Brexit extension avoids ‘terrible outcome,’ says IMF’s Lagarde

International Monetary Fund Managing Director Christine Lagarde said on Thursday the delay of Britain’s separation from the European Union avoids the “terrible outcome” of a “no-deal” Brexit that would further pressure the global economy.

Lagarde told a news conference, however, that the arrangement will prolong uncertainty and won’t resolve the issues between Britain and the EU.

“At least UK is not leaving on April 12 without a deal. It gives time for continued discussions between the various parties involved in the UK. It probably gives time for economic agents to better prepare for all options, particularly industrialists and workers, in order to try to secure their future,” Lagarde said. “A no-deal Brexit would have been a terrible outcome.”

Meanwhile, British finance minister Philip Hammond said on Thursday he would urge fellow international policymakers to find ways to achieve sustainable economic growth and tackle climate change at meetings this week in Washington.

Hammond is travelling to the spring meetings of finance ministers and central bank governors at the International Monetary Fund and World Bank, just hours after Prime Minister Theresa May secured a delay to Britain›s departure from the European Union, potentially until Oct. 31.

The British finance minister made no direct mention of Brexit in his statement, but said he wanted to share his country›s expertise in areas ranging from climate change to trade.

Separately, stocks on Wall Street and in Europe clung to small gains on Thursday as investors waited for first-quarter earnings reports while US Treasury yields rose after strong US data and a six-month extension of Britain›s deadline to leave the European Union.

The dollar index also rose as worries about the world›s largest economy eased after US data showed March producer prices increased by the most in five months.

The number of Americans filing applications for unemployment benefits dropped to a 49-1/2-year low last week, pointing to sustained labor market strength that could assuage fears the economy was rapidly losing momentum.

Other data on Thursday showed producer prices increased by the most in five months in March amid a surge in the cost of gasoline. But underlying producer prices remained soft, the latest indication of tame inflation pressures that strengthen the Federal Reserve›s decision to suspend further interest rate increases this year despite a tight labor market.

Initial claims for state unemployment benefits fell 8,000 to a seasonally adjusted 196,000 for the week ended April 6, the Labor Department said. That was the lowest level since October 1969, when the size of the labor market was about half of what it is now. Claims have declined for four straight weeks.

The data followed a decision by EU leaders to push the Brexit deadline to Oct. 31 so that Britain would not crash out of the bloc on Friday without a treaty - though it offered scant clarity on when, how or if Brexit will happen.

But gains were muted as US investors awaited the first-quarter earnings season, which starts in earnest on Friday with reports from big banks. First-quarter profit estimates have dropped steadily in the last six months, with S&P 500 earnings expected to fall 2.5% and mark the first year-on-year decline since 2016, according to Refinitiv data.

“The big elephant out there is earnings. Street estimates are for a year-over-year decline despite higher revenue and that›s driven by a handful of large companies that are heavily weighted, so it could be a bit deceiving,» said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“Often the market will just wait it out when we start to get close to earnings.” The Dow Jones Industrial Average rose 38.08 points, or 0.15%, to 26,195.24, the S&P 500 gained 2.84 points, or 0.10%, to 2,891.05 and the Nasdaq Composite dropped 3.32 points, or 0.04%, to 7,960.93.

The pan-European STOXX 600 index rose 0.11%, but MSCI’s gauge of stocks across the globe shed 0.03%.

US-China trade negotiations were to continue on Thursday. US Treasury Secretary Steven Mnuchin said on Wednesday that the two countries largely agreed on a mechanism to police any trade agreement they reach, including establishing new «enforcement offices.” In currency trading, the dollar index rose 0.09%, with the euro down 0.01% to $1.1272.

The Japanese yen weakened 0.40% versus the greenback at 111.47 per dollar, while Sterling was last trading at $1.3082, down 0.05% on the day, suggesting fears remain about where Brexit is headed.

While British Prime Minister Theresa May defended her decision to delay Brexit and seek a compromise exit plan, one angry lawmaker stood up in Parliament on Thursday and asked her to resign.

“They keep kicking the can down the road. There›s real confusion there,» said Ghriskey. “It doesn›t solve anything.” In the fixed income market, US Treasury benchmark 10-year notes last fell 5/32 in price to yield 2.4952%, from 2.477% late on Wednesday.

Agencies