emerging markets, stocks weree down 1.3 percent and on track for a 2 percent weekly decline - their biggest since November - as some of China's main indexes dropped more than four percent on the day. Currencies still feel the pain from Thursday's dollar jump, with South Africa's rand slipping 0.3 percent, Russia's rouble and Mexico's peso easing 0.2 percent and many currencies on track for a second week in the red. Turkey's lira was eking out small gains, but they came after two days of losses amid concerns over fresh tensions between Ankara and Washington. Upcoming events/data/themes for market reports on Friday: China Feb trade balance, FX reserves Japan Feb bank lending, Jan current account, Q4 GDP revision Europe corp events: Air France (Traffic), Essilor Luxottica, Eurazeo, ICA Gruppen (Sales), VAT Group. France, Italy, Spain Jan industrial production France Jan trade balance Italy Jan producer prices Czech Feb jobless US Feb employment report Canada Feb employment report, housing starts Sovereign credit rating reviews – S&P: Bosnia, Congo, Cyprus, Denmark, Kazakhstan, Macedonia/Moody's: Bulgaria, Luxembourg/Fitch: Ukraine/DBRS: Luxembourg SATURDAY, March 9 China Feb inflation (Editing by Larry King)

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