The Jim Bakker Show

Sterling skids to three-month low as ‘hard Brexit’ fears bite

By Jemima Kelly

LONDON (Reuters) – Sterling skidded to its lowest levels – bar a “flash crash” in October – in 32 years on Monday, hit by fears that Prime Minister Theresa May will say on Tuesday that Britain is set for a “hard” Brexit out of the EU and its single market.

Sterling fell as much as 1.5 percent against the dollar and 2.5 percent against the yen. That shifted the spotlight away from the greenback, which has come under pressure in recent days as investors ponder U.S. President-elect Donald Trump’s likely economic policies after he takes office on Friday.

The pound plunged to $1.1983 <GBP=D4> in early trade in Asia, depths not seen since a bout of thin liquidity triggered a “flash crash” on Oct. 7 that wiped as much as 10 percent off the pound in a matter of minutes. Apart from that, it was the lowest level since May 1985.

By 1230 GMT (7:30 a.m. ET) sterling had managed to climb back above $1.20, but was still trading down more than 1 percent on the day at $1.204.

Dealers said the market was reacting to various media reports over the weekend that said May would signal plans for a “hard” Brexit in her speech on Tuesday, saying she’s willing to quit the European Union’s single market in order to regain control of Britain’s borders.

“Every time there’s ‘hard Brexit’ headlines, that triggers a fresh bout of selling sterling,” said MUFG currency analyst Lee Hardman, in London. “It’s almost impossible to see Europe allowing the UK to remain a full member of the single market if it wants to regain control of the border and the laws and wants to strike its own agreements.”

Hardman added that the weekend reports were “not really new news”, as May’s government has consistently pointed toward giving priority to immigration controls over single market access, and that was why sterling had not fallen further in London trading hours.

U.S. markets were closed on Monday for Martin Luther King day, which means liquidity will be lower.

“The fact that the sell-offs usually happen during periods in which there’s less liquidity increases the risk we could have a sharper sell-off (today), but as we saw in the flash crash that doesn’t mean that’s fundamentally justified,” said Hardman.

Citi’s head of European G10 currency strategy in London, Richard Cochinos, said Britain’s hefty current account and budget deficits meant it was heavily dependent on foreign capital. The more uncertainty investors feel over Britain’s place in Europe, he said, the more investment dries up – the key reason for sterling’s weakness.

May has said she will trigger Article 50 – starting the formal EU withdrawal talks – by the end of March. But so far, she has revealed few details about what kind of deal she will seek, frustrating some investors, businesses and lawmakers.

“SAFE-HAVEN” YEN

The euro climbed as much as 1.5 percent against the pound to a two-month high of 88.53 pence <EURGBP=>, before retreating to 87.85 pence, still up 0.7 percent on the day.

Against the yen, which is perceived as a safe haven, sterling fell as much as 2.3 percent to a two-month low of 136.48 yen <GBPJPY=>, before recovering to trade down around 1.4 percent on the day by 1230 GMT.

The Japanese currency gained broadly as a risk-off mood permeated markets, hitting a six-week high of 113.61 yen to the U.S. dollar <JPY=>.

“The risk-averse sentiment stemming from ‘hard Brexit’ (worries) is pushing down the dollar/yen,” Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

“But so far, I think the correction from the dollar/yen’s high in December, and concerns about stronger protectionism under the new U.S. presidency, have been the dominant theme.”

The dollar index climbed 0.4 percent to 101.59 <.DXY>.

Trump revealed few policy clues at his first press conference last week since his November election victory. The dollar rose after the election on expectations that his administration would embark on stimulus to boost growth and inflation, prompting the U.S. Federal Reserve to adopt a faster pace of interest rate hikes.

But Trump’s protectionist stance has also added to some investors’ risk aversion, as he has threatened to impose retaliatory tariffs on China, build a wall along the Mexican border and tear up the North American Free Trade Agreement (NAFTA).

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

(Additional reporting by Wayne Cole in Sydney and Tokyo markets team; Editing by Catherine Evans)

UK government expects to lose Brexit trigger case, making contingency plans: report

LONDON (Reuters) – The British government expects to lose its legal battle to start the Brexit process without going through parliament, and has drafted versions of a bill to put to lawmakers after the ruling, the Guardian newspaper reported on Tuesday.

The Supreme Court is expected to rule in the next two weeks on whether the government can trigger Article 50 of the European Union’s Lisbon Treaty, the first formal step toward leaving the bloc, without first getting parliament’s approval.

Citing unnamed sources, the Guardian reported that ministers had privately conceded they were very likely to lose the case, and had drawn up at least two versions of a bill to be presented to parliament after the ruling. [http://bit.ly/2iiL6oP]

The report also said the government had asked the court for early sight of the ruling before it is made public, to allow for contingency planning.

During the Supreme Court hearing in December, government lawyer James Eadie said that if judges ruled parliament had to give its assent to the triggering of Article 50, the solution would be a “one-line” bill.

The Guardian said ministers were hoping the ruling would allow Prime Minister Theresa May to put forward a short bill or motion, narrowly focused on Article 50, to make it difficult for lawmakers to amend.

Those in favor of a clean break with the European Union are concerned that parliament, where a majority of members were in favor of remaining in the bloc, could seek to water down ministers’ plan in pursuit of a so-called “soft Brexit”.

The government’s opponents in the legal battle argued that triggering Article 50 would nullify the 1972 act of parliament that opened the way for Britain to join the EU, and therefore parliament had to give its assent for its act to be undone.

London’s High Court backed that argument, prompting the government to appeal to the Supreme Court, Britain’s highest judicial body, in December.

(Reporting by Estelle Shirbon; editing by Michael Holden)

Dollar falls against yen on risk reduction; sterling sinks

By Sam Forgione

NEW YORK (Reuters) – The U.S. dollar slumped against the safe-haven yen on Monday on investors’ reduced appetite for risk, while sterling sank to more than two-month lows on talk that Britain would drastically rework trade ties with the European Union after Brexit.

A fall in U.S. Treasury yields and U.S. stocks drove the dollar down as much as 0.6 percent against the yen to a session low of 116.16 yen JPY=. The dollar remained within recent trading ranges and did not test Friday’s more than three-week low of 115.04 yen.

Analysts said there was no fundamental catalyst for the dollar’s decline against the yen, with traders probably reacting to lower U.S. yields and equities.

“There’s an optical relationship with the fact that stocks are lower,” said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.

The dollar was last down 0.4 percent at 116.43 yen. It dipped modestly against the euro and Swiss franc, leading the dollar index .DXY, which measures the greenback against a basket of six major currencies, to stand 0.08 percent lower at 102.150.

The pound slid more than 1 percent against both the dollar GBP=D4 and the euro EURGBP=R after weekend comments from British Prime Minister Theresa May that she was not interested in keeping “bits of membership” of the European Union.

Sterling slid as low as $1.2125, its weakest against the dollar since the end of October. It fell about 1.2 percent against the euro, hitting 86.91 pence per euro, the lowest since mid-November.

“Anything that suggests a hard Brexit is more likely … is very damaging to UK growth prospects,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York.

Against the dollar, sterling was last down 1 percent at $1.2156, while the euro EUR= was up 0.3 percent at 1.0562. The dollar was down 0.17 percent against the franc at 1.0162 francs CHF=.

On Wall Street, the benchmark S&P 500 stock index .SPX was down 0.13 percent, while benchmark 10-year U.S. Treasury yields US10YT=RR fell nearly four basis points on the day to 2.383 percent.

(Reporting by Sam Forgione; Additional reporting by Marc Jones in London; Editing by Lisa Von Ahn))

Hard Brexit is not inevitable, says British PM May

By Elizabeth Piper

LONDON (Reuters) – A clean break with the EU’s single market is not inevitable, British Prime Minister Theresa May said on Monday, seeking to clarify comments that pushed down the pound on the possibility of a hard Brexit from the European Union.

She criticized British media for misinterpreting what she described as long-term position on EU talks but the pound failed to recover from a 10-week low and was down more than 1 percent to the dollar and 1.2 percent against the euro on the day.

May, under pressure to offer more detail on her strategy before launching divorce talks with the European Union, said on Sunday in her first televised interview of the year that Britain would not be able to keep “bits” of its membership.

Some commentators saw that as a sign she was heading for a hard Brexit, which business says would damage the economy by breaking links with the single market of 500 million consumers. May shot back that the media was using terms she did not accept.

“I’m tempted to say that the people who are getting it wrong are those who print things saying I’m talking about a hard Brexit, (that) it is absolutely inevitable there’s a hard Brexit,” she told the Charity Commission, a government department that regulates charities in England and Wales.

“I don’t accept the terms hard and soft Brexit. What we’re doing is (that we are) going to get an ambitious, good, best possible deal for the United Kingdom in terms of … trading with and operating within the single European market.”

May’s frustration was clear. The former interior minister, who was appointed as prime minister shortly after Britain voted to leave the EU at a June referendum, is increasingly concerned that Brexit will define her time in power, sources say.

In her speech on Monday, she said she wanted her government to help to heal the divisions in Britain that were deepened by the EU vote, and ensure that “everyone has the chance to share in the wealth and opportunity on offer in Britain today”.

She announced measures to boost support to those suffering from mental health problems and said she would do more on housing, education and schooling, but despite applause from the audience, two out of four questioners asked about Brexit.

May has repeatedly said she will not reveal her strategy before triggering Article 50 of the EU’s Lisbon Treaty to start some of the most complicated negotiations since World War Two, but her reticence has spurred scrutiny of her every comment.

She has largely stuck to the script that she wants Britain to regain control over immigration, restore its sovereignty and also to get the best possible trading relations with the EU, but any comment that seems to stray is pored over for signs of how May sees Britain’s future relationship with the EU.

Asked whether May had ruled out getting preferential access to the single market in her interview on Sunday, her spokeswoman said she had ruled nothing out or in.

On Monday, May again said she was ambitious before the talks with the EU, which are due to be launched before the end of March.

“But we mustn’t think of this as sort of leaving the EU and trying to keep bits of membership, what bits of membership will we keep,” she said.

“It’s a new relationship, we’ll be outside the EU, we will have a new relationship but I believe that can be a relationship which has a good trading deal at its heart.”

(Additional reporting by William James and Kylie MacLellan; editing by Jeremy Gaunt)

Europe gets Trump ‘wake-up call’, but can it step up?

U.S. President-elect Donald Trump greets his running mate Mike Pence during his election night rally in Manhattan, New York

By Alastair Macdonald and Gabriela Baczynska

BRUSSELS (Reuters) – For Europe, already reeling from Britain’s decision to leave its 28-member club, Donald Trump’s election introduces a host of new uncertainties it is ill-equipped to tackle.

Preoccupied by a growing anti-establishment mood across the continent, the European Union’s leaders gave little thought to the idea a man dubbed “the pioneer of a new authoritarian and chauvinist international movement” by Germany’s deputy chancellor could take power in the United States.

The day before, one of the EU’s leaders had confided a contingency plan of “crossing ourselves and praying”. The day after, as they pledged to work with Trump, a senior EU diplomat summed up their dilemma.

“Since we have refused to really think through this scenario, we have a list of questions that need to be answered, but almost everything is a big unknown,” the envoy told Reuters.

For some, Europe must now step up and take more responsibility, both for its own security and the wider world, if the entrepreneur makes good on campaign talk of limiting U.S. defense commitments and other engagements abroad.

Trade relations, climate change, Russia and tackling Islamic State are all areas where Europe may have to forge its own path if a Trump-led Washington pulls back from the global stage.

“This is another wake-up call,” said Manfred Weber, a German ally of Chancellor Angela Merkel who leads conservatives in the European Parliament. “It is now up to Europe. We must be more self-confident and assume more responsibility.

“We do not know what to expect from the USA.”

Belgian Foreign Minister Didier Reynders told Reuters a Trump White House “may help some people in Europe understand that we need to reinforce defense cooperation among Europeans”.

But EU leaders know that euroskeptic radicals, inspired by Trump and Britain’s vote to leave the bloc in June, could exploit any attempt to tighten cooperation to condemn them to the same ignominious electoral fate as Hillary Clinton.

East Europeans fret President Vladimir Putin may use Trump’s vow to improve ties with sanctions-hit Moscow to extend Russian influence, as in Ukraine. The Norwegian head of NATO felt obliged to spell out that Trump could not renege on security guarantees.

“PUTTING ON A BRAVE FACE”

“Europe cannot blink after Brexit, after the election of Donald Trump,” French Foreign Minister Jean-Marc Ayrault said of the political earthquake in Washington, which, 27 years to the day since the fall of the Berlin Wall, continues to provide the lion’s share of military muscle to defending the continent.

“Europe must stand together more, be more active and go more on the offensive,” Ayrault said. “Even just to protect itself.”

Privately, senior officials question its ability to do that.

“Europe will need to do more to take care of its own – but are we capable?” a senior European diplomat asked. The EU has been riven with tensions over economic policy, the Syrian refugee crisis and Britain’s exit, and remains very divided.

Another senior EU diplomat told Reuters: “This changes the business model of the EU. But we have no idea how.”

He dismissed suggestions a U.S. withdrawal from some engagements could offer benefits by obliging Europeans to invest more in their cooperation and spend more on their own defense: “That’s not a silver lining. That’s putting on a brave face.”

EU foreign ministers called a special meeting over dinner on Sunday to discuss what Trump’s America will mean for Europe.

Giles Merritt of pro-EU Brussels think-tank Friends of Europe said leaders had no time to lose to “head off trouble” and could revive their own Union by helping defend global stability. They “must … fashion a common European response … before President Trump sets foot in the Oval Office”, he said.

CHANGE THE WHOLE SYSTEM?

It was a result few in Europe had wanted, barring Hungary’s authoritarian prime minister Viktor Orban. European leaders — and Obama Administration envoys — were reduced to highlighting the lowest common denominators of shared history and ideals in giving assurances of continued cooperation.

After a U.S. campaign marked by accusations of racism and sexism, Merkel, preparing for her own election battle next year, said she would work with Trump on the basis of shared values that included “respecting … people’s dignity regardless of their origin, the color of their skin, religion (or) gender”.

Donald Tusk, the former Polish premier who chairs EU summits, responded to what he called “new challenges” and “uncertainty over the future of our Transatlantic relations” by stressing centuries of blood ties across the ocean.

French President Francois Hollande stressed a need for even stronger Transatlantic cooperation to tackle climate change, Islamist security threats and the global economy.

Washington’s ambassador to NATO could offer no detail on the incoming administration’s policy but reassured European peers in Brussels that NATO had always been a “bipartisan venture”.

Anthony Gardner, outgoing President Barack Obama’s envoy to the EU, said change was possible in areas including sanctions on Russia, support for Ukraine, nuclear proliferation, trade, NATO and the Middle East, but added: “Let’s wait to see who appoints as his key advisers.”

He did not see Washington abandoning a key partner for the past 50 years, but his reassurance did not quell a sense of near panic among some senior officials in Brussels.

One said grimly: “This is bad. Brexit was a stupid and damaging mistake but the people running it are not complete lunatics. Now we have a populist in power who can change the whole system as we know it.”

(Editing by Philippa Fletcher)

At odds over Brexit, UK nations hold ‘frustrating’ talks on common stance

By Kylie MacLellan

LONDON (Reuters) – British Prime Minister Theresa May tried to persuade the leaders of Scotland, Wales and Northern Ireland on Monday to work with her government on a common Brexit negotiating position, but the Scottish leader dismissed the meeting as “deeply frustrating”.

May says that while the devolved governments of the UK’s three smaller nations should give their views on what the terms of Brexit should be, they must not undermine the UK’s strategy by seeking separate settlements with the EU.

“I don’t know what the UK’s negotiating position is because they can’t tell us,” Scotland’s First Minister Nicola Sturgeon said after talks at May’s Downing Street office.

“I can’t undermine something that doesn’t exist, it doesn’t appear to me at the moment that there is a UK negotiating strategy,” she told Sky News television.

While England and Wales voted for Brexit in a June referendum, Scotland and Northern Ireland voted to remain in the EU, setting the devolved governments in Edinburgh and Belfast on a collision course with the UK’s central government in London.

This could lead to a constitutional crisis, and potentially to Scottish independence and renewed political tensions in Northern Ireland.

At the meeting with Sturgeon and the Welsh and Northern Irish leaders, May proposed setting up a new body to give the three devolved governments, which have varying degrees of autonomy from London, a formal avenue to express their views.

“Working together, the nations of the United Kingdom will make a success of leaving the European Union — and we will further strengthen our unique and enduring union as we do so,” May said in a statement after the talks.

But Sturgeon struck a very different tone as she emerged.

“What I’m not prepared to do … is stand back and watch Scotland driven off a hard Brexit cliff edge because the consequences in lost jobs, lost investment and lower living standards are too serious,” she said.

CONFLICTING PRIORITIES

The British government, which has promised to kick off formal divorce talks with the EU before the end of March, has said it will negotiate a bespoke deal on behalf of the whole United Kingdom with the bloc’s other 27 members.

Sturgeon said she would make specific proposals over the next few weeks to keep Scotland in the single market even if the rest of the UK left, and that May had said she was prepared to listen to options.

“So far those words are not matched by substance or actions and that is what has got to change,” Sturgeon said.

Sturgeon, head of the Scottish National Party, has said her government is preparing for all possibilities, including independence from the UK, after Britain leaves the EU. She wants each of the UK’s four assemblies to get a vote on the proposed negotiating package.

In Northern Ireland, there are fears that Brexit could undermine a 1998 peace deal and lead to the reintroduction of unpopular and cumbersome controls on the border with the Republic of Ireland, an EU member.

Northern Ireland’s First Minister Arlene Foster said the devolved nations had to be at “the heart of the process” so that issues relevant to them could be tackled as they arose.

Welsh First Minister Carwyn Jones said it was difficult for the devolved administrations to influence the process when there was so much uncertainty over what the government was seeking.

Jones said he had argued very strongly for “full and unfettered access” to the EU’s single market, which is in doubt because EU leaders say it would require Britain to continue to accept EU freedom of movement rules.

One of the central planks of the pro-Brexit campaign was that exiting the EU would give Britain greater control over immigration and help reduce the numbers arriving in the country.

(Additional reporting by Elisabeth O’Leary, William James and Kate Holton; Editing by Estelle Shirbon and Robin Pomeroy)

Brexit not the end of European Union, Juncker says

By Alastair Macdonald and Robin Emmott

STRASBOURG (Reuters) – The president of the European Commission, Jean-Claude Juncker, sought on Wednesday to rally support for the European Union, saying the bloc battered by the UK Brexit referendum was not about to break up despite its existential crisis.

In setting out the Commission’s plans for the first time since the UK voted to exit the EU on June 23, Juncker highlighted the British referendum as a warning that the EU faces a battle for survival against nationalism in Europe.

“The European Union doesn’t have enough union,” Juncker told the European Parliament in Strasbourg, noting his own executive was limited in its response to problems by division among states that was the worst he had seen in three decades in EU politics.

“There are splits out there and often fragmentation exists,” he said. “That is leaving scope for galloping populism.”

But he underlined he believed the world’s biggest trade bloc was still an important force. “The EU as such is not at risk.”

Proof of that, Juncker said, was the success of a new European investment fund that the former Luxembourg premier proposed to double to 630 billion euros ($707 billion) by 2022 to help with a sharp fall in spending since the global financial crisis, helping projects from airports to broadband networks.

The 48-minute speech drew a standing ovation from the main parties in an assembly dominated by supporters of closer European integration, but there was scorn from eurosceptics, including Marine Le Pen, the French National Front leader, and Nigel Farage, the triumphant Brexit campaigner from UKIP.

The pro-Brexit British Conservative leader, Syed Kamall was also dismissive: “Today was billed as a relaunch, but sadly it’s fundamentally the same mantra we’ve heard year after year,” he said, criticizing plans for more EU military cooperation — something long blocked by Britain, whose voice no longer counts.

AFRICA FUND

Juncker also wanted to extend the fund to the private sector in Africa to help curb emigration to Europe, starting with a pot of 44 million euros that could also be doubled later on.

An Africa fund was part of Juncker’s efforts to stress a more positive agenda, particularly over the migration crisis that has deeply divided the European Union. He also had veiled criticism of eastern European countries unwilling to take in refugees from North Africa and the Middle East.

“Solidarity must come from the heart. It cannot be forced,” Juncker said.

But the Juncker address offered few clues to the talks with London that the EU insists cannot start until Prime Minister Theresa May formally sets starts a two-year countdown to British departure. Juncker urged that to be done quickly and reiterated the EU negotiating position that Britain could not retain its full EU market access if it blocks free immigration from the EU.

“There can be no a la carte access to the single market,” he said of British hopes to cut immigration and keep free trade.

A summit of the 27 EU leaders in Bratislava on Friday is also unlikely to shed much light on the Brexit issue. Juncker will travel there to urge national leaders to remember the big picture and stop their “bickering”.

“What are we instilling in terms of values in our children. Is this a union that has forgotten its past, has no vision for the future? Our children deserve better,” Juncker said, speaking of his own father, a war veteran who died last month.

BORDER GUARDS

With Germany and France both facing major elections in the coming year, major changes in the Union are unlikely, but EU officials are concerned that left-right political tensions over fiscal policy in the euro zone or divisions over taking in refugees will jeopardize the cohesion of the bloc.

Juncker also urged states to complete the setting up of a European Border and Coast Guard, a project driven by last year’s chaotic arrival of over a million migrants and refugees, and proposed new cooperation among EU armies, as well as pushing for an acceleration of capital markets union.

Claiming success in fostering investment by the application of seed capital and guarantees from the EU and national governments, the Commission has put the European Fund for Strategic Investment (EFSI) at the heart of its economic policy.

Set up last year to run for three years until 2018 with a target of mobilizing 315 billion euros of investment, the current EFSI target is based on 21 billion euros of EU money being leveraged 15 times by other investors.

However, as the EU’s current, seven-year budget program ends in 2020, the total target will rise to 500 billion euros for five years and the Commission will call on member states to add to their contributions.

Brussels says the fund could also serve to bolster Internet connectivity across the bloc.

“We propose today to equip every European city with wireless internet,” Juncker said, revealing the kind of project he hopes can help build some love for the EU among ordinary voters.

(Additional reporting by Gabriela Baczynska, Alissa de Carbonnel, Jan Strupczewski, Marilyn Haigh, Francesco Guarascio, Foo Yun Chee and Robin Emmott in Brussels; Writing by Robin Emmott; Editing by Alastair Macdonald)

Global stocks outlook dims with risk aversion on the rise again: Reuters poll

By Ross Finley and Rahul Karunakar

LONDON/BENGALURU (Reuters) – Optimism about stock market performance this year has wilted, with investors fretting about the global economy and unexpected shocks likely to condemn most key indices to a weaker performance than thought just a few months ago.

The latest Reuters poll of over 250 analysts, fund managers and brokers worldwide taken June 27-July 11 also showed an intensifying pull between stretched share prices – with Wall Street at a record high – and bond markets, with most government bond yields at record lows and vast swathes of them negative.

Strategists at Citi have noted that the gap between the global government bond benchmark yield, just 0.5 percent, and the dividend yield on global equities of about 2.7 percent, is the widest in 60 years, and on that basis, stocks look attractive.

Ten of the indexes polled are expected to be lower by the end of the year when just three months ago the consensus view among forecasters was that they would be up, in some cases significantly. [Graphic: http://tmsnrt.rs/29t4c95]

But the poll results do not provide a definitive picture on where forecasters are recommending investors put their money, although hopes remain high once again that next year will be better, particularly for struggling emerging markets.

The Bank of England is set to reverse course in response to Britain’s shock vote on June 23 to leave the European Union, with rate cuts and renewed government bond purchases nearly certain in an attempt to limit the damage. [BOE/INT]

The trouble is, even though the vast majority polled don’t expect any financial crisis from Brexit, that shock has increased risk aversion, as well as the risk a likely British recession may have ripple effects well beyond its borders.

Expectations for an interest rate rise in the United States have also faded despite a surprisingly strong jobs report last week, triggering a rally in stocks and U.S. Treasuries.

So while in past years the prospect of more central bank cash might have lit a fire under the stock market, there is a clear sense now of pessimism in the latest results about the outlook for European shares, as well as Britain’s FTSE 100. [EPOLL/FRDE] [EPOLL/GB]

“The Brexit vote has damaged the outlook for the global economy and EPS (earnings per share). This is clearly unhelpful for global equities. It also drove global bond yields down to unprecedented levels, which has increased the relative income attractions of equities,” wrote Citi strategists in a note.

“These two opposing forces are likely to keep share prices trapped in the current trading range. While Citi strategists collectively forecast a 7 percent rise in global equities by mid-2017, investors could probably generate a better return if they wait for the next dip.”

Even on Wall Street, where stocks had their worst start to the year ever only to rally back to a record high, in large part on optimism about the economy, many are now cautious, especially ahead of a presidential election in November. [EPOLL/US]

“It’s Brexit one day, election issues the next. We’ve been telling clients to sort of buckle up,” said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management.

However, with increasing central bank ownership of a government bond market limited in size by fiscal restraint, stock and bond prices are likely to continue rising, simply because the money that’s been created has to go somewhere.

The European Central Bank also has both feet on the accelerator, having launched its latest aggressive expansion to its stimulus well before the Brexit vote. Now many are speculating it may have to consider doing even more to make sure the euro zone economy doesn’t veer off track as a result.

Perhaps unexpectedly, the most optimistic outlook appears to be for Japan, where stocks have been beaten down by a soaring yen and a moribund economy. [EPOLL/JP]

In addition to a much lengthier and more aggressive central bank stimulus program than in Europe, more fiscal stimulus is in the pipeline there after elections at the weekend where Prime Minister Shinzo Abe was victorious.

Indian shares are also expected to perform well on relative stability compared with other Asian economies, although forecasts are markedly less optimistic for the remainder of the year than those taken three months ago. [EPOLL/IN]

For Asia more widely, as well as Latin America, forecasters were less upbeat, looking past the U.S. presidential election and potential near-term trouble as a result of Brexit to peg 2017 for a rebound. [EPOLL/ASIA] [EPOLL/BR]

“There are likely to be more periodic sell-offs in risky assets in the months ahead, but we do not expect these to prevent EM (emerging market) stocks from performing reasonably well,” wrote David Rees, senior markets economist at Capital Economics.

“If anything, the vote for ‘Brexit’ appears likely to ensure that global monetary conditions remain looser for longer,” he wrote. “This, along with relatively low valuations, will support EM equities in the next 18 months.”

(Poll data: <EQUITYPOLL1>)

(Other stories from the Reuters global stock markets poll:)

(Additional reporting and polling from reporters in Seoul, Shanghai, Sydney, Tokyo, London, Frankfurt, Milan, Moscow, Johannesburg, New York, Brasilia, Sao Paulo, Toronto and Bengaluru; Editing by Adrian Croft)

Obama urges NATO to stand firm against Russia despite Brexit

European Council President Donald Tusk (L-R), U.S. President Barack Obama and European Commission President Jean-Claude Juncker deliver remarks to reporters after their meeting at the NATO Summit in Warsaw, Poland July 8, 2016. REUTERS/Jonathan Ernst

By Yeganeh Torbati and Wiktor Szary

WARSAW (Reuters) – U.S. President Barack Obama urged NATO leaders on Friday to stand firm against a resurgent Russia over its seizure of Crimea from Ukraine, saying Britain’s vote to leave the European Union should not weaken the Western defense alliance.

In an article published in the Financial Times newspaper as he arrived for his last summit of the North Atlantic Treaty Organisation before he leaves office in January, Obama said America’s “special relationship” with Britain would survive the referendum decision he had warned against.

“The special relationship between the U.S. and the UK will endure. I have no doubt that the UK will remain one of NATO’s most capable members,” he said, but noted that the vote raised significant questions about the future of EU integration.

The 28-nation EU will formally agree to deploy four battalions totaling 3,000 to 4,000 troops in the Baltic states and Poland on a rotating basis to reassure eastern members of its readiness to defend them against any Russian aggression.

Host nation Poland set the tone of mistrust of Russia. Its foreign minister, Witold Waszczykowski, told a pre-summit forum: “We have to reject any type of wishful thinking with regard to a pragmatic cooperation with Russia as long as it keeps on invading its neighbors.”

Obama was more diplomatic, urging dialogue with Russia, but he too urged allies to keep sanctions on Moscow until it fully complies with a ceasefire agreement in Ukraine, and to help Kiev defend its sovereignty. Ukraine is not itself a member of NATO.

“In Warsaw, we must reaffirm our determination — our duty under Article 5 of the North Atlantic Treaty — to defend every NATO ally,” Obama said.

“We need to bolster the defense of our allies in central and eastern Europe, strengthen deterrence and boost our resilience against new threats, including cyber attacks.”

Estonia, Latvia, Lithuania and Poland – all NATO members – have requested a permanent NATO presence. They fear Moscow will seek to destabilize their pro-Western governments through cyber attacks, stirring up Russian speakers, hostile broadcasting and even territorial incursions. Critics say the NATO plan is a minimal trip wire that might not deter Russian action.

The head of NATO’s military committee, Czech General Petr Pavel, said Russia was attempting to restore its status as a world power, an effort that includes using its military.

“We must accept that Russia can be a competitor, adversary, peer or partner and probably all four at the same time,” he said.

The Kremlin said it was absurd for NATO to talk of any threat coming from Russia and it hoped “common sense” would prevail at the Warsaw summit. Moscow was and remains open to dialogue with NATO and is ready to cooperate with it, Kremlin spokesman Dmitry Peskov said in a conference call with journalists.

Russia often depicts NATO as an aggressor, whose member states are moving troops and military hardware further into former Soviet territory, which it regards as its sphere of influence.

Russian President Vladimir Putin made several gestures aimed at showing a cooperative face before the summit. At the same time, Moscow highlighted its intention to deploy nuclear-capable missiles in Kaliningrad, a Russian enclave between Poland and Lithuania.

Putin agreed to a meeting of the NATO-Russia Council next week, the second meeting this year of a consultation body that was put on ice after Moscow’s seizure of Crimea in 2014. Russia allowed a U.N. resolution authorizing the EU to intercept arms shipments to Libya in the Mediterranean, and Putin talked by telephone with Obama in the run-up to the NATO meeting.

However, a White House spokesman said they reached no agreement on cooperation in fighting Islamic State militants in Syria during that call on Wednesday.

BRITAIN

Outgoing British Prime Minister David Cameron, who said he will resign after losing the referendum on EU membership last month, will seek to emphasize an active commitment to Western security at his final NATO summit, to offset any concern about Europe’s biggest military spender leaving the EU.

The first item on the summit agenda was the signing of an agreement between the EU and NATO on deeper military and security cooperation.

The U.S.-led alliance is also expected to announce its support for the EU’s Mediterranean interdiction operation. NATO already supports EU efforts to stem a flood of refugees and migrants from Turkey into Greece, in conjunction with an EU-Turkey deal to curb migration in return for benefits for Ankara.

Obama and the other NATO leaders will have a more unscripted discussion of how to deal with Russia over dinner in the same room of the Polish Presidential Palace where the Warsaw Pact was signed in 1955, creating the Soviet-dominated military alliance that was NATO’s adversary during the Cold War.

NATO Secretary-General Jens Stoltenberg sought to balance the new military deployments and air patrols close to Russia’s borders by stressing the alliance would continue to seek “meaningful and constructive dialogue” with Moscow.

“We don’t want a new Cold War,” he told reporters. “The Cold War is history and it should remain history.”

Turkish President Tayyip Erdogan told reporters before leaving Ankara to attend the summit that NATO also needed to adapt to do more to fight a threat from Islamic State militants, who were accused of last week’s deadly attack on Istanbul airport.

“As we have seen from the terrorist attacks first in Istanbul and then in Iraq and Saudi Arabia, international security is becoming more fragile,” Erdogan said.

“The concept of a security threat is undergoing a serious change. In this process, NATO needs to be more active and has to update itself against the new security threats,” he said.

(Additional reporting by Gabriela Baczynska and Robin Emmott in Warsaw, Humeyra Pamuk in Istanbul and Elizabeth Piper in Lodon; Writing by Paul Taylor; Editing by Toby Chopra, Larry King)

Don’t give UK a generous Brexit deal, EU voters say: poll

LONDON (Reuters) – Voters in Germany, France, Sweden and Finland think Britain should not be given a generous deal when it tries to renegotiate its ties with the European Union, an opinion poll published on Friday showed.

Germans and the French were most opposed to helping Britain out: 53 percent of respondents in both countries said it should not expect any favors compared with 27 percent who said the EU should offer Britain a generous deal, polling firm YouGov said.

Furthermore, nearly half of voters in the two EU heavyweight countries said they would support a free trade deal with Britain only if Britain agreed to continue to allow EU citizens to live and work in the country.

Opposition to the EU’s free movement of workers principle was one of the main campaign messages of those who wanted Britain to leave the bloc, a decision British voters backed in a referendum on June 23.

Britain has yet to notify the EU formally of its plan to leave, a step which would kick off a period of up to two years for its exit to be completed.

The front-runner to become Britain’s next prime minister, interior minister Theresa May, has said she wants to hold informal talks with the EU about the outlines of a deal before launching the two-year exit period.

Of five continental EU countries covered by YouGov’s poll, only voters in Denmark favored offering Britain a generous deal, the polling firm said.

YouGov interviewed 2,045 people in Germany, 1,008 people in France and around 1,000 people in each of Sweden, Finland and Denmark between June 30 and July 5.

(Writing by William Schomberg; Editing by Richard Balmforth)

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