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Latest News

  • Trump Says "Illegal" Voters Cost Him Popular Vote

    Sparking his latest confrontation with the media, mostly the NYT, CNN and WaPo, overnight president Trump told members of Congress on Monday in a private reception that he lost the popular vote in the election because millions of undocumented immigrants cast votes for his opponent.

    Trump's claim, which much of the mainstream press has determined to be "fake news" despite occasional evidence to the contrary, was first made by Trump before his election, and drew widespread criticism by the press overnight.

    According to a Bloomberg report, Trump told Republican and Democratic congressional leaders at the White House reception that he would have won the popular vote had three to five million undocumented immigrants not cast ballots for Democrat Hillary Clinton, three people familiar with the remark said. Two of the people said Trump used the term “illegals” to describe the alleged immigrant voters. As a reminder, Hillary Clinton won the national popular vote by about 2.9 million ballots.

    A White House spokesman, Marc Short, told Bloomberg that the administration would not comment because the reception was off the record. The White House press secretary, Sean Spicer, later said that he would "look into" the report.

    Naturally, it is illegal for anyone but citizens to vote in most U.S. elections. Various reports during and after the election, especially during the infamous Jill Stein recount, found irregularities in voting which suggested that illegal voters were indeed allowed to cast votes, however not to the extent claimed by Trump, who suggested that at least 3 million undocumented immigrants voted in the 2016 election. There were sporadic reports of people voting illegally, as there are in nearly all elections, but federal and state officials of both parties said that the election’s integrity was overwhelmingly secure.

    Trump first asserted that illegal ballots had tilted the popular vote in Clinton’s favor in a Nov. 27 tweet. "In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally," he said. He provided no evidence for the claim. Elections officials in California, New Hampshire and Virginia said it was baseless. 

    Subsequently Trump said he would have won the popular vote had he campaigned for the most votes in the election, rather than focusing on an Electoral College victory.

    For now, however, the media has found a new Trump "scandal" over which to obssess, as the president continues to dominate the newsflow with secondary and otherwise irrelevant stories, which preoccupy the US press, while the important stuff remains largely uncovered and leads to increased "uncertainty" in markets about the future about Trump's policies.

    Meanwhile, the NYT's text and headline, speak for themselves :

    President Trump used his first official meeting with congressional leaders on Monday to falsely claim that millions of unauthorized immigrants had robbed him of a popular vote majority, a return to his obsession with the election’s results even as he seeks support for his legislative agenda.

  • Johnson & Johnson Slides On Top-Line Miss, Disappointing Drug Sales, Soft Outlook

    On the surface, key Dow component Johnson & Johnson reported strong earnings, with EPS of $1.58 coming stronger than the $1.56 consensus expectation, despite revenue of $1.81BN missing consensus of $18.28BN. Among the key notables in the earnings report was the company's announcement it was in a process to evaluate potential strategic options for the Johnson & Johnson Diabetes Care Companies, specifically LifeScan, Animas, and Calibra. Such option  "may include the formation of operating partnerships, joint ventures or strategic alliances, a sale of the businesses."

    However, the reason why the stock was over 2% lower in the pre-market, and pressing the entire Dow average as a result, is because Dow took a page out of the IBM playbook, when it used yet another sharply reduced effective tax rate, which in Q4 dropped to 14.5%, on an adjusted basis (and 11.8% unadjusted), down from 17.7% the prior quarter. Had JNJ used its previous tax rate, it would have missed both the top and bottom line.

    Additionally, Wall Street appears to be further disappointed with the company misses across virtually all key drug sale categories, as follows:

    • 4Q Remicade rev. $1.62b, est. $1.64b
    • 4Q Stelara rev. $879m, est. $881.7m
    • 4Q Zytiga rev. $519m, est. $588m
    • 4Q Imbruvica rev. $346m, est. $377m
    • 4Q Invokana rev. $371m, est. $387.7m
    • 4Q Simponi rev. $426m, est. $445m
    • 4Q Olysio rev. $10m, est. $33m (1 est.)
    • 4Q Xarelto rev. $598m, est. $559.7m

    Completing the disappointing trifecta was JNJ's outlook, which came in below the Wall Street consensus estimate: the company now sees FY17 sales $74.1b to $74.8b, and FY adj. EPS $6.93 to $7.08.

  • US Futures, Oil Flat As Greenback Rises Despite Mnuchin's "Strong Dollar" Warning

    US equity futures were flat, European stocks rose and Asia was mixed after the dollar posted a modest rebound overnight despite Mnuchin's "strong dollar" comments, while oil was flat and gold fell, as investors focused on President Donald Trump’s plans to boost growth. The pound fell after a U.K. court ruled that Parliament must vote on triggering Brexit.

    The dollar struggled in Asia on Tuesday as U.S. President Donald Trump's focus on protectionism ahead of fiscal stimulus fueled suspicions his administration might be content to gain a competitive advantage through a weaker currency. However, early European trading saw modest gains in the USD, which rose to 113.4 in the USDJPY after dropping as low as 112.52, while the EURUSD declined to 1.73 after rising as high as 1.77 in Asian trading.  The talk of trade wars came even as more data pointed to a welcome revival in activity worldwide. A survey of Japanese manufacturing out Tuesday showed the fastest expansion in almost three years as export orders surged. Indeed, sentiment took an early knock when Mnuchin told senators that he would work to combat currency manipulation but would not give a clear answer on whether he views China as manipulating its yuan.

    Still, the recent euphoria surrounding the Trumpflation trade now appears largely gone: "It's interesting that markets did not respond positively to a reaffirmation of lower taxes and looser regulation, reinforcing the impression that all the good news is discounted for now," wrote analysts at ANZ in a note. "As week one in office gets underway, there is a growing sense of scepticism, not helped by the tone of Friday's inaugural address and subsequent spat with the media."

    Doubts about exactly how much fiscal stimulus might be forthcoming helped Treasuries rally. Yields on 10-year notes eased to 2.39 percent, having enjoyed the steepest single-day drop since Jan. 5 on Monday.  “The driver of a shift higher will be optimism that President Trump’s policies deliver more growth,” Juckes said. “If he starts tweeting about fiscal policy instead of trade policy maybe the bond bears can come out of hibernation again.” As the chart below shows, the dollar continues to trade in lockstep with 10Y TSY yields.

    As traders arrive at their desks in the US, the greenback has managed to advance against most major currencies, reversing declines sparked after Treasury Secretary nominee Steven Mnuchin said on Monday afternoon that a strong U.S. currency could have a negative short-term effect on the economy.  In written answers to a Senate Finance Committee, Mnuchin also reportedly said an excessively strong dollar could be negative in the short term.

    The pound extended losses after judges ruled Prime Minister Theresa May must ask Parliament to trigger the two-year countdown to the U.K.’s departure from the European Union, handing lawmakers a chance to soften the plan. Gold fell after touching the highest since November while oil climbed above $53 a barrel.

    MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.4 percent, while Shangahi was flat and the Nikkei slipped 0.4 percent.  European stocks halted a three-day decline, led by Italian shares amid reports that Assicurazioni Generali SpA may get investment from Intesa Sanpaolo SpA and Allianz SE.

    S&P500 futures were lower by 1 point at publication.

    The yield on the 10-year Treasury rose three basis points to 2.42 percent.

    Market Snapshot

    • S&P 500 futures down less than 0.1% to 2261
    • Stoxx 600 up 0.2% to 362
    • FTSE 100 up 0.2% to 7167
    • DAX up 0.2% to 11567
    • German 10Yr yield up 2bps to 0.38%
    • Italian 10Yr yield up 1bp to 2%
    • Spanish 10Yr yield up 3bps to 1.46%
    • S&P GSCI Index up 0.7% to 401.5
    • MSCI Asia Pacific down less than 0.1% to 140
    • Nikkei 225 down 0.5% to 18788
    • Hang Seng up 0.2% to 22950
    • Shanghai Composite up 0.2% to 3143
    • S&P/ASX 200 up 0.7% to 5650
    • US 10-yr yield up 2bps to 2.42%
    • Dollar Index up 0.12% to 100.28
    • WTI Crude futures up 0.9% to $53.22
    • Brent Futures up 0.9% to $55.75
    • Gold spot down 0.4% to $1,213
    • Silver spot down 0.6% to $17.13

    Top News

    • Mnuchin Says Excessively Strong Dollar May Hurt U.S. Economy
    • Australia Pushes for TPP Without U.S. After Trump Exits Deal
    • Trump Said to Tell Lawmakers ‘Illegals’ Cost Him Popular Vote
    • Brexit vote
    • Goldman Hails Global Rebound as Currie Sees Commodity Demand
    • Emirates Stokes Ire of U.S. Airlines With Flights Through Greece
    • OPEC Helps Cheap U.S. Oil Find Its Way to Group’s Top Buyers
    • Nike and Ford Caught in Crossfire of Trump’s Trade Overhaul

    Asia stocks traded mixed following a subdued lead from Wall St. where US indices finished mostly lower amid investor uncertainty during Trump's first day in office. ASX 200 (+0.7%) outperformed led by mining names following gains across the metals complex on the back of a weaker USD, while Nikkei 225 (-0.6%) was pressured by recent JPY strength in which USD/JPY declined below 113.00. Shanghai Comp. (+0.2%) and Hang Seng (+0.2%) traded with an indecisive tone following a weaker liquidity operation by the PBoC and as participants look ahead to Lunar New Year. 10yr JGBs were higher and tracked the gains seen in T-notes amid outperformance in the long-end, while participants also digested the latest results of the 40yr auction which resulted in a slightly higher b/c

    Top Asian News

    • Australia Pushes for TPP Without U.S. After Trump Exits Deal
    • Trump Withdrawal From Asia Trade Deal Could Boost China Clout
    • BOJ Is Said to Be Wary of Yield Target Hike Even If CPI Hits 1%
    • China Small-Cap Stocks Extend January Slump on Liquidity Squeeze
    • Toshiba to Report Writedown Amount on Feb. 14 With Earnings
    • Top Goldman Forecaster Urges China to Tighten Monetary Policy
    • $12,000 Trips Abroad Replace Chinese New Year Treks to Grandma’s

    European equities trade mostly higher with some mild underperformance in the FTSE 100 with BT Group on track for its biggest ever intra-day drop after cutting profit forecast for 2017, 2018 amid Italian accounting scandal. EasyJet fell in the wake of its earnings update, in which they stated that the fall in GBP will likely reduce PBT by over GBP 100mIn. Intesa Sanpaolo falls in the wake of reports that the bank may be considering a share swap offer for Generali. Notable US pre-market earnings today include 3M, Alibaba, Du Pont, Johnson & Johnson, Kimberly Clark, Lockheed Martin, Travelers and Verizon. Gilts slipped after the aforementioned Article 50 Supreme Court ruling in favour of parliament. Eurozone debt sees a marginally pull back from yesterday's gains with bond yields creeping higher. Slight outperformance in peripheral bonds with focus for Italy on the constitutional court hearing regarding the new electoral reform for the lower, which may increase expectations of an early snap election.

    Top European News

    • Supreme Court Rules Brexit Trigger Needs Parliamentary Vote
    • Euro Area Starts 2017 on Strong Note as Price Pressures Build
    • Generali Jumps on Report That Intesa Plans to Mount Takeover Bid; Generali’s Move Defensive, Intesa Unlikely Buyer: Citi
    • BT Plunges After Cutting Outlook, Tripling Writedown in Italy
    • Philips Falls After Disclosing DoJ Talks on Defibrillators
    • EasyJet Drops After Weak Pound, Fuel Costs Hurt 2017 Outlook
    • Busch Seeks Rest of Vacuum Peer in Deal Valued at $1 Billion
    • Etihad CEO Hogan to Go as Carrier Struggles With Investments
    • EU Courting of London Banks May Derail 5-Year Tobin Tax Push

    In FX, the UK supreme court ruling was pretty largely as expected, barring a few last minute jitters which saw the latter (devolution) qualification in question. Cable initially rallied towards the Asian highs just ahead of 1.2550, but held off these levels to dip back under 1.2500 figure. Bids seen ahead of 1.2400 to support, but the USD perspective takes over from here. EUR/GBP has seen choppy trade either side of 0.8600, but 0.8500-0.8700 looks safe for now. Elsewhere USD/JPY shows clear signs of basing out in the mid 112.00's having targeted this level twice now and finding yield-play dip buyers. We are unlikely to get a major push north just yet, but we sense any form of sobriety from president Trump could facilitate a modest push back to 114.00-115.00 for now. However, EUR/USD is pretty unrelenting alongside this, with the corrective moves perhaps not yet exhausted despite some softness in the German PMIs this morning.

    In commodities, consolidation prices across the board is the dominant theme, with the wait-and-see approach on president Trump's agenda going forward puts much of the market on the sidelines for now. Gold is the first point of focus in direction relation to the greenback, but with equity markets fading a little, the risk element is also proving supportive for now. The yellow metal still trades on a USD 1200 handle, but has come off slightly in recent trade. $50.00 remains the comfort zone for Oil prices, with the backdrop of the OPEC agreement maintaining stability for the foreseeable future here. Copper outperforms Iron ore. West Texas Intermediate crude was unchanged, erasing earlier gains as Iraq said it’s close to implementing its share of pledged output curbs agreed with OPEC to trim bloated global inventories and stabilize the market. Oil slid 0.9 percent the previous session after U.S. drillers added the most rigs in more than three years.

    In terms of the day ahead, we’ll also get the flash US manufacturing PMI for January while existing home sales and the Richmond Fed manufacturing survey will also be released.The Italian constitutional court is also due to rule on ex-PM Renzi’s electoral law for the Lower House known as Italicum. Central bank wise we’re due to also hear comments from the ECB’s Villeroy and Lautenschlaeger today. Meanwhile on the earnings front we’re due to get results from 21 S&P 500 companies today including Verizon and Johnson & Johnson at or prior to the open.

    US Event Calendar

    • 8:55am: Redbook weekly sales
    • 9:45am: Markit US Manufacturing PMI, Jan. P, est. 54.5 (prior 54.3)
    • 10am: Existing Home Sales, Dec., est. 5.51m (prior 5.61m)
    • 10am: Richmond Fed Manufacturing Index, Jan., est. 7 (prior 8)
    • 4:30pm: API weekly oil inventories

    Government:

    • President Trump meets with CEOs of Fiat Chrysler, GM, Ford
    • 9:30am: Senate Energy and Natural Resources Cmte votes on nomination of Rep. Ryan Zinke for Interior secretary and Rick Perry for Energy secretary
    • 10am: Senate Judiciary Cmte votes on nomination of Sen. Jeff Sessions for attorney general
    • 10am: Senate Banking, Housing and Urban Affairs Cmte votes on nomination of Ben Carson for HUD secretary
    • 10am: Senate Finance Cmte holds hearing on nomination of Rep. Tom Price for HHS secretary
    • 10am: Senate Commerce, Science and Transportation Cmte to vote on nominations of Elaine Chao for Transportation secretary and Wilbur Ross for Commerce secretary
    • 10:30am: House Ways and Means Cmte Chairman Kevin Brady details panel’s 2017 agenda
    • 10:30am: Senate Budget Cmte holds hearing on nomination of Rep. Mick Mulvaney for OMB director
    • 12pm: House considers H.R.7, which would amend Affordable Care Act to bar expenditure of federal money to purchase insurance that covers abortion services

    DB's Jim Reid concludes the overnight wrap

    Today sees the UK Supreme Court appeal ruling after the Government lost their case to trigger Article 50 without a parliamentary vote. The decision has lost some of its potential impact as the expected loss is likely to be followed by PM May attempting to pass a narrow bill (with no restrictions on the government’s negotiating position) through both houses. It’s expected that such a bill passes but there are risks that last week's speech where May admitted that leaving the single market was likely may have upset the moderates in her party and also that the Labour Party somehow manages to successfully unite behind a particular amendment that gets wider support but that the government won’t tolerate. This could lead to early elections if no bill can pass but is it really in the Labour Party's interest to have one now? Probably not so we would expect a bill to pass. The threat hanging over a rejection in the House of Lords is reform of the chamber that might remove their influence so PM May has got leverage over both the opposition and the House of Lords.

    The potential curveball from today is whether the court extends the judgement to the devolved regional assemblies (eg Scottish and Welsh) thus creating a constitutional crisis. An equally big curveball would be the court referring the whole matter to the European Court of Justice which would be heavily ironic. So a lot to look for today albeit with a clear central scenario. We’re expecting the outcome of the case around 9.30am GMT.

    From my side, thinking about Brexit and also Mr Trump at a very top level, it’s fascinating to contrast Theresa May’s and Donald Trump’s big speeches last week. Simplistically the UK PM accepted that the UK will leave the EU and the single market but wants Britain to be global and seems prepared to do free trade deals with everyone who would want and allow one. In contrast Mr Trump’s main theme was nationalistic and to put “America first”. The contrast was sharp. The interesting thing though is that most economists are pretty optimistic on US growth and concerned about UK growth going forward and yet if you take both leaders at face value then the UK will be far more open to the global economy than the US. However I suppose this masks the fact that a trade shock to the UK could be bigger than the US due to its larger reliance on trade. Also it’s all very well for the UK to look to be global but it’s another thing actually getting free trade agreements, especially with the EU. Nevertheless it is interesting that at face value the UK's official line is far more open to the rest of the world than the US at the moment. We'll see how this evolves over the coming months.

    That leads us nicely into what was a very busy and eventful first 24 hours in the new Trump administration. The most significant news yesterday was the announcement that Trump had pulled the US out of the 12-nation Trans-Pacific Partnership, calling the move a “great thing for the American worker”. The withdrawal wasn’t a huge surprise given how vocal Trump had been about the TPP during his campaign but it still evoked a wide range of reactions from various business heads and political leaders. Indeed Republican senator John McCain said that the move was a “serious mistake” and that “it will create an opening for China to rewrite the economic rules of the road at the expense of American workers”. The President also appeared to target Japan as a country which makes it difficult to sell US products there. In any case the speed with which Trump moved may have been a bit of a surprise and it now means that the focus will turn over to a likely renegotiation of NAFTA with Canada and Mexico.

    Trump didn’t just stop with the TPP though. Indeed there was plenty of focus on a meeting with various business leaders in which he said that he would impose a “very major border tax” on US companies that move overseas and export back into the US. The President also said that regulations have “gotten out of control” and that he wanted to reduce regulation by at least 75%. According to the WSJ among the CEO’s in attendance at the meeting were those from Ford Motor, Lockheed Martin, Under Armour, Dow Chemical and Whirlpool. The article also suggested that Trump had asked the various leaders to come back  within 30 days with ideas aimed at boosting manufacturing in the US. Away from that Trump also ordered a federal hiring freeze excluding the military while Treasury Secretary Steven Mnuchin reignited the Dollar debate again by saying that “from time to time, an excessively strong dollar may have negative short-term implications on the economy”.

    While that comment sent the Greenback down further in later trading in reality it had been a fairly rough day from the get go for the US Dollar with the market clearly jittery in the face of the early protectionist policies being put through by Trump. The Dollar index ended the day down -0.58% with the index closing at the lowest level since December 5th. It’s down another -0.14% this morning. Risk assets got the jitters too although in fairness a late bounce into the close limited the decline for the S&P 500 to only -0.27% compared to -0.64% at the day’s lows. That said it’s clear that equity markets continue to remain  fairly directionless. If you exclude the 0.00% return on January 10th then the index has now bounced between a gain and a loss day-to-day for 12 consecutive sessions. Meanwhile it had been much the same in Europe with the Stoxx 600 ending -0.43% while it was rates which really benefited from the risk off tone with 10y Treasury yields rallying 7.0bps to close below 2.400% again and 10y Bund yields finishing down 6.0bps at 0.358%. Gold (+0.65%) also continued its remarkable start to the year which has seen it rally over +6% already this month.

    This morning in Asia we’ve seen bourses get off to yet another mixed start. While the Nikkei (-0.46%) and Kospi (-0.11%) have followed the lead from Wall Street, the Hang Seng (+0.29%), Shanghai Comp (+0.18%) and ASX (+0.37%) have edged higher. Meanwhile most Asian currencies are stronger reflecting the latest leg lower for the Dollar while Oil has largely pared yesterday’s decline. Moving on. There wasn’t much in the way of economic data out yesterday with the sole release being the flash January consumer confidence reading for the Euro area which improved a touch to -4.9 from -5.1. More notable was the latest CSPP holdings data out of the ECB. The data revealed that total holdings now stand at €56.886bn which implies net purchases settled last week of €2.876bn or an average daily run rate of €575m in that week. Not only is that well above the daily run rate since the programme started (at €362m) but it is also the strongest CSPP week since the start of the programme. We would guess though that given December was a softish month for purchases as a result of the holiday season, we may be seeing a bit of catch up in last week’s numbers.

    Staying in Europe, in yesterday’s EMR we highlighted the Socialist Primary result in France where Hamon came out on top with a little over 36% of the vote. In addition, our economists noted that the turnout was disappointing on Sunday with between 1.5 and 2 million voters. They go on to say that without a higher turnout next Sunday the Socialist candidate's campaign in the Presidential race could be called into question and senior centre-left politicians may reconsider their support. They also note that since the beginning of December, Hollande's execonomy minister Macron has surprised many with the momentum and support he has been gathering as an independent Presidential candidate. As far as the polls are concerned they note that Le Pen is just ahead of Fillon in the first round, with both slightly above 25%.

    However, based on the polls, Fillon would defeat Le Pen in the second round of the Presidential election. However, Macron could benefit from wider support of left-wing supporters and beat Le Pen as well as Fillon in the second-round. That is, the potential re-alignment of political forces in the centre and centre-left should be monitored carefully in the next few weeks as it could turn the first-round of the election campaign from a two-person to a three-person race.

    In terms of the day ahead, this morning in Europe the focus will be on the January flash PMI’s where we’ll get manufacturing, services and composite readings for the Euro area, Germany and France. The UK will also release December public sector net borrowing data. Over in the US this afternoon we’ll also get the flash manufacturing PMI for January while existing home sales and the Richmond Fed manufacturing survey will also be released. Away from the data the key event today is the aforementioned Supreme Court ruling in the UK concerning the ability of the UK government to trigger article 50 without parliamentary approval. The Italian constitutional court is also due to rule on ex-PM Renzi’s electoral law for the Lower House known as Italicum. Central bank wise we’re due to also hear comments from the ECB’s Villeroy and Lautenschlaeger today. Meanwhile on the earnings front we’re due to get results from 21 S&P 500 companies today including Verizon and Johnson & Johnson at or prior to the open.

     

     

  • Turkish Lira Crashes After Central Bank Unexpectedly Keeps Benchmark Repo Rate Unchanged

    With Wall Street consensus expecting the Turkish central bank to hike its benchmark repo rate by 50bps (in two cases by as much as 75 bps and five analysts were expecting as much as a 100 bps increase) in hopes of arresting the recent record collapse in the Turkish Lira, this morning the central bank again proved it has become a political appendage of Erdogan, who has repeatedly stated he is against any rate hikes, when the central bank kept its overnight benchmark repo rate unchanged at 8%, even as it raised its less relevant overnight lending rate by the expected 75 basis points.

    The latest breakdown of Turkey's rates:

    • Benchmark repo rate: 8%
    • Overnight lending rate: 9.2%
    • Overnight borrowing rate: 7.25%

    The disappointment was particularly acute following a November decision to hike rates by 50 bps, the first such increase in more than two years.

    As a result, the lira plunged nearly 2% with USD/TRY surging as much as 1.9% to session high of 3.8284.

    In its justification, the central bank said that it can deliver further tightening if needed, noting "inflation expectations, pricing behavior and other factors affecting inflation will be closely monitored and, if needed, further monetary tightening will be delivered."

    “Moreover, necessary liquidity measures will be taken in case of unhealthy pricing behavior in the foreign exchange market that cannot be justified by economic fundamentals.”

    "Recent data indicate partial recovery in economic activity, which is “expected to continue at a moderate pace. Yet, excessive fluctuations in exchange rates since the previous meeting have increased the upside risks regarding the inflation outlook"

    It concluded that “significant rise in inflation is expected to continue in the short term due to lagged pass-through effects and the volatility in food prices.”

    In other words, expect Turkish inflation to soar in the near future as the currency crash accelerates, all the while Erdogan blames some vast foreign conspiracy to overthrow him.

  • In Blow To Theresa May, UK Supreme Court Rules Parliament Must Vote Before Brexit Can Start

    In a blow to Theresa May's ambitions to implement a "clean Brexit", on Tuesday morning UK’s Supreme Court ruled the UK Prime Minister can’t start the Brexit process without approval from Parliament, a decision that could potentially complicate her path toward a clear break from the European Union. Eight justices voted against the government and three voted in favor of it, in a decision that was widely expected.

    The case had been brought by a group of British citizens opposed to Brexit with the help of some of the U.K.’s top constitutional lawyers. Spearheading the legal challenge were British businesswoman Gina Miller and hairdresser Deir Dos Santos. Grahame Pigney, a France-based expatriate who used crowdfunding from more than 4,000 people to pay for lawyers, joined the suit as a co-party

    The government responded that the ruling wouldn’t affect May’s plans to trigger talks to leave the EU by the end of March and the opposition Labour Party said after the judgment it wouldn’t seek to stop Brexit from happening. But Labour said it would try to amend any bill introduced by Mrs. May to kick off the Brexit process, possibly influencing how the U.K.’s new relationship with the EU will look.

    According to the WSJ, while a majority of lawmakers voted to stay in the EU, many have said they won’t seek to block Article 50, which formally starts Britain’s exit from the EU, given the popular vote, in which 52% voted to leave. “The British people voted to leave the EU, and the government will deliver on their verdict—triggering Article 50, as planned, by the end of March,” a U.K. government spokesman said. “Today’s ruling does nothing to change that.”

    Lord David Neuberger said any change in the law to put Brexit into effect must be made by an act of Parliament. “To proceed otherwise would be a breach of settled constitutional principles stretching back many centuries,” he said. He said the Supreme Court justices were ruling on the process of legally bringing the result into effect, and that the ruling had nothing to do with whether the U.K. should exit from the EU or the timetable.

    While the outcome was not surprising, the case has been one of the most politically charged in decades. After the High Court ruled against the government in November, pro-Brexit activists called the decision an attempt to overturn the will of Britons who chose to break away from the bloc in a June referendum. The Daily Mail newspaper said the three High Court judges who ruled on the case were “enemies of the people.” But the landscape has shifted since then.

    As previously reported, in December, Mrs. May won lawmakers’ backing to trigger the start of Brexit by the end of March after promising to give Parliament, the majority of whom backed staying in the EU, an opportunity to scrutinize her plan first.

    Mrs. May has outlined a plan for a definitive break from the EU, saying she intends to take the country out of the EU’s single market for goods and services. Leaving the single market will create uncertainties for U.K. businesses that rely on trade with Europe, particularly financial markets, auto makers and aerospace.

     

    Asked in an interview with a German newspaper this month whether the U.K. was seeking to become a tax haven with low levels of corporate tax, U.K. Treasury Chief Philip Hammond said the U.K. could change its economic model if it isn’t granted access to trade in the EU after it leaves the bloc.

     

    Jeremy Corbyn, Labour leader, said in a statement after the ruling that Labour “will not frustrate” the process for trigger the U.K.’s exit.

     

    “However, Labour will seek to amend the Article 50 bill to prevent the Conservatives using Brexit to turn Britain into a bargain basement tax haven off the coast of Europe,” Mr. Corbyn said. “Labour will seek to build in the principles of full, tariff-free access to the single market and maintenance of workers’ rights and social and environmental protections.” He added that the party would demand that the U.K. government lays out a plan for negotiations so parliamentarians could hold it to account.

     

    Kelvin Hopkins, a Labour member of Parliament, urged his party not to seek to complicate the process of leaving.

     

    “My colleagues in the House of Commons need to realize that if we are seen to frustrate the will of the British people, by opposing or delaying Brexit we could find ourselves in a position where we will never see a Labour government again,” Mr. Hopkins said in a statement.

    Over four days of hearings before the Supreme Court last month, the government said it had the right to trigger Brexit because of the so-called royal prerogative, in which executive authority is given to ministers so they can govern on the monarch’s behalf.

    The market's reaction has been subdued, with the resulting modest decline in sterling - the opposite of what would be expected from the adverse ruling - suggesting that the court's decision had been fully priced in by the market. In fact, as HSBC predicted ahead of the decision, "if ruling states that Parliamentary approval will be needed to start the Brexit process it will be “mildly negative” for the pound." as the government is prepared for this and “should be able to table a short and simple Parliamentary Bill in the coming days” meaning Article 50 could still be triggered before the end of March.

    Sure enough, GBPUSD is now modestly lower following the announcement.

    And indeed, as Reuters writes, Theresa May's plans to start the process of Britain leaving the European Union by the end of March are unlikely to be hindered or slowed by Tuesday's Supreme Court ruling the government must seek parliamentary approval. In the ruling, judges on Britain's top judicial body upheld an earlier High Court decision that lawmakers had to give their assent before May can invoke Article 50 of the Lisbon Treaty which formally starts two-years of divorce talks.

    However, the legal defeat, while an inconvenience and embarrassment for the government, is not expected to delay its Brexit timetable or, as some investors and pro-EU supporters hope, make it possible to stop Britain leaving the bloc. Part of this is because the opposition is divided.

     

    "We will not block Article 50," Jeremy Corbyn, leader of the main opposition Labour Party which campaigned against Brexit, said last week. "All Labour MPs (members of parliament) will be asked to vote in that direction next week, or whenever the vote comes up." Not all Corbyn's colleagues may go along, but May can get the votes she needs for overall passage.

     

    However, what the decision could do is give an opportunity for Labour and other lawmakers who oppose a "hard Brexit" - an agreement with the EU that puts immigration curbs above access to the single market - to have a greater influence on what the final deal should look like.

    The greatest potential threat to May comes from parliament's unelected upper chamber, the House of Lords, where many peers remained strongly opposed to Brexit and do not have voters to worry about. If the Lords were to vote against approving the triggering of Article 50, the Brexit timetable could be severely delayed.

    However, the government is confident the bill will pass through the Lords because there would be a constitutional crisis if unelected peers were to thwart the will of the people expressed both through the referendum and from their representatives in the Commons.


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