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Brexit Bulletin: May Drops Single Market Hint

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  • May Drops Single Market Hint

Theresa May has had a torrid start to 2017. On Sunday she made a bid to take back control, signaling that regaining control of immigration and lawmaking are her key priorities in upcoming Brexit talks, even if that costs Britain membership of the single market.

The prime minister told Sky News on Sunday that leaving the European Union will be about “getting the right relationship, not about keeping bits of membership.”

“We are leaving. We are coming out. We are not going to be a member of the EU any longer, so the question is what is the right relationship for the U.K. to have with the European Union when we are outside,” she said.

“We will be able to have control of our borders, control of our laws, but we still want the best possible deal for U.K. companies to be able to trade in and within the EU and European companies to operate and trade in the U.K.”

A report released on Monday by the think tank Civitas outlined how U.K. exporters could be compensated if May can’t strike a free trade deal. It suggested that by levying £13 billion ($15.9 billion) of tariffs on European products, the government could craft an £8.8 billion package of support based on research credits, cash for disadvantaged regions and cheaper energy bills.

May also used the interview to deny the government’s plan to exit the EU is “muddled,” saying she’ll unveil details of her strategy in the coming weeks.

In a bid to broaden her country’s political agenda beyond Brexit by promoting domestic issues, May will on Monday unveil a plan to “transform” attitudes about mental health. Meanwhile, Foreign Secretary Boris Johnson is in New York to meet advisers to President-elect Donald Trump, who tweeted over the weekend that he will meet May in the Spring.

Weekend Wrap

Trade Secretary Liam Fox has identified 50 nations as potential markets as he urges businesses to take advantage of export opportunities, the Press Associated reported. Donor Andrew Cook warned the Conservative Party it will get no more money from him if May withdraws from the single market, according to The Times. Canadian trade expert Jason Langrish told the Observer that Britain risks a “catastrophic Brexit” because a trade deal could take a decade to strike.

Ivan Rogers, who quit last week as ambassador to the EU, told former Prime Minister David Cameron before Christmas that May was botching Brexit, the Sunday Times said. The Mail on Sunday reported that Trump is considering naming Brexit-supporter Professor Ted Malloch as his envoy to Brussels. The Telegraph says takeovers and investment deals in the British tech sector rose by 40% to a new high last year despite the Brexit vote. The Daily Express reported the U.K. wants a share of the 42,000 bottles of wine owned by the EU.

Test for Shoppers

British consumers, who helped the economy emerge largely unscathed from the Brexit vote, now face their next big health check.

Last week Next offered a grim outlook for 2017 following a downbeat holiday selling season. Now Marks & Spencer, department-store chain Debenhams, grocer J Sainsbury and other retailers are poised to provide business updates.

Their updates should reveal clues about any changes to household spending patterns, and whether the economy will continue weathering the U.K.’s decision to leave the EU, according to Bloomberg’s Jill Ward and Sam Chambers. A sharp upswing in inflation in expected this year. That, and uncertainty over the economic outlook could test how willing households are to keep on splurging.

Brexit Bullets

  • Almost half of companies see more risk than opportunity in 2017, says manufacturers organization
  • FTI consulting poll of 161 executives finds 51 percent predicting Brexit will benefit their businesses
  • German Vice Chancellor Sigmar Gabriel tells Der Speigel that an EU breakup is no longer inconceivable
  • Merkel to deliver first key speech of 2017 on Monday about future of Europe
  • 75 percent of continental academics in U.K. “more likely to consider leaving” after Brexit, says poll

On the Markets

The pound fell against the dollar and euro in Asian trading after May’s hints about the single market.

By contrast, the FTSE 100 last week logged its fifth successive weekly gain, the longest winning streak since before last year’s referendum.

According to Chris Hughes of Bloomberg Gadfly, such gains may explain why foreign takeovers of British companies have been surprisingly few given the fall in sterling.

Investors moved quickly to price in the benefits weaker sterling would give U.K.-listed companies, such as Arm Holdings, that derive a large portion of their revenue from overseas. Companies drawing at least 75 percent of their revenue from outside the U.K. are up about 22 percent since the referendum. That cancels out the pound’s 16 percent fall against the dollar in the same period.

According to Chris Hughes of Bloomberg Gadfly, such gains may explain why foreign takeovers of British companies have been surprisingly few given the fall in sterling.

Investors moved quickly to price in the benefits weaker sterling would give U.K.-listed companies, such as Arm Holdings, that derive a large portion of their revenue from overseas. Companies drawing at least 75 percent of their revenue from outside the U.K. are up about 22 percent since the referendum. That cancels out the pound’s 16 percent fall against the dollar in the same period.

And Finally…

Chastened by how the economy proved more resilient in the wake of the referendum than they anticipated, economists at HSBC and Morgan Stanley are hedging their bets slightly this year.

While both are still predicting slowdowns, each last week outlined scenarios in which the economy again tops expectations.

For that to happen in Morgan Stanley’s eyes there would need to be a “Goldilocks Brexit” in which the U.K. and EU enjoy what the bank’s analysts called a “gentle” split, resulting in better inflation and unemployment pictures than they now project.

Over at HSBC, economist Liz Martins still thinks Brexit will be “disruptive, peppered with uncertainty and detrimental to growth.” But she added that negotiations could go smoothly, allowing the breakup to be extended over time with London-based banks perhaps allowed continued access to the bloc for a while. That might encourage businesses to keep investing and sterling to gain by enough to cool inflation and prompt consumers to spend, she said.

 

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

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Crude Oil Holds Steady Above $55 Per Barrel on Tuesday

Brent Crude oil, against which Nigerian crude oil is priced, rose from $54.46 per barrel on Monday to $55.27 per barrel as of 9:03 am Nigerian time on Tuesday.

Last week, Brent crude oil rose to 11 months high of $57.38 per barrel before pulling back on rising COVID-19 cases and lockdowns in key global economies like the United Kingdom, Euro-Area, China, etc.

While OPEC has left 2021 oil demand unchanged and President-elect Joe Biden has announced a $1.9 trillion stimulus package, experts are saying the rising number of new cases of COVID-19 amid poor vaccine distribution could drag on growth and demand for oil in 2021.

On Friday, Dan Yergin, vice-chairman at IHS Markit, said in addition to the stimulus package “There are two other things that are going with it … one is of course, vaccinations — in the sense that eventually this crisis is going to end, and maybe by the spring, lockdowns will be over.”

“The other thing is what Saudi Arabia did. This is the third time Saudi Arabia has made a sudden change in policy in less than a year, and this one was to announce (the) 1 million barrel a day cut — partly because they are worried about the impact of the surge in virus that’s occurring,” he said.

Also, the stimulus being injected into the United States economy could spur huge Shale production and disrupt OPEC and allies’ efforts at balancing the global oil market in 2021.

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Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

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Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

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Crude Oil

OPEC Says Uncertainties Remain High in 2021

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OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

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