Here’s What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what we’re watching ahead of the market open in Europe, including the reopening of U.S.-China trade negotiations, the return of Brexit and succession planning at a Swiss bank.

Muted Monday

The Stoxx 600 benchmark stock index in Europe jumped the most since June 2016 on Friday as the dour mood of the first two days of trading was wiped away by more encouraging data, reassurances about the rate hiking cycle from Federal Reserve Chairman Jerome Powell and by a further move by China to support its economy. Asian stocks were benefiting from Friday’s buoyancy but the open in Europe looks likely to be less exciting, with futures pointing marginally higher. 

Negotiations Restart

Markets were gripped in the first three days of trading in 2019 by jitters about the health of global trade after a stream of weak manufacturing reports. Now the attention can move back to the trade tensions between the U.S. and China following more positive noises from both sides in recent weeks and with their representatives due to meet on Monday. This will be the first set of talks between the two nations since U.S. President Donald Trump and Chinese leader Xi Jinping agreed to a ceasefire in the trade war last month, so this could set the tone as the 90 days that they agreed to put down their swords for tick on.

Brexit Returns

After a merciful break over the Christmas-New Year period, Brexit is likely to return to the forefront of market conversations with a vengeance. A meaningful vote on Prime Minister Theresa May’s plan is due to be held the week after next, so tit-for-tat promotions and take downs of her proposal, plus warnings about the divisive dangers of a second referendum and the economic dangers of a no-deal EU departure, will be the order of the day. How substantive these statements are, as opposed to political grandstanding, will determine whether U.K. stocks or the pound are affected.

Swiss Succession Planning

UBS AG is said to be in the early stages of planning to eventually replace current Chief Executive Officer Sergio Ermotti, who has been in charge of the Swiss group since 2011 and is one of the longest-reining CEOs in European banking. As ever when these things start to happen, the focus of the speculation will be on the background of the potential candidate --specifically which part of the banking sector the person has spent their career in. The first name mentioned has been Christian Meissner, former investment banking chief at Bank of America Corp., so that should be enough to get tongues wagging about how UBS may or may not see its future.

When Will the Shutdown End?

What had initially appeared likely to prove a short-lived if rancorous negotiation to keep the U.S. government open has turned into a bi-partisan battle that has Donald Trump repeating a previous threat to declare a national emergency so he can circumvent Congress and build a wall on the Mexican border. The president also said the wall, by the way, may now be more of a steel barrier. An emergency declaration would probably spark a legal challenge by Democrats but the key question is when this is going to end, because the longer the shutdown goes on, the bigger risk it becomes for markets after being seen as a relatively minor concern underlying much larger ones.

To contact the editor responsible for this story: Tom Lavell at tlavell@bloomberg.net

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