Welcome to your morning markets update, delivered every weekday before the European open.
Good morning. It’s two years to the day since the U.K. asked the European Union for a divorce, but how the separation eventually pans out is still anyone’s guess. Meanwhile, Asia stocks gained as U.S.-China trade discussions recommenced and one of the U.K.’s biggest drugmakers announced its largest acquisition in 12 years. Here’s what’s moving markets.
March 29, 2019
On the day that Theresa May had originally hoped to lead the U.K. out of the European Union for good, Brexiteers are having to keep their independence day champagne on ice. With the exit date delayed until at least April 12, a stripped-down version of the prime minister’s lambasted divorce deal will be voted on in Parliament today. The agreement’s fateremains firmly in the hands of Northern Ireland’s Democratic Unionist Party, who still aren’t playing ball. The pound is higher after slumping on Thursday.
Weeks or Months
Investors in Asian stocks were upbeat as U.S.-China trade talks resumed in Beijing, with Treasury Secretary Steven Mnuchin saying officials enjoyed a “very productive” working dinner. That was despite White House economic adviser Larry Kudlow causing some concern by saying the Trump administration is prepared to keep negotiating for weeks or even months, if necessary. The dollar is on course for a second weekly rise after U.S. central bankers overnight said the economy was still on track for solid growth this year, while suggesting calls for a rate cut might be premature. But be warned, economists aren’t always on the money.
Angela’s Angst
Angela Merkel doesn’t want us to hear the creaks in Europe’s largest economy. She’ll be leaving soon, and there’s some concern that if Germany’s growth takes a hit on external risks like China and Brexit, the public might take note ahead of an election. After data showed slowing inflation on Thursday, we’ll get the latest reading of German unemployment today. But the chancellor may not need to panic just yet – it’s already at an unprecedented low, and is expected to fall again.
Pascal Pounces
Pascal Soriot couldn’t sit on the sidelines any longer. The AstraZeneca Plc chief executive joined a recent wave of cancer treatment deal-making last night, having watched global rivals like GlaxoSmithKline Plc and Eli Lilly & Co. snap up oncology assets in recent months. Astra will pay Japan’s Daiichi Sankyo up to $6.9 billion to jointly develop and commercialize a breast- and gastric-cancer treatment called trastuzumab deruxtecan. Astra’s biggest deal since 2007 will be partly funded through the sale of as much as $3.5 billion of shares, which could weigh on the stock this morning.
Coming Up…
A final reading of quarterly U.K. gross domestic product is expected to be steady at 0.2 percent, but the data will surely be overshadowed by events in Westminster. Meanwhile, European Central Bank rate-setter Benoit Coeure speaks in Paris, after some of his colleagues emphasized downside risks to growth earlier in the week. We’ll also get a trade balance update from Turkey, following a turbulent week for the country’s markets.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
And finally, here's what Mark Cudmore is interested in this morning
Take the forthcoming quarter-end reviews with a large sack of salt. Whether financial commentators or investor letters, or bulls versus bears, there’s opportunity for a fair amount of misleading hyperbole. Yes, it has been the best quarter for global equities in seven years. But that should only be presented in the context that the fourth quarter of 2018 was the worst in more than seven years. There are similar size and scopes to be used across a variety of assets. Past performance isn’t an indicator of future returns. What’s perhaps most relevant is that global equities still aren’t expensive on a historical basis. The one-year blended-forward estimated price-earnings ratio for the MSCI All-Country World Index remains below its five-year average. Same for the price-to-free cash flow ratio. The price-to-book ratio, at 2.22, may be above its five-year average, at 2.13, but still well off the 2018 high of 2.46.
Mark Cudmore is a Bloomberg macro strategist and the Managing Editor of the Markets Live blog. To read more, go to MLIV<GO> on the terminal.
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