Brexit woes: Industrial output declines & trade deficit increases - by Joe Mellor

The deal PM May secures with the EU is increasingly important, but the anti-European rhetoric from the Government is making that less likely.

The vote for Macron, who is very pro-EU, in France might strengthen the EU’s resolve in the negotiations with the UK.

Industrial output dropped by 0.5% in March, sharper than the 0.3% fall that had been forecast.

This followed a 0.7% fall in February leading to a total growth of just 0.1% for the first quarters of the year according to the Office for National Statistics figures.

It was hoped that a fall in the pound might increase exports but there doesn’t appear to be much evidence this has happened. Instead there was a surge in imports, up £2.9bn over the month, with an increase in imports of goods from both EU and non-EU countries.

The broad services and goods deficit jumped to £4.9bn in March from £2.6bn in February.

Exports increased by just £600m. Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said the March trade figures were “simply dreadful”.

The uncertainty over Brexit appears to be grinding the economy to a halt and a turnaround in the next quarter is essential, however that looks unlikely.

Read more Brexit woes: Industrial output declines & trade deficit increases - The London Economic

European Parliament Blocks EC Money Laundering Blacklist because they consider it incomplete- by Joe Kirwin

EU Money Laundering Controls

The European Commission will be forced to draw up a new blacklist of countries that facilitate money laundering after the European Parliament overwhelmingly rejected the latest effort that failed to consider countries that enable tax evasion.

EU lawmakers voted 392-80, with 207 abstentions, to reject the list that includes 11 countries, including Afghanistan, Bosnia and Herzegovina, Iraq, North Korea, Yemen and Syria, among others.

These are countries that the Paris-based Financial Action Task Force has signaled as destinations for laundering money or sources of terrorism financing.

Any country that ends up on the money laundering blacklist will face stricter controls when doing business in the EU, to ensure financial stability and general safety.

“We can not accept that the commission relies merely on an international body—the so-called Financial Action Task Force (FATF)—in drawing up a list of jurisdictions with strategic anti-money laundering and counter-terrorism financing,’' said Ana Gomes, a Portuguese parliamentarian from the Socialist and Democrat group, in a May 17 statement.

“How can we explain to our citizens that Panama for instance, which led the Panama Papers scandal, is not even on the list?” she asked.

Parliamentary opposition to the current blacklist also concerns the criteria used by the European Commission. EU lawmakers insist that the list should also include countries that facilitate tax evasion, which the Commission believes is beyond its mandate.

A key difference between the two EU institutions concerns the threshold for identifying beneficial owners of companies. EU member states insist it should be 25 percent or more, whereas the European Parliament wants 10 percent or more. Negotiations will continue in June.

The dispute over the AMLD blacklist is different from a tax haven blacklist that EU member states are due to finalize by the end of 2017.

Currently, EU member states are “screening” 92 countries as candidates for the tax haven blacklist. The U.S. is among the 92 countries.

Read more: European Parliament Blocks EC Money Laundering Blacklist | Bloomberg BNA

Brexit: London Mayor Elections 2016: Amid Tight Brexit Polls, Pro-EU Sadiq Khan Poised For Victory

With the referendum on the U.K. leaving the EU looming June 23, a so-called Brexit has become a prominent topic of debate leading up to the London mayoral election, in which Khan is facing off against pro-leave politician Zac Goldsmith to become the leader of the nation’s capital.

While the London mayor exhibits limited power over the outcome of the referendum, a pro-Brexit mayor would have been seen as a symbolic defeat both for the Prime Minister David Cameron and for his entire pro-EU campaign, experts said. London has historically been heavily integrated into the EU financial and political system as well as statistically anti-Brexit.

“It’s crucial [for the EU campaign] that Goldsmith won’t be winning,” said Charles Lichfield, an EU analyst for risk consultancy Eurasia, saying Khan’s win is “certainly not something that the pro-Brexiters could use.”

Nearly 60 percent of Londoners who responded to a recent YouGov poll said they supported the U.K. staying in the EU. London has long been considered not only an international capital but a European one where EU nationals from across the continent live, work and study. With the London stock exchange and a thriving financial services sector, the capital is a financial hub that facilitates trade within the EU and beyond, and many citizens have expressed fear the city would lose some of its status and economic standing.

The debate over a Brexit centers on national sovereignty, security and economic strength. Supporters of the U.K. leaving the EU say the country would be better able to control its national borders without constraints from the EU while maintaining London would keep its economic prowess with or without the EU trading bloc. Proponents of staying in the EU argue the country’s membership is part of what has contributed to security and a thriving economy. The margin between the two camps has remained tight in the weeks leading up to the June vote, and the latest results from the Financial Times’ Brexit poll tracker — which takes the average of recent polling data — put support for remaining in the EU at 46 percent, and support for leaving at 43 percent.

If Goldsmith wins — a seemingly unlikely possibility as Khan was leading according to the most recent polling information — pro-Brexit campaigners would have been able to point to London as a symbol of the necessity for a Brexit, arguing if the European hub could recognize the necessity of leaving Europe, then everyone could, Lichfield explained.

Current London Mayor Boris Johnson came out in favor of a Brexit in February, going against the stance both of his Conservative Party and of the prime minister, a close political ally. A pro-Europe London mayor such as Khan would complete a pro-European trifecta of the prime minister, the London mayor and the chancellor of the exchequer — three of the most powerful positions in the U.K., all lobbying for the U.K. to stay in the EU.

Read more: London Mayor Elections 2016: Amid Tight Brexit Polls, Pro-EU Sadiq Khan Poised For Victory

ECB stimulus surprise sends stock markets sliding

European stock markets have fallen and the euro has soared following the economic stimulus measures announced by the European Central Bank.

After initially rising following the broader than expected package, Frankfurt closed down 2.3%, Paris ended 1.7% lower and the FTSE 100 slid 1.8%.

The euro initially fell 1.6% against the US dollar to $1.0822 before jumping as high as $1.1218.
It was one of the biggest one-day swings in the currency's history.
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Sharp rises for European banks were also largely wiped out.

The ECB cut its main interest rate from 0.05% to 0% and cut its bank deposit rate, from minus 0.3% to minus 0.4%.

The bank will also expand its quantitative easing programme from €60bn to €80bn a month.
Stimulus,

Jasper Lawler, of CMC Markets, said: "Stocks came off highs of the day when some of the initial euphoria was nullified by the suggestion by ECB president Mario Draghi that rates would not be cut any further."

Simon Derrick, chief currency strategist at BNY Mellon: "If the intention of the ECB board was to help weaken the euro then their work was entirely undone by Mr Draghi's comments about the future path of rates."

John Hardy, head of currency strategy at Saxo Bank, said: "This was a much bigger bazooka than the market was expecting and shows the ECB trying to get ahead of the confidence curve after learning its lesson in December."

The stimulus measures announced three months ago have largely failed to drive economic growth higher or boost inflation.

Read more: ECB stimulus surprise sends stock markets sliding - BBC News