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Good morning. Yet further uncertainty about the future of Brexit and about the possibility of a trade deal, plus Spain looks likely to announce elections.

Here’s what’s moving markets this morning.

Far apart

The respective trade delegations from the U.S. and China are said to be some way apart on the demands being made for China to structurally reform. Cue trade jitters coming back to the fore after optimism earlier in the week. Of concern too is economic data from the U.S., with retail sales casting clouds on the outlook and indicators of coming recession rearing their heads. Still, President Donald Trump is going to sign a compromise funding bill to avoid another shutdown, while also declaring a national emergency to get more money for a border wall. 

Defeated

U.K. lawmakers have thrown out Prime Minister Theresa May’s plan to renegotiate the Brexit deal, an embarrassing defeat and one that leaves her devoid of a political mandate to retool the exit agreement. May can thank Euroskeptic MPs from her own party for the loss, after they abstained from the vote in protest that the current plans effectively take no-deal off the table. Now, the U.K. is said to have told the European Union it doesn’t want to renegotiate the deal and will water down its requests for more concessions on the Irish backstop. The long and short of it? More uncertainty.

Election

Spain is on the brink of announcing new elections after the budget proposals put forward by its Socialist government were rejected earlier in the week. It’ll be the third election in four years for the country and has come about after Prime Minister Pedro Sanchez was unable to secure the support of Catalan independence parties, as  the ructions that gripped the country a few years ago continue to reverberate. Keep a close eye on the reaction in Spanish bonds and its banking sector, though it’s likely these well trailed polls have been priced in already.

Pessimism

European futures are pointing lower as we move towards Friday’s open, taking a cue from a drop in stocks in Asia on the renewed concerns about the future of the trade war, which are spoiling what’s been a solid week. Slowing factory prices in China aren’t helping. Oil, however, is headed for a weekly gain as output cuts by OPEC and its non-OPEC partners are helping to offset those trade jitters.

Coming up…

European trade balance data is on the cards and we’ll get the latest U.K. retail sales to see how the high street fared during the January sales. German insurance giant Allianz SE raised its dividend and otherwise met estimates. We’ll have numbers from Royal Bank of Scotland Group Plc to chew over how Brexit is impacting U.K. lenders and after it was said to be among the banks involved in a European bond trading cartel. And France’s Electricite de France SA is out with results in the wake of news the French government is mulling de-listing the nuclear group.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours

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