Theresa May Stepping Down as U.K. Prime Minister

May 24, 2019

The effective date of Prime Minister May’s resignation is June 7th. Her decision followed an emphatic parliamentary defeat on her last attempt to secure approval of a managed Brexit and EU parliamentary elections. While the exact result of how British voters cast their ballots will not be known for a while, exit polls point to a catastrophic collapse for Conservatives in favor of a one-issue Brexit Party. That group seems to have captured fives times more votes than did the Conservatives. Next in the Brexit saga will be an intra-party battle to lead the Conservative Party. The winner will become prime minister. At this point, a no-deal Brexit in October looks conceivable again.

In the other big geopolitical event, U.S. President Trump hinted that restrictions could be eased against the Chinese tech firm Huawei, which the U.S. has branded a security risk, but only in conjunction with broader concessions by Beijing leaders acquiescing to America’s trade policy demands.

The dollar overnight fell 0.2% against the yuan, loonie and sterling. The greenback rose 0.1% against the yen and Aussie dollar, fell 0.3% relative to the kiwi, and is unchanged on balance versus the euro and Swiss franc.

Stock markets mostly rose overnight. In action around the Pacific Rim, share prices rose 1.6% in India (where PM Modi has apparently won another term), 0.4% in Indonesia, and 0.3% in Singapore and Hong Kong but fell by 0.7% in South Korea, 0.6% in Australia and 0.2% in Japan. Equities in Europe show gains of at least 1% in Germany, Spain and Italy, 0.9% in France and 0.7% in Great Britain.

West Texas Intermediate crude oil rebounded 1.3% but remains south of $59.0 per barrel, and gold slipped 0.3% and is below $1,290 per ounce.

Ten-year sovereign debt yields rose two basis points in the U.K., 1 bp each in the U.S. and Germany, but fell two bps in Japan. Minutes from the ECB’s April Governing Council meeting suggest that the monetary stance in the euro area will be relaxed further at next month’s meeting when new forecasts are to be unveiled.

Japanese CPI inflation accelerated in April to 0.9% but by no more than analysts were anticipating. Excluding both fresh food and energy, consumer prices were only 0.6% higher than a year earlier.

On-year real GDP growth in Singapore of 1.2% in the first quarter was the weakest advance in 39 quarters.

Malaysian CPI inflation stayed at a mere 0.2% in April, and core inflation of 0.4% was also minuscule.

New Zealand’s NZD 433 million trade surplus in April was a bit more than twice the size of the year-earlier surplus of NZD 200 million. The surplus over the last twelve reported months was NZD 5.5 billion in size, an increase of almost 45%.

British retail sales volume was flat on month but 5.2% higher than a year earlier. Excluding automotive fuel, sales grew 5.1% in February-April compared to a year earlier, and that beat market expectations.

The British monthly distributive trade survey index slumped 40 points to a reading of minus 27 in May. Shoppers are distressed about Brexit.

Spanish PPI inflation dipped to a 2-month low of 2.3% in April, while Finnish PPI inflation that month of 2.0% was at a 29-month low and down from 6.2% last August. Swedish producer prices decline 0.7% on month and to a 12-month rate of 4.9% in April from 6.3% in both February and March and 10.1% last September.

Austrian industrial production posted a year-on-year increase of 5.7% in March, lowest since December’s 4.4% pace.

Czech business confidence dropped 2.0 index points to a 35-month low in May, while consumer confidence in that economy climbed 1.3 index points to a 3-month high.

U.S. durable goods orders will be reported later today. So will Mexico’s GDP and current account. The U.S. and U.K. will be closed Monday for Memorial Day and the late spring banking holiday, respectively.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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