➤ Sterling seesaws before British lawmakers vote on Brexit deal with the EU.
➤ Global equities rally as China pledges economic stimulus measures.
➤ German economy grows at slowest pace in five years in 2018.
➤ Wall Street set to open higher; JPMorgan, Wells Fargo reporting fourth-quarter 2018 earnings.
The British pound struggled to hold on to gains against the dollar as markets await a crucial vote in the British Parliament on whether to approve the U.K.'s draft withdrawal agreement with the European Union later today.
In a last-minute effort to convince members of Parliament to back the draft Brexit deal, U.K. Prime Minister Theresa May warned yesterday that a vote to turn down the agreement could jeopardize Brexit altogether. The EU, meanwhile, released a letter reiterating that the Irish backstop, a key point of contention in the withdrawal agreement, would only be used temporarily, if at all.
Sterling lost early gains and was down 0.09% against the dollar at $1.285 at 6:30 a.m. ET, hours before British lawmakers vote on the Brexit deal. It was up 0.22% against the euro at €1.124.
But with the deal widely expected to be struck down in parliament later today at about 7 p.m. London time, the markets "will probably not react to the defeat itself but to the size of the defeat," Danske Bank Research said in a daily note. If the withdrawal agreement gets officially rejected, May will have three days to present a new deal to parliament.
"A narrow defeat means that May might be able to get it through at a later stage, but a big defeat means we are in uncharted territory," Danske Bank Research added.
The pound could fall if a general election is called following the Brexit deal's expected defeat as it would bring further uncertainty regarding Britain's exit from the bloc, ING analysts said in a note analyzing the currency's possible reaction to various Brexit scenarios. The most positive outcome for sterling would be a second Brexit referendum, the analysts said, adding that the currency could still strengthen to about $1.40 if a market-friendly resolution is reached by 2019-end.
Meanwhile, the euro slipped 0.31% against the dollar as preliminary data showed GDP growth in Germany, the eurozone's largest economy, slowing to a five-year low of 1.5% in 2018. The Chinese yuan rose 0.11% to 6.76 per dollar.
The safe-haven Japanese yen dropped 0.30% against the dollar, while gold dipped 0.15% to $1,289.40 per ounce as equities across the globe advanced. The Chinese government reportedly pledged to cut more taxes in a bid to shore up the domestic economy, offering support to Asian stocks as the Shanghai SE Composite index gained 1.36% and Hong Kong's Hang Seng rose 2.02%. Japan's Nikkei 225 returned from holiday with a 0.96% gain from Friday's close.
The positive sentiment in Asia spilled into European equities, with the FTSE 100 index up 0.29%, France's CAC 40 gaining 0.17% and Germany's DAX ticking up 0.07%. Futures point to U.S. stocks staging a comeback at the open, after the S&P 500 closed 0.53% lower yesterday, while the tech-heavy Nasdaq Composite dropped 0.94%.
JPMorgan Chase & Co. and Wells Fargo & Co. are reporting their fourth-quarter 2018 earnings before markets open. Citigroup Inc. shares closed nearly 4% higher yesterday after the banking group's profit for the last quarter of 2018 beat consensus estimates.
Yields on 10-year Treasurys slipped 1 basis point to just under 2.70%. Brent crude oil jumped 1.54% to $59.90 per barrel on the ICE Futures Exchange.
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Chinese economy, wealth disparity in US could impact 2019 retail performance
Alibaba Group president downplays significance of China slowdown
As bankruptcy looms, PG&E's gas utility offers complex mix of strength, risks
Citigroup talks recession fears, exposure to Sears, PG&E
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The day ahead:
8:30 a.m. ET — U.S. PPI (Econoday consensus: 0.0% monthly)
8:30 a.m. ET — U.S. Empire State manufacturing survey (Econoday consensus: 12.0)
8:55 a.m. ET – U.S. Redbook
10:00 a.m. ET – ECB President Mario Draghi speaks
11:30 a.m. ET – U.S. Federal Reserve's Neel Kashkari speaks
1:00 p.m. ET – U.S. Fed's Robert Kaplan speaks
1:00 p.m. ET – U.S. Fed's Esther George speaks
6:50 p.m. ET – Japan machine orders (Econoday consensus: 3.3%)
6:50 p.m. ET – Japan PPI (Econoday consensus: -0.3% month over month, 1.9% year over year)
8:30 p.m. ET – China house price index
11:30 p.m. ET – Japan tertiary index