European cash equity markets are mostly lower ahead of the midway stage although losses are relatively modest; retail, healthcare and technology stocks are among the worst performers to start the week while banks are a bright spot (FTSE -0.4%, DAX -0.2%, CAC -0.3%). From a regional perspective, the FTSE 100 has underperformed slightly as Brexit related uncertainty intensified over the weekend. UK lawmakers will debate an amendable Government motion on the Brexit deal later today and put forward their amendments while it is still unclear whether May will bring forward a third meaningful vote. Sterling has declined in response with Gbp/Usd back below $1.32 while moves elsewhere in FX have been relatively modest. The Dollar Index has lost -0.1% to 96.6 while the Swedish Krona and Norwegian Krone are the strongest of the G10’s. Data wise, German IFO readings were broadly stronger-than-expected and helped ease recession fears after Friday’s PMI miss. We did also hear from the ECB’s Hansson who warned the slowdown in the Euro Zone economy may continue in the medium-term. Coeure added that they are not at the limit of what they can do yet on monetary policy. Looking ahead, futures are pointing to a relatively flat open on Wall Street as Trump takes a victory lap following the Mueller report. On the data front, we await the Chicago Fed National Activity Index, Dallas Fed manufacturing index and Belgium business confidence.
Key Headlines/Data:
* European Corporate News:
– LVMH (+0.5%): Shares dropped over eight-percent at one stage on suspected ‘fat-finger’ trade
– Inmarsat (+8.8%): Private equity consortium to buy Inmarsat for $3.4 Bln
– Bayer (-2.1%): Downgraded to ‘Neutral’ at Bank of America
– Hermes (-0.3%): Downgraded to ‘Neutral’ at Credit Suisse
– Peugeot (-1.9%): Rebuffed by Fiat Chrysler earlier this week for merger talks, according to the WSJ
– Sanofi (-0.7%): FDA unconvinced by diabetes drug
* Cabinet to meet amid pressure on May (BBC News):
– Prime Minister Theresa May is expected to update ministers on her Brexit strategy when she chairs a meeting of her cabinet this morning.
– It comes after a weekend of speculation about her leadership and claims of a plot to oust her – something senior ministers have denied.
– There have been suggestions that naming a date for her departure as PM could boost support for her Brexit deal.
* Chicago Fed President Evans said now is a good time for the Fed to pause and be cautious. He said he wants to see more inflation and does not see another rate increase until the second half of next year.
* German IFO Data (Mar):
– Business Climate 99.6 versus 98.5 expected, previous 98.5 revised to 98.7
– Current Assessment 103.8 versus 102.9 expected, previous 103.4 revised to 103.6
– Expectations 95.6 versus 94.0 expected, previous 93.8 revised to 94.0
* ECB’s Hansson said the slowdown in the Euro Zone economy may continue in the medium-term. He added that QE could be restarted in the event of a major shock.
* ECB’s Coeure said they are not at the limit of what they can do yet on monetary policy.
* EU official said a no-deal Brexit is becoming more likely.
* Philadelphia Fed President Harker said the outlook is pretty good but risks are tilted very slightly to the downside. He added he is in a wait-and-see mode, favouring one rate hike at most this year and one next year.
