Notes/Observations
Brexit conundrum as Ireland might not agree to a proposed border deal with UK (**Note: nine days until the EU Leader summit begins)
Major European Services PMI mixed (Beats: France, Italy; Misses: Germany, Spain; In-line: Euro Zone)
Asia:
RBA left its Cash Target Rate unchanged at 1.50% (as expected) for its 16th straight pause in the current easing cycle. RBA removed references to "higher exchange rate damping inflation" and "inflation likely to remain low over time"
China Nov Caixin PMI Services: 51.9 v 51.2 prior
Bank of Japan (BOJ) Gov Kuroda: Appropriate to patiently continue bold monetary easing under current framework, still far from 2% inflation target. No discussions about second term as Gov
RBNZ Gov Spencer (acting Gov): Persistently low inflation has prompted central bank to think about whether it needs to ‘tweak’ its approach to monetary policy
Europe:
Portugal Fin Min Mario Centeno won the Eurogroup chairmanship race; term starts in Jan
EU’s Juncker: it was not possible to make a complete Brexit deal on Monday but did make considerable progress; would need further talks to reach a complete deal
Ireland PM Varadkar noted that talks had made substantial progress and hope to reach an agreement in coming days. Most difficult issue was agreement of no hard border. Should listen to the DUP but have to listen to other Northern Ireland constituencies as well; should not forget that a majority in Northern Ireland voted against Brexit. Happy to give May more time; there was plenty of time before the Dec 14 EU leaders summit
Economic Data:
(IN) India Nov Services PMI: 48.5 v 51.7 prior (1st contraction in 5 months); PMI Composite: 50.3 v 51.3 prior
(IE) Ireland Nov Services PMI: 56.0 v 57.5 prior (63rd month of expansion), Composite PMI: 57.7 v 56.0 prior
(RU) Russia Nov Services PMI: 57.4 v 53.5e (22nd month of expansion), Composite PMI: 56.3 v 53.2 prior
(RO) Romania Q3 Preliminary GDP (2nd reading) Q/Q: 2.6% v 2.6% advance; Y/Y: 8.8% v 8.8% advance
(ZA) South Africa Nov PMI (whole economy): 48.8 v 49.6 prior
(SE) Sweden Nov Services PMI: 61.8 v 61.4 prior
(TW) Taiwan Nov CPI Y/Y:+0.4% v -0.1%e v -0.3% prior, CPI Core Y/Y: 1.3% v 1.1%e v 1.1% prior, WPI Y/Y: 1.6% v 1.3%e
(HU) Hungary Q3 Final GDP Q/Q: 0.9% v 0.8% prelim; Y/Y: 3.9% v 3.6%e
(ES) Spain Nov Services PMI: 54.4 v 55.0e (49th month of expansion), Composite PMI: 55.2 v 55.1 prior
(IT) Italy Nov Services PMI: 54.7 v 53.2e (18th month of expansion), Composite PMI: 56.0 v 55.0e
(FR) France Nov Final Services PMI: 60.4 v 60.2e (confirms 17th month of expansion), Composite PMI: 60.3 v 60.1e
(DE) Germany Nov Final Services PMI: 54.3 v 54.9e (confirms 53rd month of expansion), Composite PMI: 57.3 v 57.6e
(EU) Euro Zone Nov Final Services PMI: 56.2 v 56.2e (confirms 53rd month of expansion, Composite PMI: 57.5 v 57.5e
(NO) Norway Nov Region Survey: Output Past 3 months: 1.22 v 1.23 prior; Output next 6 months: 1.19 v 1.11 prior
(UK) Nov Services PMI: 53.8 v 55.0e (16th month of expansion), Composite PMI: 54.9 v 55.8e
(ZA) South Africa Q3 GDP Annualized Q/Q: 2.0% v 1.7%e v 2.5% prior; Y/Y: 0.8% v 0.8%e
(EU) Euro Zone Oct Retail Sales M/M: -1.1% v -0.7%e; Y/Y: 0.4% v 1.6%e
Fixed Income Issuance:
(ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2-35, 2040, 2044 and 2048 bonds
(ES) Spain Debt Agency (Tesoro) sold total €4.61B vs. €4.0-5.0B indicated in 6-month and 12-month Bills
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.2% at 386.8, FTSE +0.2% at 7355, DAX -0.1% at 13043, CAC-40 -0.3% at 5375, IBEX-35 -0.3% at 10177, FTSE MIB -0.1% at 22343, SMI -0.1% at 9323, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes: European Indices trade this morning, after strong gains yesterday. The FTSE outperforms as Cable drops on continued stumbling blocks on Brexit negotiations. On the M&A front Cineworld trades lower after confirming to acquire Regal and the subsequent launch of a £1.7B right offering. On the earnings front NeoPost falls sharply after a fall in Rev, while IG Index trades over 5% higher following a positive trading update, whilst Dialog Semicoductor rebounds after a sharp drop yesterday following a business update. Provident Financial trades over 10% lower after the FCA informs of an investigation into Moneybarn. Looking ahead, notable earners include Autozone, HD Supply and GIII apparel.
Equities
Consumer discretionary [Cineworld [CINE.UK] -4.2% (Confirm to acquire Regal, to launch rights issue), – Ferguson [FERG.UK] +0.4% (Q1 results), Neopost [NEO.FR] -11% (Earnings)]
Financials: [ IG Group [IGG.UK] +5.4% (Trading update), Provident Financial [PFG.UK] -13% (FCA to investigate MoneyBarn)]
Technology: [Dialog Semi [DLG.DE] +5% (Rebound following business update)]
Healthcare: [Gensight [SIGHT.FR] +1.2% (Postiive 1/II trial data)]
Speakers
BOE Financial Policy Committee (FPC) Nov 27th Minutes: Agreed to raise the UK countercyclical capital buffer (CCyB) rate from 0.5% to 1.0%, with binding effect from Nov 28th 2018. Did considered raising banks’ capital requirements last week by more than it had previously signaled to tackle risks to the financial system including those from Brexit. Would reconsider adequacy of the 1.0% CCYB during H1 2018
Chancellor of Exchequer Hammond (Fin Min) stated that was very confident of moving the Brexit deal forward
Scotland First Min Sturgeon: Could be the moment for opposition to force a different approach and push to keep the whole UK in the single market and customs union
Italy Stats Agency (ISTAT) Monthly Economic Note: Growth is strengthening in the short term
Norway Central Bank (Norges): Employment growth seen remaining moderate
Czech Central Bank Gov Rusnok reiterated view that would gradually raise interest rates
Czech Central Bank Vice Gov Hampl: Cannot exclude raising the countercyclical buffer Various Finance Ministers comment ahead of EcoFin meeting
EU’s Moscovici: There was no tax haven in the EU. Black list of tax havens to include approx 20 States. Must keep pressures on tax havens
EU’s Dombrovskis: US tax reform will be discussed at today’s meeting
Germany Fin Min Altmaier: Tax blacklist was an important 1st step
Currencies
GBP/USD maintained a heavy tone following Monday’s disappointment that no breakthrough was made on the Brexit negotiations. The current conundrum as Ireland might not agree to a proposed border deal with UK. There are only nine days until the EU Leader summit begins (Dec 14th) and the UK needs to show by then that sufficient progress has been made to move on to trade negotiations. GBP/USD at 1.3425 just ahead of the NY morning and some 40 pips off its worst levels
Fixed Income
Bund futures trade 163.11 up 14 ticks, trading in a narrow range. Continued downward pressure sees 162.10 followed by 161.50. A reversal targets 163.40 then 163.75.
Gilt futures trade at 125.11 up 22 ticks, as the pound extends losses on Brexit fears. Continued upside eyeing 125.15 then 125.65. Downside targets include 124.01 then 123.75.
Tuesday’s liquidity report showed Monday’s excess liquidity rose to a record high of €1.915T from €1.912T. Use of the marginal lending facility rose to €394M from €243M prior.
Corporate issuance saw no deals price in high-grade primary
Looking Ahead
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender
05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
05:30 (UK) DMO to sell £2.75B in 0.75% July 2023 Gilts
05:30 (BE) Belgium Debt Agency (BDA) to sell €1.2B in 3-month and 6-month bills
06:00 (IE) Ireland Nov Unemployment Rate: no est v 6.0% prior
06:00 (IE) Ireland Oct Industrial Production M/M: No est v 0.7% prior; Y/Y: No est v -3.2% prior
06:00 (BR) Brazil Oct Industrial Production M/M: 0.1%e v 0.2% prior; Y/Y: 5.2%e v 2.6% prior
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:30 (CL) Chile Oct Economic Activity Index (Monthly GDP) M/M: -0.1%e v -0.1% prior; Y/Y: 2.9%e v 1.3% prior, Economic Activity (ex-mining) Y/Y: No est v 0.7% prior
06:30 (TR) Turkey Nov Effective Exchange Rate (REER): No est v 87.96 prior
06:30 (EU) ESM to sell €1.5B in 3-month Bills; Avg Yield: % v 0.6730% prior; Bid-to-cover: x v 4.8x prior (Nov 7th 2017)
07:00 (BR) Brazil Nov Services PMI: No est v 48.8 prior, PMI Composite: No est v 49.5 prior
07:00 (RU) Russia announces weekly OFZ bond auction .
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (NZ) Fonterra Global Dairy Trade Auction
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Oct Trade Balance: -$47.5Be v -$43.5B prior
08:30 (CA) Canada Oct Int’l Merchandise Trade (CAD): -2.7Be v -3.2B prior
08:30 (SK) Slovenia Debt Agency (Ardal) to sell 12-month Bills – 08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves
09:00 (MX) Mexico Sept Gross Fixed Investment: No est v 0.3% prior
09:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves
09:45 (US) Nov Final Markit Services PMI: 55.2e v 54.7 prelim, Composite PMI: No est v 54.6 prelim
10:00 (US) Nov ISM Non-Manufacturing Composite: 59.0e v 60.1 prior
10:00 Poland Central Bank Gov Glapinski to hold post rate decision press conference
11:30 (US) Treasury to sell 4-Week and 52-Week Bills
15:00 (MX) Mexico Citibanamex Survey of Economists
16:00 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index
16:30 (US) Weekly API Oil Inventories
19:00 (CO) Colombia Nov CPI M/M: 0.1%e v 0.0% prior; Y/Y: 4.1%e v 4.1% prior
