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Sentiments Stabilized after German Confidence Data, Brexit to Take Spotlight Again

Market sentiments generally stabilized today after initial selloff in Asia. While major European indices are still in red, losses are so far very limited. German 10-year bund yield even managed to turn positive briefly. Better than expected German Ifo Business Climate gave sentiment a mild lift. Yet, the picture isn’t cleared as manufacturing sector remained weak. With an empty economic calendar in North America, focus will turn to Brexit debate in the Commons.

UK Prime Minister Theresa May just completed her Cabinet meeting without any comments to the press. The discussions there were reported to be positive but inconclusive. It’s now uncertain whether indicative vote on Brexit will be tabled today, or will be pushed after another meaningful vote on Tuesday. Meanwhile, there seems to be a tacit understanding that for some Brexiteers, May’s future is linked to the MV3.

In the currency markets, Yen and Canadian Dollar are currently the weakest ones, followed by Dollar. Sterling recovered some ground but remains clueless. Australian and New Zealand Dollar are the strongest ones. In Europe, FTSE is down -0.65%. DAX is down -0.04%. CAC is down -0.12%. German 10-year bund yield is up 0.0034 at -0.008. Earlier in Asia, Nikkei dropped -3.01%. Hong Kong HSI dropped -2.03%. China Shanghai SSE dropped -1.97%. Singapore Strait Times dropped -0.91%. Japan 10-year JGB yield dropped -0.119 to -0.085.

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EU completes April 12 no-deal Brexit preparation

In a statement released today, EU said it completes the preparations for no-deal Brexit on April 12. It also noted that it is “increasingly likely” that UK will leave EU without a deal. EU also urged all EU citizens and businesses to continue informing themselves about the consequences of a possible “no-deal” scenario and to complete their no-deal preparedness.

EU’s no-deal contingency measures cover PEACE programme, EU budget, fishing rights and compensation, financial services, air connectivity and safety, road connectivity, rail connectivity, ship inspects, re-alignment of the North Sea – Mediterranean core network corridor, climate policy, Erasmus+ programme, social security entitlements and Visa reciprocity.

EU explained again that in a no-deal scenario, UK will “become a third country” without any transitionary arrangements. And this week “cause significant disruption for citizens and businesses”. In such case, relations between UK and EU will be government by general international public law, including rules of the World Trade Organization. Tariffs will immediately apply at the borders. And these controls could sauce significant delays at the border.

German Ifo rose to 99.6, resilient economy except manufacturing

Germany Ifo Business Climate improved to 99.6 in March, up from 98.7 and beat expectation of 98.5. That’s also the first increase following six declines in a row. Current Assessment rose 0.2 to 103.8, beat expectation of 102.9. Expectations gauge also rose to 95.6, versus consensus of 94.0.

Looking at the details, manufacturing dropped from 9.1 to 6.6, seventh decline in a row. But services rose from 21.3 to 26.0. Trade rose from 4.9 to 8.2. Construction rose from 18.0 to 20.3.

Ifo President Clemens Fuest noted “sentiment among German business leaders has improved somewhat”. And “companies are somewhat more satisfied with their current business situation, and they are decidedly more optimistic regarding business in the coming six months.” He added “the German economy is showing resilience.”

Ifo economist Klaus Wohlrabe said, “Brexit uncertainty is particularly hitting the industrial sector. The other sectors don’t appear to be affected” .

Fed Harker: Risks tilt very slightly to the downside, at most one hike this year

Philadelphia Fed President Patrick Harker said in a sp