Mixed Reactions to Historic UK-EU Deal Rekindling Brexit Debates

Economic

Summary:

The new UK-EU agreement on defense, security, and trade has sparked contrasting views within the UK—praised by businesses eager for stability but criticized by fishing communities and Brexit...

UK-EU Deal Marks a New Chapter Amid Lingering Brexit Wounds

On May 19, the UK and European Union reached a landmark agreement addressing defense cooperation, security, and trade, just ahead of their first post-Brexit summit in London. British Prime Minister Keir Starmer hailed the deal as a victory for both sides, emphasizing its role in restoring the UK’s standing on the global stage. In social media remarks, Starmer called for moving beyond political discord to focus on practical solutions improving citizens’ lives.

A major component of the deal allows UK defense companies to participate in Europe’s €150 billion rearmament program, signaling deepened strategic ties. Despite Brexit, the EU remains the UK’s largest trading partner. However, bilateral trade has declined since Brexit, with UK exports to the EU dropping 21% and EU exports to the UK falling 7%.

Support from Business and General Public

Many businesses welcomed the agreement as a return to pre-Brexit predictability. Phil Rusted, head of Practical Plants, an importer of European crops, called it the best news in nine years, promising improved hiring and business growth. Economists like Philip Shaw view the deal as positive amid global threats to globalization, especially benefiting sectors like food exports by easing border inspections and lowering costs.

The Federation of Small Businesses described the deal as genuine progress, appreciating the relief it provides exporters of plants and animals. Polls indicate broad UK public support, with 66% favoring closer EU ties and only 14% opposing.

Compromises and Controversies

Experts note significant UK concessions, including granting EU fishing rights in British waters and agreeing to financial contributions to participate in the EU Court of Justice system, aspects that remain contentious.

Fishing organizations have fiercely opposed the deal, labeling it a loss of the best growth opportunity for their industry and coastal communities. They accuse the agreement of dragging the UK fishing sector back into decline.

The deal has reignited debates over whether the UK is effectively reversing Brexit by aligning closely with EU regulations. Former Prime Minister Boris Johnson condemned the agreement on social media as a "terrible sellout," reflecting the deep divides Brexit continues to evoke.

The UK-EU agreement symbolizes both a pragmatic step toward cooperation and a flashpoint for unresolved Brexit tensions. While offering economic and strategic benefits, it also underscores the ongoing challenges the UK faces in balancing sovereignty aspirations with the realities of close EU interdependence.

Source: The Conversation

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Glendon

Commodity

Oil edged higher in a choppy session as the market juggled the outlook for more OPEC+ supply and the risk of additional US sanctions on Russia.

Brent traded above $64 after closing 1% lower on Tuesday. OPEC+ will gather online on Wednesday to review production quotas for this year and next, before eight key members decide at the weekend whether to bolster output again in July.

Members held preliminary talks last week on making a large production hike for a third consecutive month, according to delegates.

President Donald Trump, meanwhile, warned in a social media post on Tuesday that Russian leader Vladimir Putin was “playing with fire” as the US weighed whether to target Moscow with additional sanctions.

The ramp up of idled production by OPEC and its allies has stoked fears about oversupply and added to the pressure on prices. Parts of the futures curve for Brent are in contango — a bearish structure that signals ample supply.

“From a macro perspective, it is a wait and see game in terms of risk appetite, with oil hesitant to follow higher equities even as long-dated US and Japanese yields came down,” said Harry Tchilinguirian, group head of research at Onyx Capital Group. “Right now there are downside fundamentals to the flat price, with the possibility of another voluntary cut unwind from OPEC.

Oil has trended lower since mid-January, with sweeping tariffs from the Trump administration and retaliatory measures from targeted countries adding to bearish headwinds, raising concerns over an economic slowdown. However, there has been some signs recently of easing trade tensions.

Source: Yahoo Finance

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Daniel Carter

Economic

Political

Central Bank

ECB President Lagarde addresses the media following the Governing Council's monetary policy meeting in Frankfurt.

Christine Lagarde is determined to complete her eight-year term as president of the European Central Bank, the ECB said on Wednesday after the Financial Times reported that she held talks about leaving early to lead the World Economic Forum.

The FT said Lagarde, who still has more than two years left in her mandate, has held talks about taking over as head of the WEF for years and last met with former WEF President Klaus Schwab in April to discuss a succession plan.

Schwab was quoted as saying Lagarde, who is on the WEF's board of trustees, was at the centre of their succession plan and they had discussed timelines and even practical arrangements, including accommodation for Lagarde.

Asked to comment on the report, an ECB spokesperson said: "President Lagarde has always been fully committed to deliver on her mission and is determined to complete her term."

Lagarde's non-renewable term at the ECB runs until October 31, 2027.

Schwab, the WEF's founder, resigned with immediate effect last month and the group said it launched an investigation into his affairs following a whistleblower letter alleging misconduct.

Schwab denies the allegations.

Source: Yahoo Finance

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Gerik

Economic

Commodity

Oil Prices React to U.S. Restrictions on Venezuelan Exports

On May 28, Brent crude futures inched up by 7 cents, or 0.1%, reaching $64.16 per barrel by early afternoon, while U.S. West Texas Intermediate (WTI) crude rose 9 cents, or 0.2%, to $60.98 per barrel. This mild price increase comes amid growing concerns over potential supply disruptions after the U.S. government issued a new asset license barring Chevron from exporting oil from Venezuela, though allowing it to maintain its operations there.

The renewed restrictions restrict Chevron from expanding activities or shipping Venezuelan crude, reversing previous licenses that had supported Venezuela’s struggling oil output, which had recently recovered to about one million barrels per day despite sanctions. Robert Rennie, head of commodity and carbon strategy at Westpac, noted that losing Chevron’s Venezuelan crude supply would create shortages for U.S. refineries, increasing their dependence on Middle Eastern oil.

OPEC+ Production Decisions Weigh on Price Movements

Despite supply concerns, price advances remain capped by market expectations that OPEC+ will maintain or potentially increase production. The full OPEC+ membership was scheduled to convene on May 28, but market observers anticipate no immediate change in output levels. A separate meeting of eight members later in the week, on May 31, may decide on production adjustments effective in July.

Oil markets continue to balance geopolitical and supply-side uncertainties with OPEC+ production discipline. While U.S. sanctions on Venezuelan exports tighten supply, decisions by the oil cartel are expected to play a crucial role in shaping prices in the near term.

Source: Reuters

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Political

Rising Tensions Amidst Military Advances

U.S. President Donald Trump sharply criticized Vladimir Putin on May 27, accusing him of “playing with fire” by refusing to engage in ceasefire negotiations with Kyiv. This comes as Russian forces have made notable territorial gains in Ukraine’s northeast Sumy region, capturing four villages and exerting additional pressure on Ukrainian defenses.

On the social media platform Truth Social, Trump warned that “if it weren’t for me, lots of really bad things would have already happened in Russia,” underscoring his belief that his influence had prevented worse outcomes. Trump’s remarks reflect frustration over Moscow’s continued drone and missile attacks—the deadliest since the conflict’s escalation in 2022—without meaningful progress toward peace talks.

Russian Deputy Security Chief Dmitry Medvedev dismissed Trump’s comments, warning of the catastrophic risk of World War III if tensions escalate further.

Ceasefire Negotiation Stalemate

Following a recent phone call, Putin indicated willingness to collaborate with Ukraine on drafting a peace memorandum and defining a ceasefire’s terms. However, Kyiv, the U.S., and European allies have demanded an immediate, unconditional 30-day ceasefire, which Moscow has yet to accept. Critics accuse Russia of using negotiations to stall while advancing militarily.

The Russian capture of Novenke, Basivka, Veselivka, and Zhuravka villages in the Sumy region represents a serious setback for Ukraine, though evacuations spared civilian casualties. Ukrainian forces have launched countermeasures, including firing long-range drones into Russia, temporarily disrupting Moscow’s airport operations.

Sanctions and Military Aid Under Consideration

While Trump has not enacted new sanctions against Russia, U.S. officials report preparations for a fresh sanctions package. Pressure mounts from Ukrainian President Volodymyr Zelenskiy for increased U.S. military assistance as the conflict intensifies.

The heightened military activity and diplomatic deadlock underscore the fragile and volatile nature of the Russia-Ukraine conflict. Trump’s pointed warnings and Russia’s territorial advances signal a critical juncture, with global attention focused on whether diplomatic efforts can avert further escalation.

Source: Reuters

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Economic

Record High Yields Shake Confidence in Japan’s Bond Market

Yields on Japan’s 40-year government bonds recently hit an all-time high of 3.689%, retreating slightly but remaining elevated near 3.318%. Similar trends are seen in 30-year and 20-year bonds, which have increased by over 60 and 50 basis points respectively this year. The sharp rise in yields signals growing investor caution, as demand for these bonds weakens to levels not seen since mid-2024.

Rising yields may trigger a significant repatriation of capital, with Japanese investors potentially withdrawing funds from U.S. assets to invest domestically. Analysts at Macquarie warn of a “trigger point” that could accelerate this movement. The unwinding of carry trades—where investors borrow in low-yield yen to fund higher-yield foreign investments—could create substantial volatility. Societe Generale strategist Albert Edwards warns of a “global financial market Armageddon” if yields continue climbing and the yen strengthens, particularly hurting U.S. tech stocks, which have attracted large Japanese inflows.

Broader Global Market Implications

Higher borrowing costs from rising Japanese yields are expected to tighten financial conditions globally, potentially dampening growth and extending bear markets across asset classes. Japan’s position as the world’s second-largest creditor—with record net external assets exceeding $3.7 trillion in 2024—amplifies these risks. Strategist David Roche notes this could mark the “end of U.S. exceptionalism” as capital shifts not only in Japan but across Europe and China.

The surge in long-term yields partly stems from Japanese life insurers, major buyers of 30- and 40-year bonds, having fulfilled regulatory purchasing requirements. Coupled with the Bank of Japan’s reduction in bond purchases last year, this has created a supply-demand imbalance pushing yields higher.

Carry Trade Dynamics and Currency Effects

The carry trade’s unwind, prompted by the Bank of Japan’s interest rate hikes and yen appreciation starting last August, contributed to a global market selloff. Portfolio manager Michael Gayed warns the current scenario could surpass last year’s turmoil if U.S. bond yields decline while Japanese yields rise, damaging the “cheap yen” dynamic crucial to carry trades. Natixis economist Alicia García-Herrero emphasizes that the strengthening yen amid capital repatriation is unsustainable for Japan’s economic recovery.

Some analysts argue the unwind may be more gradual this time due to a reduced interest rate differential and increased dollar weakness, leading to fewer short yen positions than last year. EDHEC professor Riccardo Rebonato foresees a prolonged erosion of carry trade positions rather than a sudden crash.

Japan’s Holdings of U.S. Debt Remain Stable

Despite concerns, Japan’s holdings of U.S. Treasuries are structurally anchored in a broad strategic alliance encompassing economic, defense, and geopolitical cooperation. State Street strategist Masahiko Loo sees limited risk of large-scale divestment. Additionally, most foreign investment in U.S. assets is in equities rather than Treasury bonds, suggesting that any capital outflows in a severe downturn would likely first impact stocks and corporate bonds before government debt.

Japan’s escalating long-term bond yields present a significant test for global financial stability, with potential repercussions through capital flows, currency markets, and risk asset valuations worldwide. While the exact scale and speed of carry trade unwinding and capital repatriation remain uncertain, the elevated yields and stronger yen mark a critical juncture in global monetary and financial dynamics.

Source: Reuters

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Gerik

Economic

Climate Change as a Financial and Operational Challenge

Climate change has evolved from being merely an environmental issue to a critical financial factor impacting global business operations. Vietnam’s commitment to achieving net-zero emissions by 2050 necessitates profound shifts in corporate governance to meet emerging environmental and social demands.

Effective corporate governance plays a central role in guiding companies through the complex impacts of climate change. Simon C.Y. Wong, an international corporate governance expert, warns that failing to act timely could lead to global economic damages of up to $38 trillion by 2049. Integrating environmental, social, and governance (ESG) factors into business strategies is essential, with boards of directors leading this transformation.

In Vietnam, leading firms like Vinamilk and PAN Group have pioneered ESG integration. Vinamilk has developed Global GAP-certified dairy farms and incorporated ESG principles across its supply chain to reduce greenhouse gas emissions, while PAN Group applies international governance standards to enhance sustainable operations.

Phạm Minh Hương of Deloitte Vietnam emphasizes that corporate governance transcends compliance—it is a strategic foundation for environmental and social objectives. Adopting international standards such as IFRS S1 and IFRS S2 enhances transparency and competitiveness, particularly benefiting export-driven sectors like Vietnam’s seafood industry, which must meet stringent EU and US market ESG criteria.

Regulatory Framework and Enforcement

The Vietnamese legal framework, including the 2019 Securities Law and Decree 155/2020, sets clear corporate governance requirements. The State Securities Commission (SSC) intensifies oversight of ESG disclosures, imposing strict sanctions on non-compliant listed companies. In 2023 alone, 15 firms were penalized for delayed or opaque sustainability reporting, demonstrating regulatory resolve to improve governance quality and assist companies in adapting to climate risks while seizing new opportunities in the green economy.

Climate change presents both risks and opportunities. Firms can tap into markets demanding environmentally friendly products and enhance energy efficiency. The Ministry of Industry and Trade estimates that improving Vietnam’s energy efficiency from 1.8% to 2% equates to reducing coal-generated electricity output by half. Companies like Hòa Phát are investing in green steel technologies and renewable energy, aligning with regulatory demands and expanding market share in developed economies.

Existing Challenges and Capacity Gaps

Despite progress, challenges remain substantial. Only 14% of over 700 listed companies on the Ho Chi Minh City Stock Exchange produce separate sustainability reports, dropping below 5% for those with audited disclosures. Key obstacles include incomplete legal guidance and lack of concrete ESG implementation standards. To address this, the SSC collaborates with the International Finance Corporation (IFC) to develop Vietnam’s ESG Standards, expected in 2026, targeting especially small and medium enterprises, which represent 97% of Vietnamese firms.

Trần Khánh Lâm of the Vietnam Association of Certified Public Accountants (VACPA) views ESG assurance services as growth opportunities for the auditing sector and a driver for corporate governance improvements. VACPA has partnered with ACCA to deliver training on IFRS S1 and S2, engaging over 500 auditors in 2023. However, PwC Vietnam’s recent report highlights a skills gap, with only 20% of auditors possessing fundamental ESG knowledge, underlining the need for long-term capacity building.

Experts recommend embedding ESG into long-term corporate strategies with active board involvement. Exemplars like Vinamilk and Hòa Phát show that effective governance mitigates risks and generates added value. Meanwhile, policymakers must accelerate legal reforms, and auditors should enhance capabilities to support transparent reporting. Through coordinated efforts, Vietnam can transform climate change from a threat into a sustainable development catalyst, strengthening its global economic standing.

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