* A look at the day ahead from EMEA markets editor Mike
Dolan. The
views expressed are his own.
LONDON, Oct 10 (Reuters) - Another day of vague reports,
denials and counter-denials on both the U.S.-China trade talks
and the Brexit showdown looms, with little that’s emerged from
either so far this week proving to be a game changer yet. On
balance, the nods and winks on the trade talks in Washington
have been read as marginally positive – or at least when
combined with fairly clear signalling from the Federal Reserve
that it’s about to ease policy again later this month. Today’s
U.S. consumer price inflation numbers are unlikely to provide
any obstacle to that easing if the soft September producer price
report seen earlier in the week is any guide. Perhaps the main
mover overnight was a rally in China’s offshore yuan, which
strengthened to its best levels in more than two weeks after a
Bloomberg report that said U.S. and Chinese officials were
reviving a currency pact first mooted earlier this year that
stops further tariff hikes in return for commitments to hold the
yuan stable. Other reports suggest President Trump will cede
some ground on U.S. company dealings with Chinese tech giant
Huawei. On the other hand, there were Chinese press reports that
Vice Premier Liu was due to leave the talks a day early and U.S.
Commerce Secretary Ross insisted overnight that tariff rises on
Chinese goods were working and having the desired effect of
drawing trade concessions from Beijing. If there’s not
sufficient progress in this week’s talks U.S. tariffs on some
$250 billion of Chinese goods rise to 30% from 25% next Tuesday.
Wall St’s S&P500 gained almost 1 percent late on Wednesday,
with futures flat first thing on Thursday. Asia’s main bourses
were mostly higher, with Shanghai leading the way with gains of
0.7%. Japan’s Nikkei was up 0.5% and Hong Kong rose 0.3%.
Seoul’s Kospi bucked the trend and dropped 0.8%. Even though
euro stock futures were up marginally first thing, European
markets were digesting another round of dour industrial numbers.
German exports fell more than expected in August and French
industrial production also surprised with an unexpected drop of
0.9% during the month.
There was also attention on what’s seen as an internal
battle brewing within the European Central Bank over whether it
should be easing monetary policy even further. The Financial
Times reported on Thursday that outgoing ECB chief Draghi
ignored advice from the bank's monetary policy committee not to
resume bond purchases, shedding light on how divisive the move
has proven. Minutes of the ECB's latest policy meeting are
released later on Thursday. Euro/dollar strengthened above $1.10
first thing. Sterling was more mixed, weakening further against
the euro but steady against the dollar.
Much like the U.S.-China trade talks, the Brexit impasse is
now the subject of claim and counter-claim, sketchy press
reports and denials. UK PM Johnson meets Irish PM Varadkar near
Liverpool later on Thursday to see if there’s any chance of a
breakthrough that would see a deal by next week’s EU summit.
This week’s compromise proposals from London have effectively
been rejected by Brussels. If there’s no deal, Johnson is
legally obliged to seek an extension of the Oct 31 Brexit date
even though he continues to insist he will not do so.
Elsewhere, Turkey’s lira steadied after sliding to its
weakest level since June on Wednesday as Turkish troops launched
a military offensive against Kurdish forces in Northern Syria.
The lira and Turkish bonds were hit after U.S. Senators unveiled
a proposal for sanctions against Turkey for its military
operation unless certain conditions were met.
On the European corporate front, Paris stock futures are
outperforming after Louis Vuitton owner LVMH's solid Q3 print
despite HK unrest. Upbeat results from LVMH is likely to trigger
a rally as analysts were largely expecting luxury companies to
take a major hit from political protests in HK. LVMH is seen
rising 4%, while its rivals Richemont, Swatch, Kering and Hermes
are seen up 2%, according to premarket indications from traders.
Dutch health tech company Philips is seen falling 4% to 5% after
it said trade tariffs and disappointing results at its Connected
Care division would make it impossible to reach its target for
profit margin improvement this year. In other earnings-based
moves, UK packaging and paper company Mondi is seen down 3% to
5% after reporting slightly lower sales volumes; Novozymes is
called -5% after profit warning; UK's plus-sized fashion
retailer N Brown seen up 5% on H1 profit beat.
* Europe corp events: Tryg, Gerresheimer, Hansen, Mondi
trading, Givaudan sales, Flughafen Zuerich traffic
* Germany Aug trade balance
* France, Italy Aug industrial output
* ECOFIN meets in Luxembourg
* UK Aug industrial/manufacturing output, GDP, trade balance
* UK PM Johnson meets Irish PM Varadkar in Dublin
* Bank of England chief Carney speaks at launch of new 20
pound
note
* European Central Bank meeting minutes
* Serbia, Peru central bank policy decisions
* Sweden Sept inflation, house prices
* Norway, Czech Sept inflation
* Israel trade balance
* South Africa Aug manufacturing production
* Russian President Putin visits Saudi Arabia
* US Sept CPI inflation, weekly jobless claims
* Brazil Aug retail sales
* Cleveland Fed chief Mester speaks in Ohio; Minneapolis Fed
chief
Kashkari speaks in NYC
* US Treasury sells 30-year bonds
(Writing by Mike Dolan
Editing by Gareth Jones)