Notes/Observations
- Risk aversion sentiment sending equity markets lower and core bond yield lower; Trade conflicts and growth fears remain the key driver
- Poor Chinese PMIs underscore global growth concerns (Note: Caixin China PMI Manufacturing: 49.7 v 50.2e for its first contraction since May 2017; on Dec 30th China Dec Official Manufacturing PMI: 49.4 v 50.0e for its 1st contraction since July 2016 and lowest since Feb 2016
- European Manufacturing PMI Data (Beats: UK, Netherlands, Italy; Misses: Spain, Sweden; Norway, Poland, Czech; In-line: France, Germany)
Asia:
- China Dec Caixin China PMI Manufacturing: 49.7 v 50.2e for its first contraction since May 2017
- Singapore Q4 Advance GDP Q/Q: 1.6% v 3.6%e; Y/Y: 2.2% v 2.5%e
Europe:
- Italy President Mattarella year end TV address stated that the country’s high debt penalized the state and its citizens. Reprimanded the coalition govt for calling for measures promised in the 2019 budget to be verified attentively given the lack of debate
- Italy Dep PM Salvini stated that did not see any danger to Italian govt in coming months; no need for govt reshuffle.
- FT Survey on Brexit saw certain business leaders concerned about deteriorating economic conditions in the UK which would hinder UK business investment and depress consumer spending this year
- Money transport drivers in Germany have called nationwide strike, the union was unable to reach labor agreement after 5 rounds
Americas:
- US President Trump formally invited Democrats to meeting at White House on Wed, unclear if Democrat leaders will attend
- House Majority Leader Pelosi (D-CA) to attend Trump meeting
Energy:
- Russia Dec Oil Production Output: 11.45M bpd v 11.37M m/m; +4.5% y/y
Macro
- (N) China: December Caixin manufacturing PMI fell to a 19-month low of 49.7, down from 50.2 in November. The data followed the two-year low that had already been reported in the official PMI survey out of China. Fears are that the trade war has affected domestic demand as well as the export sector and will ultimately lead to expectations of fiscal stimulus as well as reserve ratio cuts.
- (EU) Eurozone: Manufacturing PMI indicates that last quarter of 2018 saw the worst factory output growth since Q2 2013, with firms having to drawdown on back orders to sustain production levels. Some temporary factors evident but trend looks worryingly weak
- (AU) Australia: CoreLogic reported home prices were down another 2.3% over the December quarter, the largest decline in 10 years. The downturn accelerated through 2018 with the overall market falling 4.8% and driven by weakness in Sydney and Melbourne. Sydney home prices were down -9% for the year with Melbourne’s -7%. Sydney house prices fell back to August 2016 levels, while Melbourne values are back to February 2017 . House price weakness has led to a chain of thought that the RBA’s next move this year will be a rate cut as opposed to a hike.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.44% at 334.20, FTSE -1.08% at 6,655.50, DAX -0.48% at 10,508.03, CAC-40 -1.90% at 4,640.96, IBEX-35 -1.55% at 8,407.85, FTSE MIB -1.57% at 18,035.50, SMI closed, S&P 500 Futures -1.49%]
- Market Focal Points/Key Themes: European Indices trade sharply lower across the board starting the year on a negative tone as weaker PMI data in China added to the negative sentiment. Asian Indices were sharply lower while US Index futures also point to a negative open. On the corporate front Ophir Energy advances on bid talk, with Amerisur Resources and Karo Pharma among other notable risers. Hammerson declines following a trading update; Italian Banks are under pressure as Banca Carige’s woes continue with the dissolving of the companies board as the company is put under administration. Elsewhere Gerresheimer trades under pressure following an analyst downgrade, while Sligro Food also declines after full year sales figures.
Equities
- Consumer discretionary: Rezidor Hotel Group AB [REZT.SE] -1.5% (recommended not to accept public offer), Sligro Food Group NV [SLIGR.NL] -1.5% (FY sales)
- Energy: Ophir Energy [OPHR.UK] +33% (confirms in talks over takeover offer), Amerisur Resources PLC [AMER.UK] +10% (operational update)
- Financials: Hammerson [HMSO.UK] -3% (trading update; update on buyback program), Spar Nord Bank A/S [SPNO.DK] +2% (designated as a systemically important financial institution in Denmark), Banca IFIS [IF.IT] -4.5%, UBI Banca [UBI.IT] -4%, Banco BPM [BAMI.IT] -3%, Unicredit [UCG.IT] -2.5% (Banca IFIS confirms acquisition of NPLs; Banca Carige’s Board of Directors dissolved, ECB appointed Monitoring Committee, trading suspended)
- Industrials: Gerresheimer AG [GXI.DE] -7.5% (analyst action)
Speakers
- Taiwan President Tsai rejected China’s stance of ‘One country, two systems’. Talks should be conducted between China and Taiwan. Taiwan was willing to have orderly exchange
- Indonesia Central Bank Gov Warjiyo reiterated stance to remain pre-emptive in monetary policy; saw less uncertainties in 2019 compared to 2018
- Indonesia Fin Min Indrawati noted that 2018 GDP growth was seen at 5.2% and supported by household and govt consumption and investment
Currencies/Fixed Income
- Risk aversion was the key driver to price action in the session which sent equity markets lower and core bond yields lower. Dealers noted that trade conflicts and growth fears remained prevalent with poor Chinese PMI data underscoring global growth concerns
- EUR/USD initially made a try to bust above stops rumored to lie above the 1.15 level but continued to encounter fierce resistance. The pair moved lower as various European PMI manufacturing data disappointed to test 1.1430 just ahead of the NY morning. Dealers also cited that precarious political climate within and outside the Eurozone had become a significant risk and would likely cut growth for the region in 2019
- USD/JPY continued to move lower on safe haven flows into the Yen. The pair moved below the 109 levelto hit its lowest level since May. Before the New Year Japan Currency Head Asakawa noted that FX turbulence had been rising and the Govt was ready to curb yen volatility if speculative activity was behind it.
Economic Data
- (IN) India PMI Manufacturing: 53.2 v 54.0 prior (14th month of expansion)
- (IE) Ireland Dec Manufacturing PMI: 54.5 v 55.4 prior (67th month of expansion but lowest since March)
- (TR) Turkey Dec Manufacturing PMI: 44.2 v 44.7 prior (9th straight contraction)
- (SE) Sweden Dec PMI Manufacturing: 52.0 v 56.2e
- (TH) Thailand Dec Business Sentiment Index: 49.5 v 53.1 prior
- (NL) Netherlands Dec Manufacturing PMI: 57.2 v 55.6e (64th month of expansion)
- (NO) Norway Dec PMI Manufacturing: 55.9 v 56.0e (6th month of expansion)
- (PL) Poland Dec Manufacturing PMI: 47.6 v
- (ES) Spain Dec Manufacturing PMI: 51.1 v 52.4 e 49.8e (2nd straight contraction and lowest since Apr 2013)
- (HU) Hungary Dec Manufacturing PMI: 54.2 v 53.5 prior (37th month of expansion)
- (HU) Hungary Nov Unemployment Rate: 3.6% v 3.7% prior
- (ES) Spain Dec Manufacturing PMI: 51.1 v 52.4 e (62nd month of expansion, but lowest since Aug 2016)
- (CZ) Czech Republic Dec Manufacturing PMI: 49.7 v 51.4e (1st contraction in 29 months and lowest since July 2016)
- (IT) Italy Dec Manufacturing PMI: 49.2 v 48.4e (3rd straight contraction)
- (FR) France Dec Final Manufacturing PMI: 49.7 v 49.7e (confirmed its 1st contraction in 27 months and lowest since Sept 2016)
- (DE) Germany Dec Final Manufacturing PMI: 51.5 v 51.5e (confirmed 48th month of expansion and lowest since Feb 2016)
- (EU) Euro Zone Dec Final Manufacturing PMI: 51.4 v 51.4e (confirmed 66th month of expansion but lowest since Feb 2016)
- (GR) Greece Dec Manufacturing PMI: 53.8 v 54.0 prior (19th month of expansion)
- (UK) Dec PMI Manufacturing: 54.2 v 52.5e (29th month of expansion)
- (DK) Denmark Dec PMI Survey: 58.1 v 57.9 prior
Fixed Income Issuance
- (IN) India sold total INR100B vs. INR100B indicated in 3-month, 6-month and 12-month bills
- (VN) Vietnam sold VND5.65T vs. VND6.5T target in 5-year,10-year, 15-year and 20-year bonds
Looking Ahead
- (IT) Italy Dec Budget Balance: No est v -€3.9B prior
- 07:00 (BR) Brazil Dec PMI Manufacturing: No est v 52.7 prior
- 08:30 (CA) Canada Nov Leading Indicators: No est v -0.1% prior
- 08:55 (FR) France Debt Agency (AFT) to sell combined €4.0-5.2B in 3-month, 6-month and 12-month BTF Bills
- 09:30 (BR) Brazil Currency Flows Weekly
- 09:30 (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: No est v +1.7% prior
- 09:30 (CA) Canada Dec Manufacturing PMI: No est v 54.9 prior
- 09:45 (US) Dec Final Markit Manufacturing PMI: 53.9e v 53.9 prelim
- 10:00 (MX) Mexico Nov Total Remittances: $2.6Be v $2.9B prior
- 10:00 (MX) Mexico weekly International Reserve data
- 10:30 (MX)) Mexico Dec PMI Manufacturing: No est v 49.7 prior
- 11:00 (DK) Denmark Dec Foreign Reserves (DKK): No est v 467.3B prior
- 12:00 (IT) Italy Dec New Car Registrations Y/Y: No est v -6.3% prior
- 13:00 (MX) Mexico Dec IMEF Manufacturing Index: 49.5e v 49.7 prior; Non-Manufacturing Index: 49.5e v 49.2 prior
- 22:30 (TH) Thailand Dec Consumer Confidence: No est v 80.5 prior; Economic Confidence: No est v 67.5 prior
