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UK Parliament takes up a 'no-deal' scenario in its next vote

Written by By Dmitry Lukashov | 2019-03-13 12:14:31 GMT

Asia:

- Japan Jan Core Machinery Orders registered its largest MoM decline since Sept and fueling concerns about external growth weakness spilling into the domestic economy (MoM: -5.4% v -1.5%e)

- Australia Mar Westpac Consumer Confidence Index hit its lowest level since 2017 (98.8 v 103.8 prior) as recent weak GDP spooked households

- Hong Kong Monetary Authority (HKMA) saw its 2nd day of intervention after the Hong Kong dollar (HKD) again traded at weak end of the HK$7.75-7.85 trading band

Europe:

- PM May’s revised Brexit Deal rejected by Parliament in a 391-242 vote (Note: smaller defeat than when the deal was rejected the first time back in January, but the margin still remained significant)

- PM May stated after the vote that she still believed best outcome would be for the UK to leave in an orderly fashion. Stood by her commitments to hold further votes in coming days (on blocking 'no deal' Brexit and on extending Article 50). If Parliament voted to leave without a deal, it would be policy of govt to implement that decision. House would have to answer if it wanted to revoke Article 50 or have a second referendum

- PM May spokesperson stated that no more talks with the EU were currently planned and added that PM May had not discussed resigning

- A group of UK lawmakers said to test whether parliament would support seeking 'standstill arrangements' with the EU would be aimed at mitigating the impact of the UK leaving the EU without an agreement. Plan would involve the Brexit being delayed until 10:59 GMT on May 22nd.

Energy:

- Weekly API Oil Inventories: Crude: -2.6M v +7.3M prior

- Venezuela Opposition Adviser Hausmann: Venezuela is barely producing 1M bpd

- OPEC Sec Gen Barkindo said to have warned that NOPEC legislation could have negative consequences; would open oil spigots, crash prices (Note: No Oil Producing and Exporting Cartels Act. The No Oil Producing and Exporting Cartels Act (NOPEC) was a U.S. Congressional bill, never enacted, known as H.R. 2264 (in 2007))

Macro

(UK) United Kingdom: Today's vote on whether to leave the EU without a deal is likely to go the same way as last night’s vote, and tomorrow's vote on delaying Brexit looks likely to pass. A statement from the EU has upped the ante by saying that the risks of a no-deal scenario is now "significantly" higher while demanding a "credible justification" for delaying. The delay question is also not straightforward, as the EU will want to know what use any extension would be used for. So the short one-off extension that May wants is probably a non-starter for Brussels. As for the PM and her position is concerned received, she is obviously secure as a confidence vote in her leadership can't be tabled for another year and Labour's push for a general election via a confidence vote on the government won't likely pass muster either as the Conservative-DUP governing alliance have the required votes to prevent it.

(US) United States: USTR's Lighthizer said an FX agreement with China has real commitments and is enforceable as it stands right now, and that they were very close to a deal. An agreement would open up a lot of agricultural sales for farmers and the US is addressing structural IP issues with precision in talks. Trump won't agree to a deal unless its enforceable noting that OECD members should not be able to declare themselves developing countries under WTO rules.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.91% at 373.96, FTSE +0.09% at 7,157.37, DAX -0.05% at 11,517.76, CAC-40 +0.31% at 5,286.32, IBEX-35 -0.07% at 9,155.21, FTSE MIB +0.18% at 20,667.50, SMI +0.92% at 9,346.60, S&P 500 Futures +0.08%]

Market Focal Points/Key Themes:

European Indices trade mixed this morning following lower Indices in Asia overnight and flat US Index futures. Following the rejection of the revised Brexit deal yesterday, today now sees the vote on a no-deal or Article 50 extension.

On the corporate front shares of German sportswear maker trades sharply lower after profits which came short of estimates; EON also declines after earnings and guidance. Spanish retail giant Inditex is another notable decliner as a strong Euro affected sales at Zara. Other notable movers include Morrisons, Rheinmetall, Clas Ohlson, Rieter Holding, Schmolz + Bickenbach which trade lower on earnings, while Salvatore Ferragamo, Balfour Beatty and Standard Life Aberdeen are among some of the risers on earnings.

In other news Pandora trades higher after its Chairman steps down; Manx Telecom trades over 20% higher on earnings and a take over for 207p/shr in cash by Kelion Bidco., while Wirecard declines following reports that its being investigated for falsifying accounts in Singapore.
Looking ahead notable earners include retailers Express, Build-A-Bear and Vera Bradly among others.

Equities

- Consumer discretionary: Adidas [ADS.DE] -5% (earnings; initial FY19 outlook), Inditex [ITX.ES] -5% (earnings), WM Morrison Supermarkets [MRW.UK] -0.5% (earnings), Dixons Carphone [DC.UK] -1% (FCA concludes investigation), Pandora [PNDORA.DK] +2.5% (to initiate search of new Chairman)

- Consumer staples: British American Tobacco [BATS.UK] -1.5% (statement on Quebec Class Action)

- Energy: Innogy [IGY.DE] n/c (earnings)

- Financials: Standard Life Aberdeen [SLA.UK] +4% (earnings; CEO change), Prudential [PRU.UK] +0.5% (earnings)

- Industrials: Rieter Holding [RIEN.CH] -9% (earnings; outlook), Balfour Beatty [BBY.UK] +3% (earnings), Volkswagen [VOW3.DE] +0.5% (Feb deliveries), Symrise [SY1.DE] -1% (earnings)

- Technology: Avast [AVST.UK] -4.5% (earnings; CEO to retire), Wirecard [WDI.DE] -3% (being investigated for falsifying accounts in Singapore)

 

Speakers

- EU's Moscovici stated that the EU did everything it could for a Brexit deal, there would not be any new negotiations by Mar 29th. Hard Brexit risks had substantially increased. Authorities were relatively prepared in terms of customs arrangements in the event of a 'no-deal' Brexit

- UK Brexit Sec Barclay: No Brexit was a bigger risk than a 'no-deal' outcome. Up to EU on how long any extension of Article 50 would be

- ECB's Angeloni (SSM board member): Italy recession was another factor weighing on Euro Zone Economy. Italian recession was self-inflicted, stemming from policy choices that drove up Government bond yield spreads

- South Africa Central Bank (SARB) Dep Gov Naidoo: Govt had no fiscal buffer to shield against crisis

- Swedish National Financial Management Authority (ESV) Budget Forecasts cut both 2019 and 2020 growth outlook.

- Conservative wing of the German CDU/CSU said to be pushing for Merkel’s resignation citing the believed impending collapse of the Grand Coalition with the Social Democrats(SPD)

 

Currencies/ Fixed Income

- GBP currency (Sterling) price action remained quite volatile as key Brexit votes continued. The GBP/USD had exhibited a sharp 2% swing between its high and lows over the past 24 hours amid the first of a series of Brexit votes this week.

- AUD/USD was softer after Australian confidence data hit a 2-year low as recent weak GDP spooked households

 

Economic Data

- (FI) Finland Jan Final Retail Sales Volume Y/Y: +1.3% v -1.3% prelim

- (ES) Spain Feb Final CPI M/M: 0.2% v 0.2%e; Y/Y: 1.1% v 1.1%e

- (ES) Spain Feb Final CPI EU Harmonized M/M: 0.2% v 0.2%e; Y/Y: 1.1% v 1.1%e

- (ES) Spain Feb CPI Core M/M: +0.1% v -1.5% prior; Y/Y: 0.7% v 0.8%e

- (IT) Italy Q4 Unemployment Rate: 10.6% v 10.5%e

- (IS) Iceland Feb International Reserves (ISK): 752B v 757B prior

 

Fixed Income Issuance

- (IN) India sold total INR120B vs. INR100B in 3-month, 6-month and 12-month bills

- (DK) Denmark sold total DKK in 3-month and 6-month Bills

 

Looking Ahead

- 06:00 (ZA) South Africa Q1 BER Business Confidence: 32e v 31 prior

- 06:00 (EU) Euro Zone Jan Industrial Production M/M: +1.0%e v -0.9% prior; Y/Y: -2.1%e v -4.2% prior

- 06:00 (EU) Daily Euribor Fixing

- 06:00 (ZA) South Africa announces details of next bond auction (held on Tuesdays)

- 06:00 (SE) Sweden to sell SEK1.5B in 0.75% 2029 Bonds; Avg Yield: % v 0.6118% prior; Bid-to-cover: x v 3.25x prior

- 06:00 (IT) Italy Debt Agency (Tesoro) to sell combined €6.25-7.75B in BTP Bonds

- (GR) Greece Debt Agency (PDMA) sells €M vs. €625M indicated in 12-month bills

- 06:15 (CH) Switzerland to sell 2029 and 2045 Bonds

- 06:30 (DE) Germany to sell €1.0B in 1.5% Aug 2048 Bunds

- 06:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2026 and 2029 bonds

- 07:00 (US) MBA Mortgage Applications w/e Mar 8th: No est v -2.5% prior

- 07:00 (IL) Israel Feb Trade Balance: No est v -$2.1B prior

- 07:00 (RU) Russia OFZ Bond auction results

- 07:45 (US) Daily Libor Fixin

- 08:00 (IS) Iceland Feb Unemployment Rate: No est v 3.0% prior

- 08:00 (BR) Brazil Jan Industrial Production M/M: -0.1%e v +0.2% prior; Y/Y: -1.5%e v -3.6% prior

- 08:00 (UK) Weekly PM May question time in House of Commons

- 08:00 (DE) German Chancellor Merkel

- 08:30 (US) Feb PPI Final Demand M/M: +0.2%e v -0.1% prior; Y/Y: 1.9%e v 2.0% prior

- 08:30 (US) Feb PPI (Ex-Food/Energy) M/M: 0.2%e v 0.3% prior; Y/Y: 2.6%e v 2.6% prior

- 08:30 (US) Feb PPI (Ex-Food/Energy/Trade) M/M: 0.2%e v 0.2% prior; Y/Y: No est v 2.5% prior

- 08:30 (US) Jan Preliminary Durable Goods Orders: -0.5%e v 1.2% prior; Durables Ex Transportation: 0.1%e v 0.1% prior; Capital Goods Orders (Non-defense/ex-aircraft): +0.2%e v -1.0% prior; Capital Goods Shipments (Non-defense/ex-aircraft): -0.2%e v 0.0% prior

- 08:30 (CA) Canada Feb Teranet/National Bank HPI M/M: No est v -0.1% prior; Y/Y: No est v 2.2% prior; House Price Index: No est v 223.96 prior

- 09:00 (HU) Hungary Central Bank Mar Minutes

- 09:00 (UK) Baltic Dry Bulk Index

- 09:00 (UK) Chancellor of the Exchequer Hammond (Fin Min) presents Spring Budget

- 10:00 (US) Jan Construction Spending M/M: +0.5%e v -0.6% prior

- 10:00 (MX) Mexico Jan Industrial Production M/M: +0.2%e v -0.4% prior; Y/Y: -2.0%e v -2.5% prior; Manufacturing Production Y/Y: 1.9%e v 0.2% prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 13:00 (FR) ECB’s Coeure (France)

- 13:00 (US) Treasury to sell 30-Year Bonds Reopening

- 14:00 (UK) Parliament holds vote on “no-deal’ Brexit

Author

By Dmitry Lukashov
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