Investors have been firmly focused on Brexit developments this morning after financial markets were jolted by the resignation of UK Brexit Minister Raab. He was not alone however with Work & Pensions Minister McVey following him out the door soon after while speculation continues to mount of a possible no-confidence vote against PM May. Gbp/Usd subsequently slumped over 200 pips to a two-week low of $1.2751 before finding support while broader risk sentiment soured. Core European bonds are firmly in the green with UK ten-year yields losing close to fourteen basis points at the lows with soft UK retail sales only adding to the downside pressure. Elsewhere in FX, the Dollar Index had advanced +0.3% to 97.2 while the Australian Dollar is the top G10 performer following strong domestic jobs data released overnight. Turning to equities, European bourses are mostly lower ahead of the midway stage led by heavy declines in auto and bank stocks; basic resources have outperformed on optimism surrounding US-China trade talks (FTSE +0.1%, DAX -0.2%, CAC +0.2%, FTSE MIB -0.3%). Elsewhere, oil prices are mixed with US crude futures down -0.5% and Brent up +0.1% while spot gold is flat. Looking ahead, futures are pointing to a slightly higher open on Wall Street with earnings due from DJIA component Walmart. Data wise, we await US retail sales, imports prices, Empire manufacturing, Philly Fed and jobless claims ahead of possible comments from Fed Chair Powell.
Key Headlines/Data:
* European Corporate News:
– Henkel (+3.2%): Q3 Ad. EBIT €926 Mln versus €930 Mln expected | Reiterates FY guidance
– Bouygues (+0.6%): 9M Net Profit €772 Mln versus €673 Mln expected | Maintains lower outlook
– Antofagasta (+2.8%): Board approves $1.3 Bln expansion of Los Pelambres copper mine in Chile.
– Dialog Semiconductor (+0.6%): Said it had not seen hit to demand from main customer Apple.
– Daimler (-2.8%): Downgraded by Citigroup
* Brexit Headlines:
– UK Brexit Minister has resigned – “I cannot in good conscience support the terms proposed for our deal with the EU”
– UK Work & Pensions Minister McVey has resigned
– @JamesERothwell (Brexit & Europe correspondent at The Telegraph) – A plugged-in Tory source, not a Brexiteer, reckons 6 Cabinet resignations to follow Raab, three unknowns, the rest will back the deal.
– @bbclaurak (Political Editor, BBC) – Brexiteer sources hoping Mordaunt goes next and soon, not clear yet if she actually will – Brexiteer ministers all now under huge pressure
– DUP lawmaker Shannon said they feel betrayed and will certainly vote against the Brexit agreement
– EU Council President Tusk confirmed a Brexit Summit will take place on Sunday 25th November
– EU Brexit Minister Barnier said the agreement with the UK is far and balanced
– @tconnellyRTE (RTE Europe Editor) – Another EU source says: The EU is at the limit of what will work on EU side – this is an extraordinarily generous EU approach to the British.
– Speaking in parliament, UK PM May outlined the details of the Brexit agreement with the EU but said what was agreed it a draft treaty and not the final deal.
* Norwegian Trade Balance (Oct) NOK 34.9 Bln, previous NOK 21.1 Bln
* EU New Car Registrations Y/Y (Oct) -7.3%, previous -23.5%
* La Stampa: Italian PM Conte is looking to work with the EU over the 2019 budget to avoid sanctions.
* Chinese Commerce Ministry confirmed the US and China have resumed high level talks on trade.
* Swedish Unemployment Rate (Oct) 6.0% versus 6.4% expected, previous 6.5%
* UK Retail Sales Data (Oct):
– Retail Sales M/M -0.5% versus +0.2% expected, previous -0.8% revised to -0.4%
– Retail Sales Y/Y +2.2% versus +3.0% expected, previous +3.0% revised to +3.3%
– Core Retail Sales M/M -0.4% versus +0.2% expected, previous -0.8% revised to -0.3%
– Core Retail Sales Y/Y +2.7% versus +3.3% expected, previous +3.2% revised to +3.6%
* Euro Zone Trade Balance (Sep) €13.1 Bln, previous €11.7 Bln
* UK sold £2.0 Bln of a 2037 Gilt:
– Bid to Cover: 1.75
– Yield Tail: 5.1 basis points
