Uphill battle for May’s Brexit deal

Jens Nærvig Pedersen Danske Bank A/S

Market movers today

The day of the long-awaited Brexit vote in the House of Commons has finally arrived (voting starts at 20:00 CET). A defeat of PM Theresa May's Brexit deal is widely expected, so markets will probably not react to the defeat itself but to the size of the defeat. A narrow defeat means that May might be able to get it through at a later stage, but a big defeat means we are in uncharted territory (and we cannot rule out that Theresa May will resign). For more details, see Brexit Monitor - May is losing control over the Brexit process but no credible alternative has emerged yet , 11 January.
In the US Empire PMI manufacturing for January is due. Regional PMIs are usually no major market movers, but this time they will receive some attention for indications where ISM manufacturing is heading after the large fall in December.
Fed's Kashkari, George and Kaplan are also scheduled to speak later today kicking off a busy week of Fed speakers, while ECB President Draghi is due to speak at the European Parliament in the afternoon.
In Sweden the November consumption indicator is on the agenda. Furthermore, the market will continue to monitor the progress towards forming a new government in Sweden which could be settled later this week.

Selected market news

Asian equity markets rose along with the oil price overnight, but overall risk sentiment remains fragile amid a slowdown in the global manufacturing sector, which was further confirmed in euro area industrial production figures published yesterday. Furthermore, unfinished political business is keeping markets anxious.

Regarding the unfinished political business, rumours and speculation before the vote on UK Prime Minister May's Brexit deal suggests that she is facing an uphill battle. Market and politicians are already turning attention to the road after an expected loss today, e.g. there is speculation about a potential extension of article 50 to give the UK more time to pass through the Brexit deal.

In Sweden, Stefan Löfven will use a couple of more days to try to convince the Left party to vote for his government. The previous vote in parliament on the government deal scheduled for Wednesday has been postponed until Friday to allow for further debate in parliament.

OPEC's recently agreed production cut deal will already undergo review on 17-18 March at a meeting in Azerbaijan before OPEC ministers will make potential decisions on policy in Vienna on 17-18 April. OPEC is facing headwinds as the deal from last December has been unable to lift oil prices.

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Author

Jens Nærvig Pedersen

Danske Bank A/S

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