The Brexit Vote in Focus despite not being the Final word

A very eventful week starts rather slowly with the big event today being the last day of the Brexit debate ahead of the vote in the UK House of Commons. Otherwise, key events this week are monetary policy decisions in the euro area, Norway and Switzerland, flash market PMIs and CPI inflation in the US and Sweden. Also, market focus will remain on global trade war concerns, general risk appetite and the oil price following Friday’s OPEC deal. With respect to Brexit, it seems unlikely PM Theresa May’s Brexit deal will be passed tomorrow despite her attempt to secure public and political backing. As a defeat is widely expected, markets would react to the size of the defeat, although we doubt the market reaction would be significant, as political uncertainty is likely to remain elevated. Many political analysts say it is likely that May will try to hold a second vote in the House of Commons at a later stage.

Friday’s non-farm payrolls disappointed slightly relative to consensus, with headline job growth, revisions and wage growth falling short of expectations. Meanwhile, we do not think markets should over interpret the release as the labour market still looks sufficiently strong for the Fed to gradually hike rates to the estimated ‘neutral’ 3.0%. On Friday, OPEC+ agreed to cut production by 1.2mb/d with effect from January 2019. The decision followed two days of back-and-forth negotiations. The output cut will be based on the level of production in October, but the country-specific production cuts will not be published even if Iran, Libya and Venezuela are exempt from the deal.