MORNING BID EUROPE-Panama fallout continues; Greek deal on hold

April 11, 2016

The “Panama Papers” revelations continue to seep into domestic politics in various countries. Seeking to take back the initiative after being on the defensive over his late father’s financial activities, British PM David Cameron will today announce legislation making companies criminally liable if employees aid tax evasion. Some commentators suspect pro-Brexit backers and media are playing the whole business up to damage Cameron and his standing as the main face of the “remain” camp. Elsewhere, after the departure of the Icelandic prime minister, Maltese premier Joseph Muscat is feeling the heat after the leaked papers showed two of his political allies had offshore accounts. Several thousand people took to the streets in Malta’s capital on Sunday to demand his resignation. Muscat says he is looking into the allegations before he takes any further steps.

Ukrainian Prime Minister Arseny Yatseniuk’s decision to resign on Sunday paves the way for Western-backed coalition parties to nominate an ally of President Petro Poroshenko to try to form a more stable government. That in turn should increase the chance that the IMF will disburse the next $1.7 billion tranche of loans, delayed since October. Parliament speaker Volodymyr Groysman, an ally of Yatseniuk, is seen as a likely successor. Some reformers at home and in the West may be disappointed by that and hope Finance Minister Natalia Yaresko, a U.S.-born technocrat, gets the job.

There had been hopes of a deal over the weekend between Greece and its international lenders, but one government source said after overnight talks in Athens this morning there were still “small details” to settle on pension reforms and how to regulate non-performing loans. Negotiations are scheduled to resume later Monday.

MARKETS AT 0645 GMT

This is a big week for Chinese data. Monday’s consumer price numbers were lower than forecast, cementing expectations monetary policy will be kept loose. This helped lift Asian shares, as measured by MSCI’s main Asia-Pacific ex-Japan index. Chinese stocks are up 1.4-1.6 percent. Oil prices, which rose sharply on Friday and boosted Wall Street, are slightly lower while the dollar is broadly down, hitting a new 17-month low vs the yen in Asian trade. European stocks should open flat to lower, according to index futures.

The yen hit 107.63 to the dollar, prompting the government to warn it could take steps. Last up 0.3 percent on the day at 107.76. This helped know Tokyo stocks, which closed down 0.4 percent. The euro is up 0.2 percent at $1.1421. Oil is down about 20 c a barrel at around $41.70 on a drop in U.S. inventories, forecasts of higher demand and prospects of an output freeze. Copper is up on a weaker dollar and gold is close to a three-week high around $1,248 an ounce. German government bond yields may be heading for record lows, not least because there is a lot of money from redeemed bonds looking for a home. Ten-year yields last down 1 basis point at 0.9 percent. Treasury yields also lower on the latest soothing words from Fed officials.

Among European shares, SAP seen opening lower after it warned first-quarter results would be weaker than expected, while Gategroup’s shares should be boosted after China’s HNA Group made an agreed offer for the firm. Eyes on Standard Chartered after Bloomberg said the company was said to start a $4.4 billion Asian asset sale; and on Daily Mail following a WSJ report said it was in talks with several private equity firms about a possible bid for Yahoo. Italian banks could be also in focus ahead of a meeting with the Treasury and central bank later on Monday to thrash out a plan to set up a state-backed fund to buy bad loans and plug capital shortfalls.

Upcoming data/events/themes for market reports on Monday:

– Ukrainian PM to resign. Bonds firmer.

– UK BRC retail sales

– Italian industrial orders

 

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