Brexit reshuffle

Market movers today

• Today's calendar is rather thin. Although we have a range of Fed speakers today (Evans, Harker and Daly), they will likely fade into the background for markets for now, as the Fed has clearly signalled it is on hold for the rest of the year.

• In Scandinavia, Danish retail sales are due for release (see next page).

• Overnight to Wednesday, the central bank of New Zealand will meet (no rate change is expected). We also get Chinese industrial profits.

• Next focal point for markets are the indicative votes in the UK parliament and some notable ECB speakers at the Watcher's conference tomorrow.

Selected market news

Yesterday, PM Theresa May was forced to abandon plans to hold a third 'meaningful vote', after members of parliament voted in favour of taking control over the Brexit process by demanding a series of indicative votes on a way forward taking place on Wednesday. While this is another sign that May is Prime Minister in name only, it may actually help getting her deal over the finish line, as some of the Brexiteers, who have made life very difficult for her, seem afraid of losing control of Brexit, as it increases the likelihood of a softer Brexit (customs union or Norway-style single market participation) or a long extension. Still, May will likely need to get more Labour MPs on board to get her deal through parliament. The indicative votes will not be legally binding and hence we do not know how the EU will respond. As the issue in the UK parliament is still that there is no majority for anything, it remains to be seen whether this is the start towards a compromise in a softer Brexit direction. Our base case remains a long extension but the development on Wednesday is crucial near term. We cannot rule out Theresa May resigning or a general election at this point.

The Eurozone gloom that captured markets late last week subsided somewhat yesterday, when Germany's Ifo index for March painted a somewhat less bleak picture of the state of the economy than the PMIs on Friday, see Flash Comment: Growing manufacturing abyss challenges Eurozone outlook . Both companies' assessment of the current situation as well as business expectations registered a first small rebound since August 2018. That said, with abundant challenges still on the horizon - not least with regard to Brexit - the German economy is far from being out of the woods just yet.  

Despite a better than feared Ifo reading, the global FI rally got another boost yesterday as the 10Y US treasury yield dropped below 2.40% and 10Y German Bund yields dropped to -3bp. Still, as pessimism over the global growth outlook eased a little, FX markets calmed down a bit after a nervous end to last week, while Asian equities rebounded overnight and S&P 500 futures also point to a higher opening today. Along with global markets Brent oil rebounded above USD67/bbl on news of a surge in Russian crude exports.

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