- Sweden Central Bank raises its Repo Rate but doubts emerge on further hikes down the road
- Global economic slowdown has not taken a toll yet on Swiss trade; recovery in the watch industry boosts Trade surplus
- UK Nov Retail Sales data handily beats forecasts; focus turns to BOE rate decision
Asia:
- BOJ left its policy steady (as expected) with Interest Rate on Excess Reserves (IOER) unchanged at -0.10%; maintained its policy framework of “QQE with Yield Control” around 0.00% and asset purchases at annual pace of ¥80T
- Australia Nov Employment Change: +37.0K v +20.0K; Unemployment Rate: 5.1% v 5.0%e
- New Zealand Q3 GDP Q/Q: 0.3% v 0.6%e; Y/Y: 2.6% v 2.8%e
Europe:
- Germany Finance Ministry Monthly Report noted that the leading indicators generally pointed to stable exports but risks remain due to a weakening global expansion
- Italy Dep PM Salvini: To look at EU budget. Italy would not accept cuts to fishing, agriculture spending; EU budget must change; Italy still could veto it
Americas:
- FOMC raised the target band by 25bps to 2.25-2.50% range (as expected). Expected ‘some’ further gradual increases in fed funds rate would be consistent with sustained economic expansion, strong jobs market, and inflation objective
- Fed Chair Powell: Forecast modestly lower path for fed funds rate which should keep us toward our mandate goal; now expect 2 rate hikes next year instead of 3
- US Senate passes bill funding government agencies through Feb 8, sends measure to House (Note: House was expected to pass the measure on Thursday)
Macro
- (SE) Sweden: The Riksbank unexpectedly raised the repo rate 25bp to -0.25%, reporting that “economic activity is strong and the conditions are good for inflation to remain lose to the inflation target in the period ahead”. Inflation expectations have established around 2% thus the “need for a highly expansionary monetary policy has decreased slightly”. The markets are concerned around heightened volatility and the uncertain risk backdrop whilst the central banks see slowing growth, but only against the background of high capacity utilization and in the case of Europe, improving wage growth and robust labor markets.
- (UK) United Kingdom: November retail sales were much better than expected rising to 1.4% m/m and 3.6% y/y, up from respective October figures of -0.4% and 2.4%. The release showed a strong 5.3% m/m jump in household goods which was the main driver behind the headline beat. Black Friday sales promotions were a significant factor. In the three months to November, sales grew 0.4% versus the prior three months, driven by growth in non-food stores and online retailing. December retail sales are set to be strong, too, based on anecdotal indications. Near record levels of employment and rising real wages are the fundamental factors underpinning consumer confidence despite Brexit.
- (UK) United Kingdom: No policy changes are expected from the BOE today, and there are unlikely to be much change in guidance with the meeting coming so soon after last month’s quarterly Inflation Report.
- (JP) Japan: The BOJ’s Kuroda said it wasn’t a problem if JGB yields turn negative and wasn’t concerned with the recent drop in JGB yields. He also said it was too early to discus the exit from the easing measures and the BoJ is closely watching protectionist moves. The BOJ are clearly concerned about current market conditions but there is evidence to suggest that the BOJ’s aggressive purchases have deprived the market of liquidity and have always ran the risk of destabilizing it.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -1.26% at 337.74, FTSE -0.49% at 6,733.00, DAX -1.00% at 10,658.66, CAC-40 -1.32% at 4,714.43, IBEX-35 -0.97% at 8,684.35, FTSE MIB -1.14% at 18,725.50 , SMI -1.39% 8,416.60, S&P 500 Futures -0.25%]
- Market Focal Points/Key Themes: European Indices trade sharply lower across the board tracking weaker Asian markets and US Indices overnight. The fall in Indices mark multi month lows across the board, the FTSE250 reaches a 2 year low on the continued sell off. US futures continue their decline this morning following the FOMC rate decision yesterday. On the corporate front Mining names trade under pressure following the fall in commodity prices with the likes of Rio Tinto, Antofagasta and Anglo American among the notable decliners. Kier Group continues to fall after a low take up of its Rights Issue; B&O trades over 25% lower after a profit warning; Hutchinson Chi-Med also falls after cutting its profit outlook. Bucking the trend shares of KPS rise after results, with Leonteq and Midatech Pharma among other risers this morning. Looking ahead notable earners include Walgreens Boots Alliance, Conagra Brands, Accenture, Carnival and Blackberry among others.
Equities
- Consumer discretionary: Swatch [UHR.CH] -1.5%, Richemont SA [CFR.CH] -2% (Swiss watch exports data), Greencore Group [GNC.UK] +6% (tender offer), Bang & Olufsen [BO.DK] -29% (profit warning)
- Energy: Engie [ENGI.FR] -1.5% (French govt likely to introduce law on energy in Feb 2019)
- Financials: Leonteq [LEON.CH] +1.5% (affirms guidance)
- Healthcare: AstraZeneca [AZN.UK] -0.5% (studies met primary endpoints), Midatech Pharma [MTPH.UK] +8% (corporate update; partnership), Hutchison China MediTech Ltd [HCM.UK] -14% (profit warning), Abivax SA [ABVX.FR] -3% (to present trial data)
- Industrials: BMW [BMW.DE] -1%, Daimler [DAI.DE] -1% (Daimler and BMW reportedly in early stage talks over cooperation on key car components), Kier Group [KIE.UK] -4% (rights issue update)
- Technology: Wirecard [WDI.DE] -2% (has 5-10% market share in German online transactions), SimCorp [SIM.DK] -2% (contract awarded)
Speakers
- Sweden Central Bank (Riksbank) Policy Statement noted that the next potential hike likely to take place in H2 2019 as indicated by forecast for Repo rate; Saw about 2 rate hikes a year after next increase. Even though inflation had been lower than expected, conditions remained good for inflation to stay close to target going forward
- Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that monetary policy remained very expansionary; inflation was seen more or less stable at the 2.0% target
- House of Commons Leader Leadsom: Government not seeking a second referendum; priority of Government is to get PM May’s deal passed
- Bank of Spain (BOS): Q4 GDP growth seen at 0.6% (**Note: same pace as Q3)
- Russia President Putin annual news conference noted that 2018 GDP growth was seen 1.8%; inflation at an acceptable level. Believed that it was bad that no talks on new START Treaty were being held between US and Russia but hoped that common sense would prevail
- Brazil Central Bank (BCB) Quarterly Inflation Report (QIR) noted that the baseline scenario was balanced and warranted keeping rates steady. 2019 GDP growth forecasts were more uncertain and conditional on reforms
- BOJ Gov Kuroda post rate decision press conference noted that the upward price momentum remained intact; risked tilted to the downside; needed to monitor risks posed by US-China trade friction. No change in BOJ’s main scenario as domestic fundamentals remained solid. So far impact from trade friction had been limited. If trade protectionism was prolonged then it would have a broad impact on global economy. BOJ not seeking exit from current monetary policy at this time. Saw no need to change policy for side effects at this time. Would consider further monetary easing as appropriate if momentum towards price target was undermined
- Japan Cabinet Office (Govt) Dec Monthly Economic Report maintained itss overall economic assessment that the domestic economy was recovering at moderate pace
- Japan Vice Finance Minister for International Affairs Asakawa (top currency official): Concerning moves in FX and equity markets this week as volatility increased. Needed to keep watching the markets closely; would act appropriately as needed. Discussed steps to respond at meeting with MOF, FSA and BOJ
- Indonesia Central Bank (BI) Gov Warjiyo post rate decision statement noted that the decision to keep policy steady was consistent with efforts to reduce current account deficit and maintain attractiveness for foreign investors; took into account global interest rate trend for coming months. Current rate was able to maintain attractiveness but the central bank would maintain front-loaded, preemptive policy and not wait for Fed Funds Rate (FFR) to rise
- Taiwan Central Bank (CBC) policy Statement noted that ot would maintain appropriate its loose monetary policy as the current inflation outlook remained mild
- China Commerce Ministry (MOFCOM) Spokesman Gao stated in his weekly press conference that the govt had plans to meet US side in Jan to hold further trade talks. China could arrange meeting and calls ‘at any time’
- China PBoC: To step up management of Bank’s Required Reserves
- IEA chief Birol: US oil production seen accelerating with serious growth through 2025. He did not see a sharp increase in oil prices in the short-term unless there was a geopolitical crisis
- OPEC Sec Gen Barkindo: Vital to make production adjustment public to support market sentiment and confidence
Currencies/Fixed Income
- USD weakened against the major pairs during the EU session following the Fed’s dovish hike on Wednesday. The greenback was initially steady during the Asian session as traders’ initial take on the Fed’s policy statement and economic projections was that it was becoming slightly more dovish but not at the pace the market wanted.
- EUR/USD tested a 1-month high as the pair tested above the 1.1470 level
- USD/JPY lower by 0.7% to test below the 112 level
- EUR/SEK slumped 1% after a surprise rate hike by the Swedish Riksbank. The cross tested 10.25 level in the aftermath but some doubts did creep back in whether the Riksbank had the scope for more hikes in 2019
Economic Data
- (NL) Netherlands Nov Unemployment Rate: 3.5% v 3.7% prior
- (JP) Japan Nov Final Machine Tool Orders Y/Y: -17.0 v -16.8% prelim
- (CH) Swiss Nov Trade Balance (CHF): 4.7B v 3.5 prior Real Exports M/M: 1.0% v 5/3% prior; Real Imports M/M: -1.5 v -2.5% prior; Watch Exports Y/Y: 3.9% v 7.4% prior
- (JP) Japan Nov Convenience Store Sales Y/Y: +0.6 v -1.5% prior
- (HU) Hungary Q3 Current Account: €0.2B v €0.2Be
- (HU) Hungary Oct Average Gross Wages Y/Y: 10.8% v 10.2%e
- (TW) Taiwan Nov Export Orders Y/Y: -2.1% v +0.8%e
- (SE) Sweden Central Bank (Riksbank) raises Repo Rate by 25bps to -0.25% (as not expected) for its 1st hike since July 2011
- (HK) Hong Kong Nov CPI Composite Y/Y: 2.6% v 2.5%
- (EU) Euro Zone Oct Current Account Balance €23.0B v €17.6B prior
- (IT) Italy Nov PPI M/M: -0.8% v +1.8% prior; Y/Y: 5.7% v 7.1% prior
- (IT) Italy Oct Current Account Balance: €6.1B v €3.1B prior
- (IS) Iceland Dec CPI M/M: 0.7% v 0.2% prior; Y/Y: 3.3% v 3.3% prior
- (IS) Iceland Nov Wage Index M/M: 0.1% v 0.4% prior; Y/Y: 6.2% v 6.2% prior
- (TW) Taiwan Central Bank (CBC) left the Benchmark Interest Rate unchanged at 1.375%; as expected
- (UK) Nov Retail Sales (Ex Auto/fuel) M/M: 1.2% v 0.2%e; Y/Y: 3.8% v 2.3%e
- (UK) Nov Retail Sales (Including Auto/fuel) M/M: 1.4% v 0.3%e; Y/Y: 3.6% v 2.0%e
- (GR) Greece Oct Current Account Balance: -€0.9B v +€0.5B prior
Fixed Income Issuance
- None seen
Looking Ahead
- (PT) Portugal Oct Current Account Balance: No est v €0.2B prior
- (AR) Argentina Nov Budget Balance (ARS): No est v -16.6B prior
- (AR) Argentina Dec Consumer Confidence Index: No est v 32.1 prior
- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3-tranches)
- 06:00 (UK) Dec CBI Retailing Reported Sales: 15e v 19 prior; Total Distribution Sales: No est v 18 prior
- 06:00 (IE) Ireland Nov PPI M/M: No est v -6.4% prior; Y/Y: No est v -2.1% prior
- 06:00 (IL) Israel Oct Manufacturing Production M/M: No est v -3.3% prior
- 06:00 (BR) Brazil CONAB Sugarcane crop forecast
- 06:00 (CZ) Czech Republic to sell Bills
- 06:00 (RO) Romania to sell RON600M in 4.25% 2023 Bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rate unchanged at 0.75%; maintain Asset Purchase Target at £435B
- 07:00 (UK) Bank of England (BOE) Dec Minutes
- 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 1.75%
- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 14th No est v $463.6B prior
- 08:00 (PL) Poland Central Bank (NBP) Dec Minutes
- 08:10 (UK) Baltic Dry Bulk Index
- 08:30 (US) Dec Philadelphia Fed Business Outlook: 15.0e v 12.9 prior
- 08:30 (US) Initial Jobless Claims: 215Ke v 206K prior; Continuing Claims: 1.66Me v 1.661M prior
- 08:30 (CA) Canada Oct Wholesale Trade Sales M/M: +0.4%e v -0.5% prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (MX7) Mexico Oct Retail Sales M/M: -0.3%e v +1.0% prior; Y/Y: 3.9%e v 4.1% prior
- 09:15 (CZ) Czech Central Bank Gov Rusnok to hold post Rate Decision press conference
- 10:00 (US) Nov Leading Index: 0.0%e v 0.1% prior
- 10:30 Weekly EIA Natural Gas Inventories
- 11:00 (US) Treasury announcement for upcoming 2-year, 5-year amd 7-year auctions during week of Dec 24th
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 12:00 (CA) Canada to sell 3-year notes
- 13:00 (US) Treasury to sell 5-Year TIPS Reopening
- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: expected to raise Overnight Rate by 25bps to 8.25%
- 14:00 (AR) Argentina Oct Shop Center Sales Y/Y: No est v -15.1% prior; Supermarket Sales Y/Y: No est v -7.9% prior
