Notes/Observations
- UK Parliament Brexit Parliament vote still on for Tuesday, Dec 11th (tomorrow); PM May faces certain defeat; Leadership challenge could emerge; myriad of scenarios remain on the table after tomorrow’s vote
- European Court of Justice (ECJ) ruling on the reversibility of Article 50 stated that UK could unilaterally revoke Brexit
- ECB decision on Thursday, analysts expect a “dovish tightening”; expected to confirm that QE will end at the end of the calendar year.
- US Nov CPI data set for release on Wednesday seen as key for pricing the Fed rate path
Asia:
- Japan Q3 Final GDP revised lower with annualized contraction at its fastest pace since 2014 ( Q/Q: -0.6% v -0.5%E; Annualized Q/Q: -2.5% v -2.0%e)
- China Nov CPI misses expectations (Y/Y: 2.2% v 2.4%e)
- China Nov Trade Balance registers a larger surplus as components disappoint (: Trade: $44.8B v $34.0Be; Exports YoY: 5.4% v 9.9%e; Imports o/Y: 3.0% v 14.0%e; trade surplus with U.S. widens to $35.5B
Europe:
- PM May said to have held emergency talks with EU leaders Sunday on possibility of postponing Brexit vote Tuesday, which is expected to fail
- UK Brexit Sec Barclay: PM May will not delay Brexit vote on Dec 11th, even though the government faced almost certain defeat
- PM May: If parliament rejected her Brexit deal, it could leave Britain in the European Union and bring the opposition Labour Party to power
- UK PM May expected to face 48 MP letters this week which would trigger a leadership battle
- UK Labour party lining up rebel Tories for no confidence vote against PM May if the Brexit vote fails in Parliament
- France President Macron expected to announce tax cuts and subsidies to lower income families in order to try and quiet the rioting
- Merkel ally Annegret Kramp-Karrenbauer elected head of Germany’s CDU
Americas:
- US Trade Rep Lighthizer: US/China trade negotiations need to reach a successful end by March 1st or new tariffs will be imposed – White House Chief of Staff Kelly confirmed he would step down; President Trump would not bring on Ayers to replace him (unable to commit to 2-years)
Macro
- (JP) Japan: Q3 GDP fell -2.5% in the final release compared to the preliminary reading of -1.2%. The sizable downward revision was driven by a drop in private capital expenditures. The downwght forward by pro-remainers in the U.K. and also contested by the EU, where officials feared that the right to unilaterally stop the withdrawal process could lead to an abuse of the process.
- (UK) United Kingdom: Tomorrow’s Brexit vote remains the only domestic focus. The prime minister affirmed will be taking place despite reports of it being delayed, and is widely expected to see the deal voted down. Labour, the LibDem’s, DUP, SNP, and significant numbers of Conservative Party MPs (reportedly over 100 at the last count) are all set to vote against it. If tard revision to Q3 exceeded market expectations and almost completely offset the 2.8% jump in Q2 GDP. As a reminder GDP fell -1.3% in Q1.
- (UK) United Kingdom: The European Court of Justice ruled earlier that the U.K. could revoke Article 50 unilaterally any time before March 29. The decision was expected after the advocate general issued a similar opinion last week. Both sides had sought clarification on the issue, brouhe deal is rejected, it would immediately create scope for multitude scenarios in the coming weeks depending on the scale of defeat.
- (DE) Germany: October’s trade surplus was small higher m/m at EUR 17.3B. Exports rose 0.7% m/m after falling -0.4% in the prior month, but a 1.3% m/m jump in imports still made for a smaller overall surplus. Accumulated data for the year to date shows a similar picture, with exports up 4.1% y/y, but imports an even stronger 6.6% y/y, leaving the accumulated surplus at EUR 195.2B, down from EUR 205.7B y/y.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.88% at 342.42, FTSE -0.47% at 6,746.25, DAX -0.66% at 10,716.38, CAC-40 -0.58% at 4,784.99, IBEX-35 -0.60% at 8,762.35, FTSE MIB -0.50% at 18,648.50, SMI -0.91% at 8,642.50, S&P 500 Futures -0.40%]
- Market Focal Points/Key Themes: European Indices trade lower across the board tracking weaker US markets on Friday and lower futures this morning as geopolitical tensions continue to weigh. On the corporate front shares of Poyry trade over 40% higher after its to be acquired by AF for €10.20/shr; Avacta also trades higher after signing a $310M deal with LG Chem. BASF trades sharply lower following its outlook mainly attributable to the chemical sector; Air France also rises as November Traffic rises. In other news Just Group trades over 20% higher following the publication of PRA PS 31/18, confirming the transitional relief for pre-2016 business. Interserve trades over 50% lower after acknowledging press reports it plans to deleverage its balance sheet. On the banking front, HSBC and Standard Chartered in focus after being named among the banks mislead by Huawei over Iran.
Equities
- Consumer discretionary: Air France-KLM [AF.FR] +1.5% (load factor), Poyry [POY1V.FI] +44% (to be acquired), Photo-Me International [PHTM.UK] -10% (earnings), ISS A/S [ISS.DK] +1.5% (presents strategy update)
- Consumer staples: ICA Gruppen [ICA.SE] -1% (November same-store sales)
- Energy: Amerisur Resources [AMER.UK] +15% (oil discovery)
- Financials: Just Group [JUST.UK] +22% (notes Policy Statement)
- Healthcare: NMC Health [NMC.UK] +1% (trading update), Avacta Group [AVCT.UK] +29%, IP Group [IPO.UK] -2% (Avacta Group signs deal), PureTech Health [PRTC.UK] -1% (collaboration with Bristol-Myers Squibb)
- Industrials: BASF AG [BAS.DE] -4.5%, Covestro [1COV.DE] -2.5% (BASF profit warning), Continental AG [CON.DE] -2% (CEO interview comments), Renault [RNO.FR] -2% (ex-Chairman of alliance with Nissan re-arrested), Interserve [IRV.UK] -50% (notes press speculation), Airbus Group [AIR.FR] -1% (gross orders)
- Technology: MorphoSys [MOR.DE] +3% (analyst action)
Speakers
- EU Court Ruling on the reversibility of Article 50; UK could unilaterally revoke Brexit
- UK Environment Min Gove: Brexit meaningful vote would go ahead as planned on Tuesday. He believed that PM May could win the vote as she was bettered placed than anyone to get improvement on Brexit terms. Extremely unlikely that he would be in leadership contest; talk about leadership challenge was a distraction
- France Fin Min Le Maire stated that current protests would impact Q4 GDP by 0.1%
- Sweden Center party Loof: Results of talks with Social Democrats were not enough; to vote against Stefan Lofven as PM and not approve the Govt transition budget
Currencies/Fixed Income
- The USD began the session on soft footing with political and rate outlook playing a factor.
- Goldman strategist Hatzius adjusted his Fed outlook with a more dovish spin and now called for less than a 50% probability of a rate in March. US Nov CPI data set for release on Wednesday seen as key for pricing the Fed rate path
- The revolving door in the Trump Administration continued with Chief of Staff Kelly leaving and top contender Ayers (currently Pence chief of Staff) would not commit to a 2-year term
- The GBP currency remained focused on the UK Parliament Brexit Parliament vote which was still set for Tuesday, Dec 11th (tomorrow); PM May said to face certain defeat and a leadership challenge could emerge. Analysts noted that a myriad of scenarios remained on the table after tomorrow’s vote. The GBP did see a brif pop higher to approach the 1.2770 area after the European Court of Justice (ECJ) ruling on the reversibility of Article 50 what stated that the UK could unilaterally revoke Brexit. However, the upcoming Parliament vote on Brexit was a headwind for the GBP sterling currency.
- EUR/USD was higher by 0.3% and holding above the 1.14 level. Dealers were looking ahead to ECB decision on Thursday with analysts expecting a “dovish tightening”. ECB was; expected to confirm that QE would end in Dec but policy would remain accommodative
Economic Data
- (NL) Netherlands Oct Manufacturing Production M/M: +0.4% v -0.2% prior; Y/Y: 3.4% v 3.1% prior; Industrial Sales Y/Y: 10.6% v 4.2% prior
- (CH) Swiss Nov Unemployment Rate: 2.5% v 2.5%e; Unemployment Rate (Seasonally Adj): 2.4% v 2.5%e
- (DE) Germany Oct Current Account Balance: €15.9B v €18.8Be; Trade Balance: €18.3B v €17.1B; Exports M/M: +0.7% v +0.4%e; Imports M/M: +1.3% v +0.5%e
- (DK) Denmark Oct Current Account Balance (DKK): 11.7B v 12.3B prior; Trade Balance: 5.8B v 5.3B prior
- (DK) Denmark Nov CPI M/M: -0.3% v -0.3%e; Y/Y: 0.8% v 0.8%e
- (DK) Denmark Nov CPI EU Harmonized M/M: -0.3% v -0.3%e; Y/Y: 0.7% v 0.8%e
- (NO) Norway Nov CPI M/M: 0.5% v 0.1%e; Y/Y: 3.5% v 3.1%e
- (NO) Norway Nov CPI Underlying M/M: 0.3% v 0.0%e; Y/Y: 2.2% v 1.9%e
- (NO) Norway Nov PPI (including Oil) M/M: -3.2% v +3.6% prior; Y/Y: 14.9% v 22.5% prior
- (FI) Finland Oct Industrial Production M/M: -2.5% v +2.3% prior; Y/Y: 0.8% v 6.1% prior
- (TR) Turkey Q3 GDP Q/Q: -1.1% v -1.2%e; Y/Y: 1.6% v 2.2%e
- (FR) Bank of France Nov Industrial Sentiment: 101 v 103e
- (SE) Sweden Dec SEB Housing Price Indicator: 10 v 13 prior
- (CZ) Czech Nov CPI M/M: -0.1% v -0.1%e; Y/Y: 2.0% v 2.0%e
- (CZ) Czech Nov Unemployment Rate: 2.8% v 2.8%e
- (NG) Nigeria Q3 GDP Y/Y: 1.8% v 1.9%e
- (SE) Sweden Oct Household Consumption M/M: -0.2% v -0.1% prior; Y/Y: -0.3% v +0.3%e
- (CH) Swiss Weekly Total Sight Deposits (CHF): 576.4B v 576.9B prior; Domestic Sight Deposits: 472.5B v 472.0B prior
- (IT) Italy Oct Industrial Production M/M: +0.1% v -0.3%e; Y/Y: +4.2% v -1.6% prior; Industrial Production WDA Y/Y: 1.0% v 1.0%e
- (EU) Euro Zone Dec Sentix Investor Confidence: -0.3 v +8.3e )lowest since Dec 2014)
- (UK) Oct Visible Trade Balance: -£11.9B v -£10.5Be; Overall Trade Balance: -£3.3B v -£1.3B; Trade Balance Non EU: -£4.3B v -£3.2Be
- (UK) Oct GDP M/M: 0.1% v 0.1%e
- (UK) Oct Industrial Production M/M: -0.6% v +0.1%e; Y/Y: -0.8% v -0.1%e
- (UK) Oct Manufacturing Production M/M: -0.9% v 0.0%e; Y/Y: -0.8% v 0.0%e
- (UK) Oct Construction Output M/M: -0.2% v -0.5%e; Y/Y: 3.8% v 3.3%e
- (UK) Oct Index of Services M/M: 0.2% v 0.1%e; 3M/3M: 0.3% v 0.3%e
- (GR) Greece Oct Industrial Production Y/Y: -1.1% v +1.8% prior
- (GR) Greece Nov CPI Y/Y: 1.0% v 1.8% prior; CPI EU Harmonized Y/Y: 1.1% v 1.8% prior
Fixed Income Issuance
- None seen
Looking Ahead
- (IL) Israel Central Bank Nov Minutes
- (MX) Mexico Nov Nominal Wages: No est v 3.8% prior
- (UR) Ukraine Nov CPI M/M: No est v 1.7% prior; Y/Y: No est v 9.5% prior
- (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley
- (DE) German Chancellor Merkel attends Conference to Endorse UN Compact on Migration
- 05:25 (BR) Brazil Central Bank Weekly Economists Survey
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-month Bills
- 06:00 (IL) Israel Nov Consumer Confidence: No est v 127 prior
- 06:00 (PT) Portugal Oct Trade Balance: No est v -€1.2B prior
- 06:00 (IL) Israel to sell Bonds
- 06:00 (RO) Romania to sell RON600M in 2.3% 2020 Bonds
- 06:30 (TR) Turkey Central Bank TCMB Survey of Expectations: 12-month inflation expectation: No est v 17.4% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (CZ) Czech Central Bank to comment on CPI data
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:30 (IT) ECB’s Angeloni (SSM member)
- 08:10 (UK) Baltic Dry Bulk Index
- 08:15 (CA) Canada Nov Annualized Housing Starts: 198.0Ke v 205.9K prior
- 08:30 (CA) Canada Oct Building Permits M/M: -0.3%e v +0.4% prior
- 08:50 (FR) France Debt Agency (AFT) to sell combined €2.4-3.6B in 3-month, 6-month BTF Bills
- 09:30 (EU) ECB announces Covered-Bond Purchases
- 10:00 (US) Oct JOLTS Job Openings: 7.100Me v 7.009M prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 13:00 (CA) Bank of Canada (BOC) Lane
- 14:00 (FR) France President Macron addresses nation
