Here's What to Watch in European Stocks This Morning
(Bloomberg) -- Good morning. Here’s what we are watching ahead of the market open in Europe:
No Plan B
The European Union has signed off on the Brexit deal tabled by U.K. Prime Minister Theresa May, but as has become increasingly clear in recent weeks, Brussels is not where the real battle is going to take place. Now, May needs to sell the deal to a skeptical Parliament, fending off criticism both from the opposition Labour Party and from Conservative backbenchers. The pound and U.K. stocks are likely in for a choppy week, with little else on the slate by way of earnings to distract from the noise of Brexit.
European oil stocks turned negative for the year on Friday thanks to the precipitous drop in oil in the past few weeks. If that continues, anticipate another bad week ahead for the sector, albeit one that does justify all the spending and capital discipline they showed during the low-crude-price era. Still, while the sector weeps, the president celebrates. Donald Trump took to Twitter to say the oil price fall is “so great” and offered up a person to thank for the decline. Himself. Just to note, oil futures are trading a little higher this morning.
Salvini Peace Offering?
Italian Deputy Prime Minister Matteo Salvini, so often leading the charge to defend the country’s controversial and now EU-rejected budget plans, has indicated the potential for tweaks to be made. Salvini said “nobody is fixated” on the 2.4 percent 2019 deficit target, saying that as long as the budget supports Italian economic growth, that deficit could be different. Given the past recalcitrance from Italian populists, spearheaded by Salvini, this might offer hope a deal can be done with the EU to avoid disciplinary action against Italy. Watch Italian bonds and the FTSE MIB stock index.
The European banking sector has had a miserable year and there has been little to suggest the picture is going to get brighter. One of the biggest sob stories has been Danske Bank A/S, caught in a huge money laundering scandal and with its shares having been given a corresponding battering for it. But Laundromat and its impact are far from over. Denmark’s financial regulator is telling lenders to more selective when choosing correspondent banks, potentially creating a new shadow over the European banking sector should others could get caught in the web.
Swiss Stock Deadline
It’s not just the U.K. that’s in the midst of trying to keep its relations with the European Union as friendly as possible. Swiss voters rejected a plan over the weekend which could have created yet more bad feelings between the country and the EU, but this week will still be an important one for Swiss stocks. Recognition of its stock market under EU regulation will expire at the end of the year and Switzerland’s government had set itself a Dec. 1 deadline for deciding whether it will need to enact an emergency plan to protect it. Watch closely for any extra volatility in Swiss stocks as that date approaches.
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