Economy

Euro zone yields surge on Brexit deal agreement

Euro zone yields surge on Brexit deal agreement”

Northern Ireland's Democratic Unionist Party announced Thursday it can not support Boris Johnson's Brexit plan due to concerns over "customs" and "VAT" issues, in a major blow to British Prime Minister Boris Johnson just hours before he is due to appear in Brussels for last-ditch talks on a Brexit agreement.

Alternatively should the United Kingdom and European Union be able to hammer out at least the basis for deal ahead of the upcoming European Union summit then the skies the limit for the Pound, as we could see it rise to its best levels since the European Union referendum.

The prospects for a deal were reinforced after Brexit Secretary Stephen Barclay told a parliamentary committee that Prime Minister Boris Johnson will seek an extension on Saturday if a deal hasn't been reached by then.

The pair said: "As things stand, we could not support what is being suggested on customs and consent issues and there is a lack of clarity on Value-Added Tax".

European shares edged lower, even as fading optimism over the Brexit deal was offset by strong earnings from Sweden's Ericsson.

Wall Street rose as upbeat earnings from Netflix and Morgan Stanley affirmed a strong start to the USA reporting season, while the dollar fell against the euro as the common currency got a lift on the long-awaited Brexit deal.

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.34%. The 10-year yield was last 2 bps higher at 0.06%.

Shares in domestically focused British companies and Irish firms, which have been seen as a barometer on Brexit sentiment, also gave up initial gains.

Earnings season is dictating USA market moves, which has historically been the case, said Kristina Hooper, chief global market strategist at Invesco.

The S&P 500 climbed from the lows of the day after President Trump said a trade deal with China probably will not be signed until he meets with Chinese President Xi Jinping at the APEC summit next month in Chile. The Dow Jones Industrial Average fell 22.82 points, or 0.08%, to 27,001.98. The Japanese yen strengthened 0.08% versus the greenback at 108.79 per dollar.

The Pound Australian Dollar (GBP/AUD) exchange rate is now flat this morning, as markets begin to sober up after catapulting the pairing to a five-month high on Friday.

Elsewhere, Turkish stocks fell with government bonds after the USA brought a criminal case against one of the nation's largest banks, in what could be an escalation of Washington's efforts to reprimand Ankara for its military incursion into northern Syria. Brent crude, the global benchmark, rose 68 cents to settle at $59.42 a barrel. U.S. West Texas Intermediate crude rose 57 cents to settle at $53.93.

With Sterling possibly being overbought last week, there is certainly some scope for GBP selling this week, with GBP exchange rates likely to come crashing back down to earth if a deal can be not be found. "Retail sales were definitely on the weaker side and given that the consumer is one of the key pillars holding up the US economy, any weakness in consumer indicators is obviously a sign of concern", said Ellen Hazen, portfolio manager F.L. Putnam in Wellesley, Massachusetts.



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