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Europe falters, Brexit no close to resolution

Theresa May will have little to offer to EU leaders at a summit next week as a longer Brexit extension is becoming the most likely option.

Centtrip: Markets ponder need for US rate cut

The Eurozone suffered two major blows yesterday, 4 April. German factory orders had their biggest annual fall in a decade in February as the industrial sector struggles to cope with US-Chinese trade tensions, global growth fears, Brexit uncertainties and the recent diesel emissions scandal. The latest figures showed a 4.2 per cent month-on-month drop and an 8.4 per cent year-on-year slump.

Meanwhile, Rome may be on a collision course with Brussels. Bloomberg reported Italy was set to cut its growth forecast for 2019 from 1 per cent to 0.1 per cent and predicted a budget deficit would widen from 2.3 per cent to 2.4 per cent, which is further away from the 2.04 per cent target the Italian government agreed with the European Commission.

The news had a limited reaction from the currency market as fears over Brexit countered problems in the Eurozone. The Pound fell throughout the day, having traded at 1.3060 against the Dollar and 1.1636 against the Euro, before recovering slightly overnight.

Brexit breakdown

After two days of talks with the Labour Party, Theresa May is still to reach any solid common ground on Brexit ahead of a crucial EU summit on 10 April, with 10 Downing Street saying both sides were “mindful of the need to make progress”.

Meanwhile, the House of Lords began debating the Cooper bill, which was voted through Parliament on Wednesday, 3 April and forces the Prime Minister to request a longer delay to Brexit. The debate is expected to continue on Monday, cutting it very fine until the EU summit.

Outside of Brexit, the focus today will be on the US labour market, including non-farm payroll (NFP) and average earnings data. The usual precursor to NFP, the ADP employment report came in much weaker than expected, so surprises could be all around. Analysts predicted 190,000 jobs would have been added in March. However, with the US labour market already at full capacity (when unemployment is below 5 per cent), the focus will be on the earnings data – a good guide to consumers’ spending ability – for an indication on the future health of the economy.

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