On Monday, Brexit secretary David Davis is set to to meet in Brussels with Michel Barnier, the EU’s chief negotiator, to begin formal talks on the process of untangling the UK from the bloc. The EU will focus on issues of citizens’ rights and the Brexit bill for the next few months, a sequence to which the UK had previously objected.
But, following the surprise election results earlier this month that left the UK with a hung parliament, those objections may now take a back-seat to the other elements of uncertainty that have been injected into its own longer-term plans.
June’s EU summit will also get underway on June 22 with a broad agenda. After a short speech from Theresa May, the UK prime minister, her delegation will leave on June 23, and Mr Barnier is expected to update remaining members on the current status of negotiations.
Investors will be watching closely to see what reactions come from both camps, now that the British elections have thrown a wrench into an already complicated and unpredictable proceeding.
MSCI and China – fourth time the charm?
China’s growing acceptance into international capital markets faces a watershed moment on Monday with a decision on whether a first batch of stocks listed on its $7tn domestic equity markets will be included into the world’s dominant emerging markets stock index.
MSCI will announce after the market close whether it would finally include China’s domestic A-shares in its global indices.
The US index provider last June delayed for a third straight year the A-shares’ inclusion into its benchmark $1.5tn emerging markets stock index, citing regulation worries and accessibility for global investors.
Based on the comments from Dallas Fed President Kaplan today, the Fed stance may be more dovish than Janet Yellen indicated.
“The Fed must be very patient and cautious in raising rates further,” he said. “I’m going to need to see that improvement in inflation.”
He spoke at the end of May and noted soft inflation then but said it wasn’t enough to alter his forecast, which is for three hikes this year. He didn’t reiterate that forecast today but he wasn’t specifically asked.
The tone from Kaplan is closer to what the market expected from Yellen this week. The widespread belief was that she would signal that the Fed wouldn’t move until it had more confidence on inflation or saw definite progress. Instead, she brushed aside weak prices as a confluence of one-off factors that will fade.
Kaplan’s comments are an early sign that the Fed may be less inclined to hike again than Yellen indicated. That’s a negative sign for the US dollar that hasn’t been picked up by the market but it will be if other Fed speakers hit the same note.
The major stock indices are ending the day mixed. The big news all day was the Amazon purchase of Whole Foods by Amazons. Visions of all food stores closing and Amazon feeding and delivering to the world was the theme (I kinda like going grocery shopping, and eyeing the bargains. Whole Foods is nice but expensive).
Amazon ended the day up $23.54 or 2.44%. The immediate damage was to the likes Target (down -5.14%), Kroger (-9.24%), and Wal-Mart (-4.65%). The drug stores were also sharply lower on expectations they will be the next in the cross hairs. Honestly, that makes more sense to me if it means lower costs. I don’t really care about delivery. The drug store is a mile away (I should walk there to get any prescriptions).
Anyway, the S&P is ending unchanged. The Dow is up. The Nasdaq is down.
Dow up 24.38 to 21384.28 (+0.11%)
S&P was up 0.69 points or 0.03% to 2433
Nasdaq was down -13.74 points or -0.22% to 6151.75.