Daily Briefing: Johnson’s “do or die” Brexit challenge

LONDON (Reuters) – Urged on by hardcore Brexiters, Boris Johnson has made his campaign for the premiership all about one date: Oct 31.

His comment yesterday that the UK would be leaving the EU by then “do or die” has captured newspaper headlines this morning and came with a challenge to his rival Jeremy Hunt to make a similar commitment.

The hardline stance was further confirmed by news that the eurosceptic Iain Duncan Smith had been appointed as “chairman” of the Johnson campaign in the final stages.

Separately, even fellow Brexiter Trade Minister Liam Fox has flatly contradicted Johnson’s assertion that Britain could use international trade rules to ensure tariff-free post-Brexit trade. But such is the mood of this campaign that details like that hardly seem to matter.

Defence ministers from the 29 countries that make up NATO gather in Brussels today for a meeting scheduled to cover everything from Russia’s breach of the Cold War-era INF Treaty to Afghanistan.

Acting U.S. Defense Secretary Mark Esper also wants to recruit support from NATO allies this week for the United States in its stand-off with Iran. Ahead of the talks he called on NATO members to join with Washington in expressing “concern, outrage” about Iran.

Denmark late on Tuesday became the third Nordic country this year to form a leftist government after Social Democratic leader Mette Frederiksen clinched terms for a one-party minority government.

Danes have become fed up with spending cuts by successive governments that have resulted in worsening welfare services and so many turned to Frederiksen, who campaigned notably for making businesses and the wealthy pay more through higher taxes. Finland and Sweden also picked Social Democrat-led governments earlier this year.


A U.S. interest rate cut as soon as next month may be in the works, but it’s unlikely to be the aggressive 0.5 percentage point move that many in world markets had begun to expect.

In a delicate piece of expectations management, and amid a daily barrage of criticism from the White House, Federal Reserve chief Powell on Tuesday restated the Fed’s independence and insisted it should not over react to short-term developments – even though he clearly flagged concern about the weakening domestic and global economies and effectively signalled the Fed was considering an easing of policy. Disappointing U.S. consumer confidence and housing data on Tuesday reinforced that.

As if to underline the Fed nuance, St Louis Fed chief Bullard earlier said he didn’t think the economy needed a 50 basis point cut as soon as next month, even though rates should be lowered by that amount by year-end.

The net effect in the futures market was to halve the percentage chance of a 50bp easing in July to about 20%, while leaving a quarter point move fully priced. Ten-year Treasury yields nudged back higher overnight to regain a toehold above 2% and the dollar’s DXY index recovered lost ground.

Dollar/yen bounced back above 107, with euro/dollar balking at $1.14 and slipping back too this morning. After six straight days of gains, gold prices staged their biggest one-day fall since April.

Fed aside, the noises surrounding the critical G20 summit this weekend and the bilateral meeting between U.S. President Trump and China’s President Xi were mixed. While U.S. officials indicated hopes that the meeting would restart trade talks and defer next month’s tariff rises, they stressed that Trump would not bring any concessions to the table.

Wall St stocks fell again, with the S&P500 taking the incoming economic data and Fed message badly and dropping almost 1% for the first time this month. U.S. stock futures were flat first thing, with European futures playing catch up after the Powell set-piece and falling 0.3%.

Major Asia bourses were steady, with Japan’s Nikkei underperforming with losses of 0.5%. New Zealand’s dollar was firmer as its Reserve Bank left interest rates unchangedas expected but said easing may be needed over time.

Elsewhere, Brent crude oil prices jumped above $66 for the first time this month after an unexpected drop in U.S. crude stockpiles and amid anxiety about the war of words between Washington and Tehran.

In Europe, the policy attention turns to the Bank of England. Governor Carney and several of his senior policymakers testify to parliament later in the day about their economic forecasts, interest rate guidance and latest inflation report.

With markets priced for another cut in BoE rates over the next year in line with global trends – the BoE’s persistent message that a rate hike is more likely than a cut will be examined closely yet again. Sterling was lower first thing.

Euro zone economic soundings were mixed early on Wednesday. German consumer morale fell for the second time in a row heading into July, a survey showed, but French consumer confidence beat forecasts for the month.

On the corporate news front, EU chipmakers are back in focus after Micron reported better-than-expected results. The news could fuel a relief rally in Infineon, Siltronic, STMicro, Dialog Semi and AMS which fell after Broadcom’s warning in mid-June.

Bus and rail operator Stagecoach reported higher annual profit even as it is set to lose three important rail franchises that could wipe off 1 billion pounds from the company’s books going forward.

Thyssenkrupp shares were seen rising 1.7% on a report of a possible takeover offer by Kone for the German company’s elevator business. European apparel retailers continued to report weak results: Sweden’s Kappahl reported a sharp drop in third-quarter profits and the UK’s Bonmarche warned of challenges in the clothing market, exacerbated by unseasonal weather in the UK.

UK smallcap RPS was seen 10-20% lower after a profit warning due to weak performance in Australia. UK tobacco stocks were seen 1% lower after San Francisco voted on Tuesday to ban sales of e-cigarettes.