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Pound gains as UK lays out no-deal Brexit tariff plans; US Treasurys edge lower


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Pound gains as UK lays out no-deal Brexit tariff plans; US Treasurys edge lower

➤ U.K. lawmakers reject PM May's revised Brexit deal in 391-242 vote.

➤ Pound picks up as U.K. to slash tariffs on most imports in case of no-deal Brexit.

➤ U.S. Treasury yields tick up after yesterday's fall on muted inflation data.

➤ U.S. stocks set for small gains at open; Boeing shares extend losses.

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Wall Street looks set to start with small gains this morning amid a weak performance in global stock markets, while sterling remains in focus in the aftermath of yesterday's Brexit vote in the British parliament.

U.K. lawmakers rejected Prime Minister Theresa May's revised Brexit deal with the European Union in a 391-242 vote, paving the way for votes on a no-deal Brexit and potentially on a delayed departure from the bloc. With analysts widely expecting lawmakers to vote against a no-deal Brexit later today, investors' focus will shift to tomorrow's vote on whether to delay Brexit beyond March 29.

"If this is then granted, we could see market expectations start to build for a softer Brexit which would be positive for the pound," MUFG Bank analysts said in a note.

The spokesperson for European Council President Donald Tusk warned that the U.K. must present a "credible justification" should it decide to extend Brexit, while European Commission President Jean-Claude Juncker had said the U.K.'s exit from the bloc must be completed before European parliamentary elections on May 23 to 26.

Ahead of the no-deal Brexit vote, the U.K. government said it would temporarily remove tariffs on most imports, including those that come from the Republic of Ireland and cross the border with Northern Ireland, in case Britain crashes out of the EU without a deal. Sterling recovered from yesterday's losses following the release of the plans and was up 0.63% to nearly $1.316 at 6:30 a.m. ET.

In other currencies, the euro added 0.08% against the dollar, while the Japanese yen was broadly unchanged.

Yields on 10-year Treasurys ticked up 1 basis point to 2.62%, having dropped more than 3 basis points yesterday as U.S. annual core inflation unexpectedly slowed in February. The S&P 500 index and the Nasdaq Composite advanced, while the Dow Jones Industrial Average drifted lower as shares in Boeing Co. extended losses amid a growing number of countries grounding 737 MAX planes following a fatal crash in Ethiopia.

Stock futures pointed to a soft open on Wall Street later as investors look for signs of progress in ongoing trade talks between the U.S and China. U.S. Trade Representative Robert Lighthizer yesterday signaled optimism in current discussions, though he declined to set a specific time frame for when a deal may be reached as major issues remain unresolved.

In Asia, the Shanghai SE Composite index and Hong Kong Kong's Hang Seng reversed yesterday's gains and were down 1.09% and 0.39%, respectively. Japan's Nikkei 225 fell nearly 1% as machine orders for January declined more than expected.

European equities traded mixed, with the FTSE 100 index declining 0.07% and Germany's DAX slipping 0.06%. The wider Stoxx Europe 600 index edged 0.13% higher, though shares in Adidas AG lost 3% as the company warned that supply chain shortages will weigh on 2019 growth.

Brent crude oil rose 0.73% to $67.16 per barrel on the ICE Futures Exchange. Gold increased 0.84% to $1,309.00 per ounce.

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The day ahead:

8:30 a.m. ET — U.S. durable goods orders (Econoday consensus: -0.8%, month over month)

8:30 a.m. ET — U.S. producer price index (Econoday consensus: 0.2% month over month)

8:30 a.m. ET — U.K. spring budget 2019

10 a.m. ET — U.S. Atlanta Fed business inflation expectations

10 a.m. ET — U.S. construction spending (Econoday consensus: 0.3% month over month)

10 a.m. ET — U.S. e-commerce retail sales

10:30 a.m. ET — EIA petroleum status report

3 p.m. ET — U.K. House of Commons expected to vote on a no-deal Brexit

10 p.m. ET — China fixed asset investment (Econoday consensus: 5.9% year over year)

10 p.m. ET China industrial production (Econoday consensus: 5.5% year over year)

10 p.m. ET — China retail sales (Econoday consensus: 8.2% year over year)