Germany's Christian Democratic Union Chooses Merkel's Successor-LIVE


Angela Merkel, who has been the CDU's head since 2000 and German chancellor since 2005, announced in November that she would not run for the party's leadership or seek a fifth term as chancellor in 2021, setting a deadline for her exit from German politics.
Germany's Christian Democratic Union (CDU) is convening in Hamburg on Friday, December 7, for the party's Annual Congress where 1,001 delegates are expected to elect a new party chair and other internal leaders.
Angela Merkel will hand over the party's reins of power, as well as problems yet to be solved, to one of three candidates that the CDU will choose at the Congress.
The favourites are CDU General Secretary Annegret Kramp-Karrenbauer, and Friedrich Merz, a former leader of the party's parliamentary group. Health Minister Jens Spahn is considered the outsider.Germany's ruling Christian Democrats vote to replace Angela Merkel as their leader today, with the successful candidate then a hot favourite to become a future chancellor.
German Chancellor Angela Merkel tours the Christian Democratic Union party congress venue in Hamburg, December 6, 2018
Their Hamburg congress is a genuine cliff-hanger, with many delegates saying they will not make up their mind until they have heard the speeches of leading candidates Annegret Kramp-Karrenbauer and Friedrich Merz. Broadly, Kramp-Karrenbauer would be seen as a choice for “more Merkel” and Merz a shift away from her centrism towards the right.
But that choice is complicated by the fact that, 18 years after she took the reins of the party and then became Europe’s pre-eminent leader, views are split on what Merkel’s legacy is.
For some, it boils down to the judgment that her handling of the 2008/09 economic crisis foisted austerity on much of Europe to keep German taxpayers happy; others say her moderate stances and her 2015 decision to allow in hundreds of thousands of refugees made her the leading bulwark against populism from Trump to Putin. Today’s decision could be critical in setting Germany’s next direction.
During the Brexit negotiations, one of the core EU red lines has been the insistence that reaping the benefits of its single market means also signing up to its rules. Today we get the Swiss slant on that quid pro quo with Switzerland's divided cabinet likely to reject a draft treaty that would bind the country more tightly to those rules in return for continued market access for its exporters.
Mirroring the Brexit debate, its critics complain of a loss of sovereignty - meaning the ruling four-party coalition has no majority to approve it before elections next year. That in turn sets up a fight with Brussels, which will ban EU-based banks and brokers from trading on Swiss stock exchanges beyond the end of 2018 as a punitive measure should Bern not sign off on Friday.
Much of central Paris will be in lockdown tomorrow with tens of thousands of extra police drafted in to contain what is being billed by protesters as "act IV" of the yellow vest wave of street anger. This is bad news economically for a city that is one of the world's top tourist and shopping draws; politically, the fall-out for Emmanuel Macron's government is getting worse.
French presidents, even those with popularity ratings as dire as Macron’s, tend to be able to sit such situations out; but they have the option of sacking their prime minister or reshuffling their government team if things get bad.
MARKETS AT 0800 GMT
Markets are still struggling today after yesterday's rout that took world stocks down 1 percent to five-week lows as the arrest of smartphone maker Huawei's CFO Meng Wanzhou threatens to chill talks on a Sino-U.S. trade truce.
Yes, Wall Street did manage to close with relatively small losses last night (largely due to hopes of a Fed rate rise pause but more on that later) and this morning in Asia, stocks managed to rise after Thursday’s drubbing. But sentiment is still fragile and Chinese mainland shares remain in negative territory.
European markets, however, look set for a firmer open after slumping 3 percent yesterday and Wall Street futures too are looking positive. But the turbulent week is not over yet – oil is continuing to slide, the dollar is set for its biggest weekly drop in two months, world stocks are down 2.3 percent so far. The post-G20 rally on Monday seems like a distant memory.
A very important development has been the move in U.S. Treasury yields which have so far posted their biggest weekly drop since April 2017. A lot now depends on what the Fed may or may not do.
U.S. stocks got some respite last night after the Wall Street Journal reported Fed officials are considering whether to signal a new wait-and-see stance after a likely rate increase at their meeting in December.
But on the other hand Federal Reserve Chairman Jerome Powell came out with comments emphasising the strength of the labour market. Still, money markets now price in less than one rate hike next year - just a couple of weeks back they had expected three. But labour strength notwithstanding, there seems to be increasing conviction that the U.S. economy is slowing sooner than expected and the sugar rush of tax cuts is wearing off.
"Since the Fed is now very data-dependent, stronger data should give the market more confidence that the Fed will continue hiking in 2019. We think the Fed will go twice next year"
Those worries have savagely flattened the U.S. yield curve with the 2-10 yield gap narrowing 7 bps this week at a new decade low below 10 bps, in turn compressing the German, Canadian, Aussie and other curves in the G10 as well. It's the biggest weekly narrowing since June. So now all eyes are on the U.S. jobs numbers - economists polled by Reuters forecast jobs rose by a solid 200,000 in November so watch this space.
In Europe, we focus - as has been the case for months now – on Brexit and Italy noise. The Italy-Germany bond yield spread blew out yesterday by 20 bps and Italian short-dated yields rose 18 bps on the risk-off mood, as well as signs the coalition would dig its heels in on reducing the budget deficit as much as the EU would like. The market is a bit more stable this morning especially as coalition leaders have dismissed reports they want economy minister Tria to quit.
On the Brexit front, it looks like Tuesday's vote will proceed and sterling is flat, awaiting more news. But homebuilder Berkeley gave us a reminder of the fallout from Brexit, warning of the consequences on real estate. Moody's reviews the UK credit rating tonight, though no change is likely.
European shares are set for a rebound at the open but there is not much enthusiasm on Asian markets or U.S. futures to bet that they will end the day in the black. A lot will depend on non-farm payrolls and how they tread the fine line of reassuring on growth after the recent yield curve drama and don’t change the growing belief the Fed has had a dovish epiphany.
On the corporate front,  shares in  German healthcare group Fresenius are expected to fall at the open after it cut its medium-term guidance. Spain's Telefonica is still under the spotlight after its British unit O2 restored its cellular network following a software glitch which caused smartphone users to lose internet access.
Associated British Foods says trading at its Primark fashion chain was challenging in November. More on the Renault/Nissan saga with Tokyo prosecutors planning to indict Carlos Ghosn on Monday for financial misconduct according to Nikkei business daily.
Good news for Roche which wins an FDA approval for a lung cancer treatment and still in  the sector,  Novartis said it would launch emergency allergy shots next year in the United States, at a price that is about 16 percent below that of similar rival products. Deutsche Bank, which in general could use some good news is under pressure on a new money laundering report.    
Emerging stocks grind 0.4 percent higher but the gains are not enough to offset three days of hefty losses with the index poised to end the week with a loss of just over 1 percent. The picture is pretty mixed though – while heavyweight Hong Kong and Taiwan are on track for weekly losses, China mainland shares extend gains for a second week thanks to Monday’s stellar gains.
Emerging currencies find little solace in the dollar weakening 0.4 percent since Monday and U.S. Treasury yields recording their biggest weekly tumble since April 2017. Treading water on the day, Turkey’s lira is on track for a 2.5 percent loss over the week while South Africa’s rand weakens 0.2 percent on the day and 1.6 percent on the week with woes over the heavy debt burden faced by state-owned utility Eskom weighing on markets.
Also watching out for reaction re Turkey’s Halkbank after a New York prosecutor dropped the appeal to extend the sentence on one of its executives, Hakan Attila, who has been convicted to 32 months in prison in May for helping Iran evade U.S. sanctions.