* A look at the day ahead from European Economics and Politics Editor Mark John and EMEA markets editor Mike Dolan. The views expressed are their own.
LONDON, May 9 (Reuters) - France's Emmanuel Macron is scheduled to speak by telephone with Iranian President Hassan Rouhani later today as part of international efforts to salvage the 2015 Iranian nuclear deal after the US withdrawal. The European countries that negotiated the accord all insist it is not dead and Rouhani - whose own career is now on the line - has also said Iran will stay in it. Separately, both China and Russia have also criticised the US move. The critical question is whether the Western investments and deals on which Rouhani had been banking to help fire up his country's economy can now go ahead, given multinationals' unwillingness to fall foul of U.S. sanctions. Those European capitals who lobbied hard for the US to stay in the deal see the move by Donald Trump as a disavowal of the transatlantic alliance that could have wider consequences down the line.
In a major reversal of expectations from barely a few weeks ago, economists polled by Reuters now believe the Bank of England will wait until August before raising interest rates rather than cracking ahead at tomorrow's meeting. What's more, just under a third of them expect no change in August either. The first trigger was some pointedly dovish comments a while back from Bank of England Governor Mark Carney, followed by a spate of data suggesting Britain's economy is barely growing. The broader picture is that, with an uncertain Brexit looming, Britain's economy has fallen from top to bottom of the list of G7 countries in terms of growth rate.
MARKETS AT 0655 GMT
However you view the reaction of world markets to the U.S. exit from the Iran nuclear deal, this is no flight to safety. Nearly all the traditional financial havens in times of geopolitical stress have actually weakened over the past two days – U.S. Treasury bonds, gold, the Swiss franc and Japanese yen. Instead, the prospect of renewed U.S. sanctions on Iran is being played primarily through the higher oil price and any disruption to world supplies from a country that produces some 4 percent of global crude. The Brent crude price has jumped to a new 3-1/2 year high of $76.75 early on Wednesday and is now up more than 50 percent year-on-year. The additional spur that higher energy prices give to inflation has lifted 10-year U.S. Treasury yields back close to the psychologically important milestone of 3 percent and this has, in turn, supercharged the resurgent U.S. dollar in a week where Fed watchers have their eyes trained on the April U.S. inflation reports. U.S. producer price inflation is out later today and consumer price numbers are out tomorrow. The contrast between the U.S. monetary policy stance and Europe remains stark, however, and the Fed looks to be the last man standing in attempts to tighten credit. Financial markets now only see a 70 percent chance of a European Central Bank interest rate rise by June next year, whereas that had been fully priced only two weeks ago. Spluttering euro zone economic numbers, such as news on Wednesday of an unexpected drop in French industrial production in March, only underline that. The euro/dollar exchange rate fell to a new 2018 low of $1.1826 first thing on Wednesday and is now down almost 6 percent from February’s peak. Any thought of a Bank of England interest rate rise tomorrow has been wiped off the table by a series of poor UK economic soundings, meantime, and sterling continues to weaken against the dollar as a result.
The dollar surge was most amplified against emerging market currencies, where steep losses for the likes of the Argentine peso, Turkish lira and Indonesian rupiah continue to accelerate and threaten a wider capital flight from developing economies at large amid concerns over climbing dollar funding costs internationally. The peso continued to weaker on Tuesday despite last week’s central bank interest rate hike to as high 40 percent, forcing Argentine President Macri to seek a financing deal with the International Monetary Fund. Turkey’s lira, in part jarred by regional security fears after the U.S. withdrawal from the Iran deal, fell to yet another record low against the dollar early Wednesday. European markets will also keep a close eye on prospects of a snap Italian election after both Italian stocks and sovereign debt took fright at the prospect on Tuesday as talks on forming a new government broke down over the weekend. A decision by the President is expected by Thursday. European shares are set to open slightly higher as investors digest a flurry of earning update, however, after Wall St stocks closed flat on Tuesday. Asia bourses were steady to slightly lower overnight.
* Malaysia, Serbia, Albania, Peru central bank policy decisions
* Europe corp events: AB InBev (Brussels: ABIT.BR - news) , Ahold Delhaize, Banco BPM, Brenntag (IOB: 0MPT.IL - news) , Delivery Hero (Sales), Deutsche Telekom (IOB: 0MPH.IL - news) , EDF (Swiss: EDF.SW - news) (Sales), Enel (LSE: 0NRE.L - news) , Fraport (IOB: 0O1R.IL - news) , G4S (Amsterdam: GF6.AS - news) (trading), Heidelbergcement (IOB: 0MG2.IL - news) , Henkel (LSE: 0IZ8.L - news) , IAG (Traffic), ICA (sales), Imperial Brands (LSE: IMB.L - news) , ING, ISS (LSE: 0QRS.L - news) , Jyske Bank (LSE: 0MGD.L - news) , Marine Harvest (LSE: 0OAW.L - news) , Nokian Renkaat (LSE: 0FFY.L - news) , Poste Italiane (Dusseldorf: 29884131.DU - news) , ProsiebenSat1, Siemens (BSE: SIEMENS.BO - news) , Skanska (LSE: 0HBT.L - news) , TechnipFMC, TGS Nopec, TUI (LSE: 0NLA.L - news) , UniCredit (EUREX: DE000A163206.EX - news) , United (Shenzhen: 000925.SZ - news) Internet, Wienerberger (IOB: 0MKZ.IL - news) , Wolters Kluwer (trading), Zurich Insurance (sales), Dialog Semiconductor Q1
* France, Spain March industrial output
* Italy March retail sales
* Germany auctions 30-year bunds
* UK auctions 10-year gilts
* German finance minister Scholz press conference on tax revenue
* Czech March trade
* Sweden, Hungary April inflation
* SAfrica April business confidence
* US Q1 earnings: Albemarle, 21st Century Fox, TechnipFMC, Liberty Media
* US April producer price inflation
* Mexico April inflationAtlanta Fed chief Bostic speaks in Jacksonville, Florida
* US Treasury auctions 10-year notes (Editing by Andrew Heavens)