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The fog of Brexit shows no signs of clearing

European markets have opened on a modestly positive note, despite a negative lead from both US and Asia markets, as growth concerns continue to temper investor sentiment.

Bond prices have continued to stay firm, driving yields lower with the US 10-year yield falling to its lowest levels since 2017, while the German government sold 10-year paper yesterday at a negative yield of -0.05%, as yields fell into negative territory for the first time since 2016.

This suggests investors are not only concerned about growth prospects in Europe, but also about a deflationary trap in the manner of the type experienced by Japan over the last 30 years, against a backdrop of expectations that central banks will be forced to ease policy further in the coming months.

It is becoming increasingly apparent that the ECB’s decision to stop its asset purchase programme at the end of last year was premature, and that despite ECB president Mario Draghi’s insistence that growth will pick up, recent data doesn’t appear to support that assertion.

Reports of progress in US, China trade talks don’t appear to be offering much in the way of comfort to investors either, despite reports of some new proposals on tech transfer and trade from Chinese officials.

In company news Germany’s Bayer is expected to be in focus again after losing another trial over claims that the weed killer “Roundup” causes cancer.

If Theresa May was hoping that offering to step down as prime minister would peel away enough votes to have a go at pushing her deal through Parliament at the third time of asking, she was mistaken. It would appear that most MPs dislike her deal more than they dislike her as prime minister.

For months now MPs in Westminster have been complaining that they haven’t been given a chance to explore other options when it comes to finding a way out of the Brexit logjam, while Mrs May pushed back saying that there was little point in looking at options that either wouldn’t find support, or would never be accepted by the EU.

Having finally snatched hold of the order paper in order to explore these options MPs managed to agree to hold eight non-binding votes on a number of different options from revoking article 50 to leaving without a deal. As it turns out the prime minister was correct in her view that the votes wouldn’t offer anything conclusive as once again MPs came back with a range of No’s across the board. In the words of Mark Carney a few weeks ago “the fog of Brexit” looks set to be with us for a few more weeks yet. 

Theresa May’s deal was not voted on with the Speaker of the House insisting that it wouldn’t make it on the order paper without significant changes. In any case this last point remains moot given that it still looks falling well short of the necessary votes to pass, given that the Democratic Unionists still won’t support it, even with Theresa May offering to step down once the deal is passed. Furthermore there are still a good number of MPs from the Conservative Party ERG wing who still remain implacably opposed to it, and would probably never vote for it. 

What we did find out was there were a couple of options that, while they still lost, they were the best of a losing bunch so to speak. There was a customs union option which got 264 votes while there was a second referendum option which got 268 votes. These were the only two options that received more votes than the prime minister’s deal last week, however on both of these non-binding votes there were a significant number of abstentions.

Last night’s votes also don’t tell us that much about what the EU will accept even if MPs agree, which means that for all the noise about the withdrawal agreement MPs are attempting to steer the next stage of the negotiation process, which seems a little like putting the cart before the horse. If this deadlock continues past 12 April, MPs may well have to look at preparing to stand MPs in the upcoming European Parliamentary elections.

We are now at the stage that MPs have shown that they don’t want to vote to leave, but also don’t want to vote to stay. It's turning into more a case of Little Britain than Great Britain, or in the words of Vicky Pollard in answer to the question do you want to leave or not, "yeah,but no but yeah but". Fortunately, sterling traders appear to have stopped listening, with the pound only modestly weaker after last night’s events.

On the data front we’ll get a final look at US Q4 GDP, which is expected to see GDP growth adjusted down to 2.4% from 2.6% in the latest update on US economic activity. Last weeks Fed meeting saw US officials downgrade their expectations for the outlook for interest rate rises, on the back of subdued inflationary pressure, and concerns over a slowing global economy.

It’s also a big day for the IPO market with ride-sharing app Lyft listing on the Nasdaq with a valuation coming in at over $20bn, with 30.77m shares listed between $62-$68 a share. Management are hoping to raise a total of around $2bn, and the shares look set to a decent pop higher when they open for trading tomorrow, given reports that the book was oversubscribed within two days.


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