Notes/Observations
European inflation data higher then expected (both UK and Sweden beat consensus)
UK Nov CPI hits highest level since March 2012; BOE Gov Carney to deliver inflation letter in Feb
Asia:
US , EU and Japan plan to step up trade pressure on China to address "severe excess capacity"
CNY currency (Yuan) might fluctuate between 6.4-6.8 in 2018 and had the potential appreciation in long term
Europe:
UK Trade Sec Fox: Would like a trading relationship with the European Union after it leaves the bloc that’s "virtually identical" to the one it has now (**Note: EU’s Barnier’s warned that a Canada-style free-trade agreement was the best the U.K. can hope for)
Economic Data:
(FR) France Q3 Final Private Sector Payrolls Q/Q: 0.3% v 0.2% prelim; Total Payrolls: 0.2% v 0.3% prelim
(RO) Romania Nov CPI M/M: 0.7% v 0.6%e; Y/Y: 3.2% v 3.1%e
(SE) Sweden Nov CPI M/M: 0.2% v 0.1%e; Y/Y: 1.9% v 1.7%e
(SE) Sweden CPI CPIF M/M: 0.2% v 0.1%e; Y/Y: 2.0% v 1.8%e
(UK) Nov CPI M/M: 0.3% v 0.2%e; Y/Y: 3.1% v 3.0%e; CPI Core Y/Y: 2.7% v 2.7%e; CPIH Y/Y: 2.8% v 2.9%e
(UK) Nov RPI M/M: 0.2% v 0.3%e; Y/Y: 3.9% v 4.0%e, RPI-X (ex-mortgage interest payment) Y/Y: 4.0% v 4.1%e, Retail Price Index: 275.8 v 276.1e
(UK) Nov PPI Input M/M: 1.8% v 1.5%e; Y/Y: 7.3% v 6.7%e
(UK) Nov PPI Output M/M: 0.3% v 0.3%e; Y/Y: 3.0% v 3.0%e
(UK) Nov PPI Output Core M/M: 0.2% v 0.2%e; Y/Y: 2.2% v 2.2%e
(UK) Nov ONS House Price Index Y/Y: 4.5% v 5.2%e
(ZA) South Africa Q3 Non-Farm Payrolls Q/Q: -0.3% v -0.3% prior; Y/Y: -0.9% v 0.2% prior
(DE) Germany Dec ZEW Current Situation Survey: 89.3 v 88.7e; Expectations Survey: 17.4 v 18.0e
(EU) Euro Zone Dec ZEW Expectations Survey: 29.0 v 30.9 prior
Fixed Income Issuance:
(ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2032, 2040, 2044 and 2048 bonds
(ES) Spain Debt Agency (Tesoro) sold total €2.89B vs. €2.5-3,.5B indicated range in 3-month and 6-month Bills
(IT) Italy Debt Agency (Tesoro) sold €4.75B vs. €4.75B indicated in 12-month Bills; Avg yield: -0.407% v -0.395% prior; Bid-to-cover: 2.1x v 2.46x prior
(CH) Switzerland sold CHF559.2 in 3-month Bills; Avg Yield: -1.101% v -1.046% prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 0.2% at at 389.6, FTSE +0.2% at 7468, DAX +0.1% at 13141, CAC-40 +0.2% at 5399, IBEX-35 -0.2% at 10288, FTSE MIB flat at 22698, SMI -0.1% at 9305 , S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade mostly higher reversing earlier losses in relatively quiet trade. The FTSE outperforms once again on relative weakness in Cable despite a slightly stronger headline UK CPI figure. M&A activity denominated the news this morning with Unibail-Rodamco’s mega acquisition of Westfield Group in Australia for $25B; Atos is to acquire Gemalto in a €4.3B deal, whilst Zurich Insurance acquired ANZ Australian life insurance business. Elsewhere Robert Walters trades sharply higher after lifting its outlook, and Carpetright trades sharply lower after a drop in profits.
Equities
Consumer Discretionary [Carpetright [CPR.UK] -8% (Earnings), Steinhoff [SNH.ZA] +32% (Looks to divest stakes in PSG and KAP), Ashtead [AHT.UK] +3% (Earnings), Robert Walters [RWA.UK] +10% (Raises outlook)]
Real Estate [Unibail-Rodamco [UL.FR] -2% (To acquires Westfield Group)]
Technology [Gemalto [GTO.NL] +32%, Atos [ATO.FR] +4.7% (Gemalto to be acquired by Atos for €46/shr)]
Financials [Unicredit [UCG.IT] +6% (Investor day)]
Materials [Glencore [GLEN.UK] -1.2% (Guidance, Investor day)]
Speakers
Germany Economic Ministry: 2017 GDP growth to show strong overall result. Domestic economy was on an upward trend at end of year
EU said to have hardened the language of a proposed Brexit resolution for this week’s European Council summit
EU Chief Brexit Negotiator Barnier reiterated that EU will fully support Ireland throughout the Brexit talks
BOE: Gov Carney inflation letter to be published alongside the Feb CPI data (**Note: Inflation Letter comes out if Headline CPI is above 3%)
German ZEW Economists: Unclear outcome of govt formation did not influence expectations significantly
Turkey President Erdogan reiterated his view that inflation could not fall due to high interest rates. Pressures for rate hike were vain efforts
Brazil Central Bank Dec Minutes: Inflation at comfortable level but threatened by frustration of expectations over reforms
Currencies
Overall FX price action was muted ahead of the plethora of rate decision over the next 48 hours.
GBP/USD was softer just ahead of the NY morning despite the slightly higher Nov CPI data ahead of Thursday BOE rate decision.
SEK currency (Krona) was firmer after Sweden Nov CPI beat expectations and hovered near the Riksbank target.
Fixed Income
Bund futures trade 163.36 down 16 ticks, easing back marginally. Continued upside sees 163.63 then 164.25. A reversal targets 162.50 then 162.38.
Gilt futures trade at 125.71 down 17 ticks after stronger than expected UK inflation data. Continued upside eyeing 126.15 then 126.65. Downside targets include 125.24 then 124.75.
Wednesday’s liquidity report showed Tuesday’s use of the marginal lending facility rose to €283M from €135M prior.
Corporate issuance saw 3 issuers raise $2.8B in the primary market
Looking Ahead
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (CL) Chile Central Bank Economist Survey
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 (BE) Belgium Debt Agency (BDA) to sell €2.1B in 3-Month and 12-Month Bills
05:30 (DE) Germany to sell €3.0B in 2019 Schaltz
06:00 (BR) Brazil CONAB Crop Report
06:00 (US) Nov NFIB Small Business Optimism: 104.0e v 103.8 prior
06:00 (IE) Ireland Oct Property Prices M/M: No est v 2.0% prior; Y/Y: No est v 12.8% prior
06:00 (ZA) South Africa Oct Manufacturing Production M/M: +1.0%e v -0.8% prior; Y/Y: +1.1%e v -1.6% prior
06:00 (TR) Turkey to sell 2019 and 2022 bonds – 06:45 (US) Daily Libor Fixing
07:00 (RU) Russia announces weekly OFZ bond auction .
07:00 (IN) India Nov CPI Y/Y: 4.3%e v 3.6% prior
07:00 (IN) India Oct Industrial Production Y/Y: 2.9%e v 3.8% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (PL) Poland Nov CPI Core M/M: 0.1%e v 0.3% prior; Y/Y: 0.9%e v 0.8% prior
09:00 (RU) Russia Oct Trade Balance: $9.5Be v $10.2B prior; Exports: $31.4Be v $30.6B prior; Imports: $21.1Be v $20.4B prior
08:05 (UK) Baltic Dry Bulk Index – 08:30 (US) Nov PPI Final Demand M/M: 0.3%e v 0.4% prior; Y/Y: 2.9%e v 2.8% prior
08:30 (US) Nov PPI Ex Food and Energy M/M: 0.2%e v 0.4% prior; Y/Y: 2.4%e v 2.4% prior
08:30 (US) Nov PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.2% prior; Y/Y: No est v 2.3% prior
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves
09:00 (MX) Mexico Oct Industrial Production M/M: +0.7%e v -0.4% prior; Y/Y: +0.8%e v -1.2% prior, Manufacturing Production Y/Y: 3.8%e v 2.8% prior
09:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds
11:30 (US) Treasuries to sell 4-Week Bills
12:00 DOE Short-Term Crude Outlook
12:00 (US) USDA World Agricultural Supply and Demand Estimate (WASDE) Crop Report
13:00 (US) Treasuries to sell 30-Year Bonds Reopening
14:00 (AR) Argentina Nov National CPI M/M: 1.4%e v 1.5% prior
14:00 (US) Nov Monthly Budget Statement: -$134.5Be v -$63.2B prior
14:00 (EU)ECB’s Draghi
16:30 (US) Weekly API Oil Inventories
