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Five Things You Need to Know to Start Your Day

Five Things You Need to Know to Start Your Day

(Bloomberg) --

Good morning. Theresa May took a gamble and appears to have lost already, trade tensions continue apace and investors are waiting for the Fed. Here’s what’s moving markets. 

May’s Last Stand

Another gamble by U.K. Prime Minister Theresa May appears to have fallen flat on its face. May proposed giving MPs a vote on putting her Brexit deal to a referendum in an attempt to win over Parliament over to her side and get her proposals through. The early indications are her deal is dead on arrival and calls for her resignation are getting louder. The pound had gained on the initial plans but that evaporated as the likelihood of failure increased. A similar fate may well await Brexit-sensitive stocks like housebuilders and government outsourcers on Wednesday. All the while, Nigel Farage’s Brexit Party is surging.

Huawei Tensions

The U.S. says Europeans are starting to come around to the threat posed by China’s Huawei Technologies Co., which has been joined at the corporate epicenter of the tensions in the trade war by up to five Chinese surveillance firms. American companies in China are now considering relocating or trimming investment. President Donald Trump is  planning support for American farmers hit by China’s retaliation and is attacking Democratic presidential nominee Joe Biden for minimizing the threat China poses. No wonder. Look how fast China’s economy is catching up to the U.S.

Fed Patience

The Federal Reserve will publish minutes from its last meeting after markets have closed but with four members of the board due to speak just on Wednesday, the broad strokes will likely already be known. The key will be in just how much consensus there was at the central bank on Chairman Jerome Powell’s statement that there was no strong will to move rates in either direction as traders and economists diverge. Eric Rosengren was the latest to say that the downside risks the U.S. economy faces are enough to convince him of the patience required on policy and James Bullard thinks the hike back in December may have “slightly overdone it.”

Currency Plays

Currency strategists are attempting to mark out where to go to best  play the trade war. Some see the Japanese yen strengthening as investors flee to safety, others think everything from the euro to South Africa’s rand and the Chilean peso will get hit hard. Shorting the Australian dollar and going long the yen is the hottest bet. Living its own story is the Turkish lira, where the cost of interventionist policies to protect the currency are starting to rack up.

Coming up...

There’s relatively muted trading in Asia on Wednesday as traders await more on the trade war and the Fed’s latest minutes. Trade concerns are overshadowing OPEC commitments to continue cutting crude output in the oil market, with WTI and Brent futures both slipping. European Central Bank President Mario Draghi is due to speak in Frankfurt, U.K. inflation figures are due and we’ll have results from high street stalwart Marks & Spencer Group Plc.

What We’ve Been Reading

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

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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