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Good morning. A no-deal Brexit has become a less likely prospect, a downed drone is raising U.S.-Iran tensions and banks had a miserable first half. Here’s what’s moving markets.
Tougher No-Deal
The U.K’s Parliament backed an amendment that will make it much tougher for the next prime minister to pull the country out of the European Union without a deal, a relatively predictable move given the way lawmakers have voted on Brexit in the past. For whomever takes up residence at 10 Downing Street next, it may seem like a defeat on the face of it but it could end up helping to persuade MPs that if they don’t back the current deal negotiated by Theresa May, they risk blocking an exit altogether. Note, too, fresh warnings about the financial sector’s access to European markets.
Downed Drone
Tensions between the U.S. and Iran keep ramping up and escalated further after U.S. President Donald Trump said his military downed an Iranian drone that had flown close to an American warship. Keep watching for the impact the tensions will have on an already volatile oil price. It also puts more pressure on Europe to find what already seems an impossible way to save the Iranian nuclear deal. One quirk? Iran’s currency is soaring.
Bank Woes
Not that it wasn’t expected, but the second quarter appears to have been pretty rough for the banking sector. Europe’s banks haven’t started reporting season yet but the numbers from their U.S. peers won’t spark much optimism, with trading desks experiencing the worst first half of a year for a decade. On the rates front, traders are now positioning on two sides of the divide on potential Federal Reserve interest rate cuts, split between those optimistic about the economy and those who see rates headed towards zero.
Phone Call
U.S. and Chinese trade negotiators talked by phone on Thursday, the second call they’ve held since a June summit where a truce in the trade war was reached. There are very few details of what was discussed or the next steps, but markets may at least be a little soothed by the two sides still talking given that tensions remain relatively high. At least one Federal Reserve official says cutting interest rates may also help to soften the blow trade war-related uncertainty is dealing to the economy.
Coming Up...
Bets on the Fed cutting rates helped Asian stocks higher, with European futures also pointing to a positive open. Oil prices are recovering a little ground having been under pressure this week. It’s a relatively data-light day but keep eyes trained on the European tech sector going into today’s session after Microsoft Corp., the software giant and the world’s most valuable public company, beat estimates. That could help tech recover after Germany’s SAP soured the mood on Thursday.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Amazon’s most ambitious project: a convenience store.
- The U.K.’s NHS is sitting on a data goldmine.
- Crime cartels have “unprecedented” influence in Southeast Asia.
- Nigerian music’s about to go global, thanks to Beyonce and the Lion King.
- U.S. soccer star Alex Morgan is looking to launch a media venture.
- Solving traffic problems with artificial islands.
- The future of the American city may be a childless one.
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To contact the author of this story: Sam Unsted in London at sunsted@bloomberg.net
To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net
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