Mar 22, 2019, by Lorcan Roche Kelly
European Leaders gave British Prime Minister Theresa May another two weeks to work out what she wants to do with Brexit. Under the deal agreed, if she cannot get lawmakers in London to endorse her withdrawal agreement she will have until April 12 to decide whether to leave without an agreement or ask for a much longer extension. In the – probably unlikely – event that the already twice defeated agreement is passed, then the U.K. will leave the European Union on May 22. Market reaction to the deal was limited, as it does little to remove the uncertainty surrounding Brexit, and so far, only offers a short extension to the deadline.
The manufacturing sector in Europe’s largest economy sunk even further into contraction in March, with IHS Markit’s purchasing manager’s index for the sector falling to 44.7 for the month, the lowest level since 2012 and well below economist’s expectations for a reading of 48. The yield on the German 10-year bund briefly turned negative in the wake of the disappointing data. The reading was enough to drag composite PMI for the entire euro region lower – it also came in below expectations at 51.3 for the month. Markit’s PMIs for the U.S. are due to be published at 9:45 a.m. Eastern Time.
The back and forth over whether a trade deal between the U.S. and China is imminent – or even likely – continues, with American officials playing down the chances of a breakthrough soon. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing for meetings at the end of next week, and Chinese Vice Premier Liu He is expected in Washington in April. The current goal is to reach an accord after Liu’s trip, though President Donald Trump has said he wants a deal that can be enforced, not one that’s quick.
Overnight, the MSCI Asia Pacific Index climbed 0.2 percent while Japan’s Topix index closed 0.2 percent higher as a rally in technology companies outweighed a plunge in pharma stocks. In Europe the Stoxx 600 Index was 0.5 percent lower at 5:45 a.m. as the miserable German manufacturing data weighed on the region’s stocks. S&P 500 futures pointed to a drop at the open, the 10-year Treasury yield was at 2.496 percent and gold was higher.
At 10:00 a.m. U.S. existing home sales numbers for February are released, with January wholesale inventories published at the same time. The weekly shale activity update comes at 1:00 p.m. with the Baker Hughes rig count. At 2:00 p.m. the Treasury releases its February budget statement which is expected to show a large deficit for the month. In corporate news, Tiffany & Co. reports earnings.