Daily Briefing: Raab to Northern Ireland as Brexit deal nears

LONDON (Reuters) – UK Brexit minister Dominic Raab heads to Northern Ireland today with a Brexit deal still snagged on future arrangements for the province’s border with Ireland to the south.

There is growing momentum around a scenario that would maintain the whole of the UK in a customs union with the EU until, at some point in the future, some more permanent solution can be found. That is a compromise that right now would risk rejection in parliament by hard Brexit party rebels.

On the flip side, if media reports and UK sources yesterday are to be believed, PM Theresa May is close to securing agreement with Brussels that would give UK financial services firms basic access to EU markets after Brexit.

That would be a win for May that would bolster her argument that her deal, while not perfect, is the best one on the table. Raab himself appeared so confident that the contours of an accord were now in place that he has told lawmakers he could meet them to discuss it on Nov. 21.

Downing Street has distanced itself from that timetable – but it has left behind the impression that the UK side at least believes agreement is now in sight.

Germany’s Angela Merkel will travel to Warsaw today to hold joint cabinet consultations with Poland’s eurosceptic government. To what extent she will also use the trip to raise concerns about rule of law and democracy in the country remains to be seen.

The wider question, now that Merkel has announced her retirement from politics, is whether she will have any sway at all in the foreign visits she conducts during the remainder of her mandate.

Some of her interlocutors may feel they can nod politely and wait for her successor to conduct any important business – the more so given the separate doubts about whether her coalition will last much into next year.

MARKETS AT 0755 GMT

The recovery across global stock markets from “red October” continued on Friday, on signs that icy U.S.-Chinese trade relations are thawing. U.S. President Donald Trump spoke with Chinese President Xi Jinping on Thursday and the two are scheduled to meet at the G20 in Buenos Aires later this month, raising hopes that the trade dispute between the two nations that has cast a dark cloud over the global economy and markets will be resolved.

Following last month’s steep fall, stocks are rebounding. The MSCI world index is up 3.6 percent this week, on track for its best week since February and among its top five weeks in several years.

Other badet markets are playing out as one might would expect, given the improvement in investor sentiment: the dollar is softer, bond yields are higher, credit spreads are narrowing and emerging markets recovering. It’s not all sweetness and light – following a batch of reports showing weak manufacturing and services activity from around the world on Thursday, shares in Apple fell 7 percent in after-hours trade after the tech giant said it would no longer report unit sales and that Christmas sales would be lower than expected.

The big economic data release on Friday is the U.S. employment report for October, while attention in Europe will also turn towards the latest bank stress test results and further company results as the third-quarter earnings season rolls along.

European bourses are set to join Wall Street and Asia in a the trade-war relief rally. Among the usual suspects likely to benefit the most from the news is Germany’s DAX and its mighty exporters, but also its car makers, who have been high-profile victims of Trump’s trade policy.

Tech stocks will probably struggle to join the fun. Apple’s results clearly were not encouraging, but it might not be that bad — iPhone suppliers in Asia shrugged off the news.

The European bank stress tests are already top news this morning, but it’s mostly curtain-raising at this stage as the results are only expected after the close. Leaks might provide some excitement: Banca Carige has emerged as “fragile” in the stress tests in a sample of six Italian mid-sized lenders, the newspaper Il Sole 24 Ore reported. Italian lenders are obviously under the spotlight with their heavy exposure to sovereign Italian debt, which is suffering from the populist government’s spending plans.

Other stock movers: Austrian lender Erste Group reports a higher-than-expected 25 percent rise in third-quarter net profit, driven by a strong performance in Eastern Europe. Barclays has picked Nigel Higgins, the deputy chairman of Rothschild & Co, as the company’s next chairman. British Airways owner IAG said most of its financial goals for 2019-2023 were unchanged from the previous period.

Emerging-market stocks see their biggest weekly leap in almost three years, up 6.2 percent, and emerging-market currencies are higher across the board.

— A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Jamie McGeever. The views expressed are their own —