- Concerns over global growth persist
- Apple cut Q1 revenue outlook citing weak sales in China; risk aversion ramps up as its suggests some grounds for worry on the impact of Trump’s trade war with China
Asia:
- China International Capital Corporation (CICC) Research: PBoC’s RRR criteria easing might release up to CNY400B (Reminder: On Jan 2nd reports circulated that China PBoC adjusted its rules on bank lending to small business)
Europe:
- UK PM May to hold talks on Brexit this week with Germany Chancellor Merkel, Dutch PM Rutte, and EU Council President Tusk in hopes of pressing the EU leaders for Brexit concessions
- UK PM May said to be urged to delay Brexit “meaningful vote” again as attempts to win party rebels to her side fail
- British Chambers of Commerce (BCC): In Q4 2018 UK services sales growth hit 2-year low
Americas:
- Apple [AAPL} cut its Cuts Q1 Revenue guidance for 1st time since 2002 ( $84B v $91.3Be)
Macro
- (UK) United Kingdom: Prime Minister May will today meet with European Council President Tusk, German Chancellor Merkel and Dutch Prime Minister Rutte. She is reportedly hoping to win concessions on the Irish border backstop. Dublin sees the backstop as crucial to guaranteeing that the 1998 Good Friday agreement won’t been breached. Ireland and the EU are gambling that UK Parliament won’t allow the UK to exit the EU without a deal. Parliament would ultimately be able to overrule the government on this, should the Withdrawal Agreement by voted down, which continues to look likely. The delayed vote on the Brexit deal and outline for a future relationship is expected to take place he week of January 14, before the legislated deadline of January 21.
- (EU) Eurozone: M3 money supply growth decelerated to 3.7% y/y. The annual growth rate of loans to households was unchanged at 3.2% y/y, and actually accelerated a tick to 3.3% y/y. Loans to non-financial corporations meanwhile rose 2.9% y/y, up from 2.8% y/y in the previous month. No evidence to suggest then that the ECB’s gradual phasing out of net asset purchases has had an impact on credit but financing conditions should remain very accommodative.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.69% at 334.50, FTSE -0.50% at 8,410.50, DAX -1.06% at 10,468.56, CAC-40 -1.02% at 4,641.50, IBEX-35 -0.39% at 8,517.00, FTSE MIB -0.81% at 18,182.50, SMI -0.20% at 8,410.50, S&P 500 Futures -1.68%]
- Market Focal Points/Key Themes: European Indices trade mostly lower across the board with the tech sector in focus following the the a decline in demand for Iphones led to a cut in Revenue forecasts. Apple suppliers trade under pressure with AMS down sharply, ASML, Dialog Semi, STMicro and Infineon among others declining. Elsewhere UK retailer Next trades higher after better than expected Q4 Brand sales; Vectura and Costain also rise after upbeat trading updates. In other news Zalando trades higher on takeover chatter, DBV Tech rises on the resignation of its CMO while airliners Ryanair and Wizz Air trade higher on Dec traffic metrics. Looking ahead notable earners include Unifirst, Park Electrochemical and Simply Good Food.
Equities
- Consumer discretionary: Next [NEXT.UK] +5.5% (brand sales; outlook adjustment), Zalando [ZAL.DE] +3.5% (takeover speculation), Ryanair [RYA.UK] +1%, Wizz Air [WIZZ.UK] +2% (load factors)
- Energy: Faroe Petroleum [FPM.UK] +5.5% (DNO extends offer timeline; acquires additional shares; offer is now mandatory)
- Financials: Randstad [RAND.NL] -5% (analyst action)
- Healthcare: Vectura Group Plc [VEC.UK] +10.5% (trading update), DBV Technologies [DBV.FR] +16.5% (Chief Medical Officer resigns), Genfit [GNFT.FR] +4.5% (licensing agreement)
- Industrials: Costain Group [COST.UK] +8% (trading update)
- Technology: AMS AG [AMS.CH] -21%, ASML Holdings [ASML.NL] -4.5%, Dialog Semiconductors [DLG.DE] -6%, STMicroelectronics [STM.FR] -7.5%, Infineon [IFX.DE] -4% (Apple outlook cut; Infineon CEO affirms FY19 Rev growth target)
Speakers
- UK Brexit Min Barclay: ‘No-deal’ EU exit far more likely if parliament rejected PM May’s Brexit deal
- Italy’s 2019 budget said to be under strict EU surveillance for 6 months
- Thailand Dep PM Wissanu: Elections planned for Feb 24th may be delayed due to the royal coronation in May
Currencies/Fixed Income
- Risk aversion trade on the guidance cut by Apple sent the JPY currency firmer across the board. During the thin Asian trade, the Yen spiked higher by over 7% against both Aussie while the USD/JPY pair tested below ¥105 handle. There was some speculation that USD/JPY volatility was part of Apple hedge or the infamous Japanese retail investors cover bad bets. Reports circulated that Japanese retail FX players were forced out of AUD/JPY cross which created a liquidity vacuum as Japanese markets continued to be closed for holiday. The resulting ‘flash crash’ in the yen-related pairs was not really viewed as any real turn in sentiment. USD/JPY managed to re-approach the 108 level in the early part of the EU session after the stops were run in Asia.
- EUR/USD at 1.1365 and marginally higher with key resistance still seen at 1.15 level.
- GBP/USD was softer as concerns over a potential ‘no-deal’ Brexit persisted ahead of the upcoming meaningful vote in parliament. Pair at 1.2575 just ahead of the US morning.
Economic Data
- (NO) Norway Nov AKU Unemployment Rate: 4.0% v 4.0%e
- (TR) Turkey Dec CPI M/M: -0.4% v -0.8%e; Y/Y: 20.3% v 20.5%e; CPI Core Y/Y: 19.5% v 19.8%e
- (TR) Turkey Dec PPI M/M: -2.2% v -1.5%e; Y/Y: 33.6% v 34.6%e
- (ES) Spain Dec Net Unemployment M/M: -50.6K v -55.0Ke
- (CH) Swiss Dec PMI Manufacturing: 57.8 v 56.9e (36th month of expansion)
- (SE) Sweden Nov Household Lending Y/Y: 5.7% v 5.8% prior
- (HK) Hong Kong Nov Retail Sales Volume Y/Y: 1.2% v 4.6%e; Retail Sales Value Y/Y: 1.4% v 4.5%e
- (EU) Euro Zone Nov M3 Money Supply Y/Y: 3.7% v 3.8%e
- (DE) Germany Dec CPI Brandenburg M/M: 0.3% v 0.1% prior; Y/Y: 1.6% v 1.8% prior
- (UK) Dec Construction PMI: 52.8 v 52.9e (9th month of expansion)
Fixed Income Issuance
- (ES) Spain Debt Agency (Tesoro) sold total €4.55B vs. €4.0-5.0B indicated range in 2021, 2023 and 2028 Bonds
- Sold €1.2B in 0.05% Oct 2021 SPGB; Avg yield: -0.039% v +0.021% prior, Bid-to-cover: 2.26x v 3.65x prior
- Sold €1.345B in 0.35% July 2023 SPGB; Avg yield: 0.329% v 0.412%; Bid-to-cover: 1.75x v 1.65x prior
- Sold €1.997B in 1.40% July 2028 SPGB; Avg yield: 1.402% v 1.456% prior, Bid-to-cover: 1.27x v 1.93x prior
- (ES) Spain Debt Agency (Tesoro) sold €500M vs. €250-750M indicated range in inflation-linked 0.7% Nov 2033 bonds ; Real Yield: 0.752%; Bid-to-cover: 2.94x
Looking Ahead
- (PT) Portugal Dec Consumer Confidence Index: No est v -1.8 prior; Economic Climate Indicator: No est v 2.3 prior
- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3-tranches)
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Dec 28th: No est v -5.8% prior (1st release in two weeks)
- 07:00 (US) Dec Vehicle Sales data throughout the session
- 07:30 (US) Dec Challenger Job Cuts: No est v 53.1K prior; Y/Y: No est v 51.5% prior
- 08:00 (CZ) Czech Dec Budget Balance (CZK): No est v -21.6B prior
- 08:00 (SG) Singapore Dec Purchasing Managers Index (PMI): No est v 51.5 prior; Electronics Sector Index: No est v 49.9 prior
- 08:10 (UK) Baltic Dry Bulk Index
- 08:15 (US) Dec ADP Employment Change: +180Ke v +179K prior
- 08:30 (US) Initial Jobless Claims: 220Ke v 216K prior; Continuing Claims: 1.69Me v 1.701M prior
- 09:45 (US) Dec ISM New York
- 10:00 (US) Dec ISM Manufacturing: 57.5e v 59.3 prior; Prices Paid: 57.7e v 60.7
- 10:00 (MX) Mexico Central Bank (Banxico) Dec Minutes
- 10:00 (CO) Colombia Nov Exports: $3.3Be v $3.8B prior
- 11:00 (DK) Denmark Dec Foreign Reserves (DKK): No est v 467.3B prior
- 11:30 (US) Treasury to sell 8-Week Bills
- 16:00 (KR) South Korea Dec Foreign Reserves: No est v $403B prior
- 16:30 (US) Weekly API Oil Inventories
