Theresa May

Market Review 26-02

Market Review 26-02

Forex News

Theresa May buckles: British PM to rule out no-deal Brexit

From: Reuters.com

British Prime Minister Theresa May will on Tuesday propose formally ruling out a no-deal Brexit in a bid to avoid a rebellion by lawmakers who are threatening to grab control of the divorce process, The Sun and Daily Mail newspapers reported.

As the United Kingdom’s labyrinthine Brexit crisis goes down to the wire, May is making a last-ditch effort to get changes to the separation package but lawmakers will try on Wednesday to impose their authority in a series of parliamentary votes.

After the British parliament voted 432-202 against her deal in January, the worst defeat for a government in modern British history, May has tried to use the threat of a potentially disorderly no-deal Brexit to get concessions out of the EU.

But many British lawmakers and some of her own ministers have warned they will try to take steps to avoid thrusting the world’s fifth largest economy into a potentially tumultuous economic crisis.

May on Tuesday will propose to her cabinet of senior ministers that she formally rules out a no-deal Brexit, opening the door to a delay of weeks or months to the March 29 exit date, The Sun newspaper reported.

The Daily Mail newspaper said May is ready to rule out a no-deal Brexit after as many as 15 ministers said they were ready to resign.

A Downing Street spokesman declined to comment on the reports.

Reuters reported on Monday that May’s government was looking at different options including a possible delay.

Sterling rose 0.4 percent to $1.3152, near a one month high. Against the euro, sterling rallied nearly half a percent to a one-month high at 86.31 pence.

It was not immediately clear how May would rule out a no-deal. She is due to chair a cabinet meeting on Tuesday and then update parliament at around 1230 GMT. Her de-facto deputy, David Lidington, told BBC radio he would not disclose what cabinet would be discussing.

DELAY?

In the June 23, 2016 referendum, 17.4 million voters, or 51.9 percent, backed leaving the EU while 16.1 million, or 48.1 percent, backed staying.

With just a month to go until Brexit, the ultimate outcome is still unclear with scenarios ranging from a last-minute deal to another referendum that May has warned would reopen the divisions of the 2016 referendum.

The opposition Labour Party said on Monday it would back calls for a second referendum on Brexit if parliament rejects its alternative plan for leaving the EU.

When asked if May was going to delay, Lidington did not address the question directly but said a delay did not resolve the issue but merely deferred a decision.

“These negotiations are at an absolutely critical time,” he told Sky News, adding that he hoped a vote on May’s deal could happen as early as next week. “We need to hold our nerve as a government, get behind the prime minister.”

After meeting EU leaders in the Red Sea resort of Sharm El-Sheikh on Monday, May said a timely exit was “within our grasp” and insisted that delaying Brexit would be no way to solve the impasse in parliament over the departure.

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EUR/USD at Risk from Eurozone PMI, US Data, Fed Testimony?

From: DailyFX.com

  • EUR/USD eyeing Fed Chairman congressional testimonies
  • Euro keeping eye on PMI data out of key Eurozone economies
  • Slower Eurozone growth raising eyebrows amid trade fears

EUR/USD may be vulnerable to several EU and US data-driven events this week. On Tuesday and Wednesday, Fed Chairman Jerome Powell will be testifying in front of congressional committees in the Senate and House, respectively. Then on Friday, the Chairman will deliver a speech outlining economic developments and longer-term challenges to the economy.

Over roughly the same time span, key US economic data will be released that may have a significant impact on Fed monetary policy expectations. These include US GDP, consumer confidence and key ISM measures. If these indicators outperform relative to expectations, Fed officials may be more inclined to raise rates this year if data demonstrates the US economy can endure a rate hike.

However, when the Fed raises rates, they are also increasing the cost of borrowing globally. According to the Bank of International Settlements, eighty percent of all global transactions are conducted in the US Dollar. Tighter credit conditions would there disrupt economic activity and could come back to the US and hurt exports. These concerns were most recently conveyed by Fed Vice Chairman Richard Clarida.

In Europe, manufacturing PMI data is scheduled to be released in Germany, France and Italy, the three largest Eurozone economies. The latter is struggling with a technical recession and fracturing internal politics between the populist coalitions that make up the current government. The Germany economy stalled as GDP reports came in and only narrowly missed a technical recession after the previous quarter showed a contraction.

Slower growth in the region has also caught the eye of Fed policymakers in the US with the Clarida commenting that Europe is ‘not that far from crisis mode’. As one of the largest economies in the world, a substantial disruption in the region’s output would almost certainly impact global markets and the US economy and potentially alter the Fed’s data-dependent monetary policy.

France is seeing a decline in the economically disruptive Yellow Vest protests but is now experiencing political tension with Italy. Considering the upcoming European Parliamentary elections in the spring are approaching, political fragmentation between founding members of the Eurozone will likely continue to weigh on the Euro.

There is also still the lingering fear of a potential EU-US trade conflict following an auto report Donald Trump received last week from the Commerce Department. It outlined potential national security threats posed by imported autos. The EU has taken the possibility of auto tariffs seriously and announced it is ready to retaliate with similar measures against Caterpillar Inc. a US industrial giant.

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Stock Market News

SEC seeks contempt charge against Tesla’s Musk, says tweet violates deal

From: Reuters.com

The U.S. Securities and Exchange Commission (SEC) is pursuing a contempt order against Tesla Inc CEO Elon Musk, saying he violated a fraud settlement by tweeting material information without preapproval, sending the firm’s shares down 5 percent.

The SEC’s request potentially could reopen a turbulent chapter for the electric vehicle maker in which regulators last year accused Musk of fraud for making misleading tweets about plans to take the company private, and demanded that he be stripped of his CEO title.

Musk, Tesla and the SEC settled the lawsuit, and part of the settlement called for any material statements made by Musk on social media to be vetted in advance by the company.

In a court filing on Monday, the regulator pointed to a Musk Feb. 19 tweet: “Tesla made 0 cars in 2011, but will make around 500k in 2019,” noting that Musk did not seek or receive preapproval before publishing this tweet, which was inaccurate and disseminated to over 24 million people.

“Musk has thus violated the court’s final judgment by engaging in the very conduct that the preapproval provision of the final judgment was designed to prevent,” the SEC wrote in its motion filed on Monday in federal court in Manhattan.

The motion asks the judge to issue an order that would put the onus on Musk to show why he should not be held in contempt for violating the settlement.

Musk corrected his tweet four hours later to say that the “annualized production rate” at year-end 2019 would probably be about 500,000, with deliveries expected to be about 400,000.

Tesla did not immediately respond to a request for comment, but Musk shot back on Twitter on Monday night, tweeting: “SEC forgot to read Tesla earnings transcript, which clearly states 350k to 500k. How embarrassing …”.

Musk was referring to comments made by him in January to analysts that Tesla would make “maybe on the order of 350,000 to 500,000 Model 3s, something like that this year”.

Tesla and Musk agreed in September to pay $20 million each to the SEC, and the billionaire stepped down as the company’s chairman but remained as chief executive. In the settlement, the agency pulled back from its original demand that Musk, who is synonymous with the Tesla brand, be barred from running Tesla, a sanction many investors said would be disastrous.

The settlement was approved by a U.S. judge in October, who can now decide whether its terms have been violated.

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U.S. stocks higher at close of trade; Dow Jones Industrial Average up 0.23%

From: Investing.com

U.S. stocks were higher after the close on Monday, as gains in the Basic Materials, Technology and Industrials sectors led shares higher.

At the close in NYSE, the Dow Jones Industrial Average added 0.23% to hit a new 3-months high, while the S&P 500 index climbed 0.12%, and the NASDAQ Composite index added 0.36%.

The best performers of the session on the Dow Jones Industrial Average were DowDuPont Inc (NYSE:DWDP), which rose 2.02% or 1.11 points to trade at 56.08 at the close. Meanwhile, Caterpillar Inc (NYSE:CAT) added 1.97% or 2.73 points to end at 141.41 and Cisco Systems Inc (NASDAQ:CSCO) was up 1.36% or 0.68 points to 50.79 in late trade.

The worst performers of the session were Walt Disney Company (NYSE:DIS), which fell 1.44% or 1.66 points to trade at 113.59 at the close. Home Depot Inc (NYSE:HD) declined 1.25% or 2.41 points to end at 189.98 and UnitedHealth Group Incorporated (NYSE:UNH) was down 0.94% or 2.51 points to 264.60.

The top performers on the S&P 500 were Danaher Corporation (NYSE:DHR) which rose 8.52% to 123.15, General Electric Company (NYSE:GE) which was up 6.39% to settle at 10.82 and Western Digital Corporation (NASDAQ:WDC) which gained 3.78% to close at 51.36.

The worst performers were H&R Block Inc (NYSE:HRB) which was down 3.31% to 24.25 in late trade, TripAdvisor Inc (NASDAQ:TRIP) which lost 3.22% to settle at 53.17 and DISH Network Corporation (NASDAQ:DISH) which was down 2.65% to 31.95 at the close.

The top performers on the NASDAQ Composite were Spark Therapeutics Inc (NASDAQ:ONCE) which rose 120.09% to 113.48, China Internet Nationwide Financial Services Inc (NASDAQ:CIFS) which was up 118.75% to settle at 2.80 and Clementia Pharmaceuticals Inc (NASDAQ:CMTA) which gained 74.66% to close at 26.06.

The worst performers were Windstream Holdings Inc (NASDAQ:WIN) which was down 46.89% to 0.45 in late trade, Sky Solar Holdings Adr Rep 8 (NASDAQ:SKYS) which lost 38.66% to settle at 0.730 and Fronteo Inc (NASDAQ:FTEO) which was down 26.67% to 8.35 at the close.

Falling stocks outnumbered advancing ones on the New York Stock Exchange by 1520 to 1489 and 102 ended unchanged; on the Nasdaq Stock Exchange, 1332 fell and 1298 advanced, while 95 ended unchanged.

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Cryptocurrency News

Cryptocurrency Assets Get Arab World’s First Regulatory Nod

From: Bloomberg.com

The Arab world’s smallest country is taking the lead in regulating crypto assets.

Bahrain’s central bank said on Monday that it issued “the final rules on a range of activities relevant to crypto assets.” The framework covers areas from licensing and governance to cyber security.

The central bank’s “introduction of the rules relating to crypto assets is in line with its goal to develop a comprehensive rules for the fintech eco-system supporting Bahrain’s position as a leading financial hub” in the Middle East and North Africa, Khalid Hamad, executive director of banking supervision at the central bank, said in an emailed statement.

Once the undisputed banking center of the Gulf, Bahrain is vying to regain its place as competition intensifies from counterparts in the region and beyond. Most central banks around the world aren’t yet convinced of the benefits of digital currencies and don’t plan to issue one any time soon, according to a recent Bank for International Settlements survey.

Bahrain’s neighbors Saudi Arabia and the United Arab Emirates have previously launched a joint pilot crypto currency initiative with the goal of easing cross-border payments and better understanding blockchain technology, a decentralized public ledger of transactions that offers more speed because it doesn’t rely on a central record keeper.

The central bank in Bahrain has already been operating an incubator-style sandbox licensing program, which included crypto-currency exchange platforms and companies using blockchain. The program allows them to test out their services as Bahrain looked into regulating the emerging industries and technologies that come along.

Bahrain’s move is a “great step in the right direction for the crypto-asset ecosystem in the region,” said Ola Doudin, chief executive officer of BitOasis, a leading crypto-currency exchange platform in the Middle East and one of the companies enrolled in the country’s regulatory sandbox.

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