Here’s What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what to watch ahead of the market open in Europe, including the meaningful vote on Brexit, persistent election chatter around Europe and how U.S. lenders are setting the tone for the bank earnings season.

Let’s Get Meaningful

After it was pulled in December in the face of near-certain defeat, the fate of U.K. Prime Minister Theresa May’s Brexit plan will be front and center. The assurances the European Union have provided, which May had hoped would quell opposition among MPs, don’t look like enough and May could be facing the biggest parliamentary defeat for a government for 95 years. Diplomats now are bracing themselves for the U.K. to delay its departure from the EU.  All the Brexit-sensitive sectors in stocks could be volatile, including housebuilders, banks, property firms and retailers before the results are known in the evening. The pound’s most accurate forecaster isn’t optimistic on the currency front either and war-gaming sterling suggests more wild rides are ahead.

Elections Everywhere

Political risk is alive and well in Europe. Sweden now has been holding talks to form a government for four months and a deal to resolve the impasse fell apart on Monday, increasing the chance it will have to hold new elections. Germany’s CDU party, meanwhile, is said to  be primed for a snap election. Given the slowdown in the country’s economy, an election would add another risk to one of Europe’s traditionally stable countries. Greece, new to this kind of stability, will also remain in focus as it heads towards a confidence vote in the government and potentially early elections.

Setting the Bank Tone

U.S. bank reporting season got under way with Citigroup Inc. on Monday and did not paint a pretty picture. A slump in fixed-income trading and a miss against full-year profit targets blamed on a volatile end to 2018 doesn’t bode well for the rest of the week, with JPMorgan Chase & Co., normally the lender that leads off the season, up to the plate today. The read-across impact on European banks from Citi was benign, but if a pattern of misses against consensus forms the impact could change as the week progresses, unless Brexit drowns it out.

Oil Too Hot?

After oil’s roaring start to the year that sent it hurtling into bull market territory, prices are slipping back a little amid concerns the rise was overdone. The question of whether OPEC output curbs will be enough to underpin prices in the face of surging U.S. production remains unanswered. And OPEC itself is having enough trouble deciding when it will hold its next meeting. Total SA, the French major, will issue some production numbers but will be closely watched for anything it has to say about the state of crude markets.

Homes, Just Not in London

Much of the debate and hang-wringing around Brexit and its impact on house prices centers on the capital, but keep in mind that most people in Britain live elsewhere. Persimmon Plc builds houses on the periphery of London but nothing central, so its results provide a clear insight into how the new home market is holding up in the U.K.’s regions. The fact it will update the market the same day parliament votes on Theresa May’s Brexit plan is just a happy coincidence.

©2019 Bloomberg L.P.