HomeContributorsFundamental AnalysisAwaiting Developments On China Trade Talks

Awaiting Developments On China Trade Talks

Notes/Observations

  • US and China mid-level trade delegates meet in Beijing with focus on technical matters
  • UK Parliament back from recess and to resume debate on the Brexit Withdrawal Bill from Wednesday
  • China Gold Reserves rise for 1st time since Oct 2016
  • FOMC minutes on Wednesday, a US CPI report on Friday and plenty of Fedspeak including Powell once again

Asia:

  • China has room for additional cut to RRR as current ratio is still relatively high. More room for China to ease monetary policy as the US was slowing pace of rate hikes. China was likely to lower rates in OMOs instead of cutting key 1-year deposit and lending rates
  • Japan Dec PMI Services: 51.0 v 52.3 prior (3-month low)

Europe:

  • PM May reiterated view that Britain would be in ‘uncharted territory’ if her Brexit deal was rejected by parliament – Northern Ireland DUP Dep Leader Dodds: the fundamental problems which made the PM’s Brexit agreement a bad deal appeared not to have changed

Energy:

  • Goldman Sachs analyst cuts 2019 WTI and Brent oil outlook citing oil surplus and resilient US shale production. Cuts 2019 WTI forecast from $64.50 to $55.50 and 2019 Brent forecast from $70.00 to $62.50

Macro

  • (DE) Germany: November factory orders dropped -4.3% y/y adding to concerns that the manufacturing sector is increasingly being impacted by global trade tensions and the risk of a hard Brexit, especially as export orders fell -3.2% m/m. Most of the drop in export orders was as a result of a -11.6% m/m decline in orders from other Eurozone countries, which suggests that the protests France disrupted not just French output, but also had knock on effects for companies in Germany. The overriding scenario looks to be one of slowing production and weakening economic growth.
  • (DE) Germany: November retail sales were stronger than expected, with internet sales contributing to the headline, and suggests that Black Friday sales is having an increasing impact and distorting seasonal comparisons.
  • (UK) United Kingdom: It has been widely reported that Parliament will vote in the Withdrawal Agreement on January 15th. This comes as Germany and Ireland have reportedly been trying to come up with a solution for the Irish border backstop with German foreign affairs minister, Heiko Mass in Dublin today. The fix is likely yo be further details in the political declaration on the future relationship, as opposed to changes to the actual Withdrawal Agreement, which suggests that the Irish border backstop will remain in place.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -0.31% at 342.32, FTSE -0.43% at 6,808.25, DAX -0.26% at 10,739.49, CAC-40 -0.42% at 4,717.34, IBEX-35 -0.10% 8,725.00, FTSE MIB +0.19% at 18,867.50, SMI -0.74% at 8,548.60, S&P 500 Futures -0.05%]
  • Market Focal Points/Key Themes: European Indices trading slightly lower across the board fading slightly after strong gains seen on Friday tracking slightly lower US futures. On the corporate front, US retailer Dunelm trades higher following a positive trading update, with Biocartis, MJ Gleeson, PGS and Addex Therapeutics among other names highers on positive trading updates. To the downside Trigano and EOS Imaging trading lower on Sales updates. Elsewhere shares of Siemens and Alstom trade lower on talk the EU Commission could oppose tie up; Mithra Pharma is a notable riser on the expansion of the Estetrol program, Staffline also rises on a contract win while Bowleven is a notable riser on the proposal of a special dividend.
  • Consumer discretionary: Adidas [ADS.DE] -1% (continues buyback program), Dunelm Group [DNLM.UK] +16% (trading update), Vertu Motors [VTU.UK] -4% (acquisition)
  • Energy: Sound Energy [SOU.UK] +31% (operational update), Bowleven [BLVN.UK] +20% (special dividend)
  • Healthcare: Sanofi-Aventis [SAN.FR] -1.5% (agreement with Regeneron amended), Biocartis NV [BCART.BE] -11% (trading update), EOS Imaging [EOSI.FR] -11% (earnings)
  • Industrials: M.J. Gleeson Group plc [GLE.UK] +3% (trading update), Volkswagen [VOW3.DE] +0.5% (CEO comments on sales and activities)
  • Technology: Siemens [SIE.DE] -1%, Alstom [ALO.FR] -3% (reportedly EU Commission could oppose the Siemens-Alstom tie-up)
  • Telecom: BT Group plc [BT.A.UK] +1% (said to be working with takeover advisors on possible Deutsche Telecom bid)

Speakers

  • UK Govt said to hold ‘meaningful vote’ on Brexit deal on Tuesday, Jan 15
  • China FX Regulator SAFE reiterated stance that expected overall FX Reserves to remain stable in 2019
  • India Central Bank (RBI) Gov Das: Have meet with MSME Associations; will examine issues. Restructuring only after examining viability. RBI has a sense of current liquidity situation; have taken steps to increase liquidity

Currencies/Fixed Income

  • USD remained on soft footing for a third straight session after Fed Chair Powell on Friday signaled a change in the policy reaction function of the Fed to being more nimble and ?exible. There was a growing bet that the Fed could soon pause in the current tightening cycle. The resumption of US-China trade talks also aiding risk-on appetite and shedding of some safe-haven bets.
  • EUR/USD higher by almost 0.5% as the pair approached the mid 1.14 neighborhood. A move above 1.15 would trigger buy-stops and likely to cause technical damage to the USD bull run.
  • GBP/USD was marginally higher as focused returned to the UK Parliament after its return from the Christmas recess. The highly anticipated meaningful vote appeared to be set for next Tuesday 9Jan 15th). The market will be looking for clarity whether PM May’s Brexit deal would pass to avoid a potential hard Brexit for Britain.

Economic Data

  • (DE) Germany Nov Retail Sales M/M: 1.4% v 0.4%e ;Y/Y: +1.1% v -0.4%e
  • (DE) Germany Nov Factory Orders M/M: -1.0% v -0.1%e; Y/Y: -4.3% v -2.7%e
  • (TW) Taiwan Dec Trade Balance: $4.7B v $4.7Be; Exports Y/Y: -3.0% v -5.1%e; Imports Y/Y: +2.2% v -0.3%e
  • (AT) Austria Dec Wholesale Price Index M/M: -2.2 % v -0.2% prior; Y/Y: 2.2% v 4.4% prior
  • (HU) Hungary Nov Retail Sales Y/Y: 5.2% v 5.5% prior
  • (CN) China Dec Foreign Reserves: $3.073T v $3.072Te ; Gold reserves (in troy oz) rose for 1st time in 26 months) 59.56M v 59.24M troy oz prior
  • (HK) Hong Kong Dec Foreign Reserves: $424.6B v $423.2B prior
  • (PH) Philippines Dec Foreign Reserves: $78.5B v $75.5B prior
  • (DE) Germany Dec Construction PMI: 53.3 v 51.3 prior
  • (UK) Dec New Car Registrations Y/Y: -5.5% v -3.0% prior
  • (CH) Swiss weekly Total Sight Deposits (CHF): 574.0B v 574.2B prior; Domestic Sight Deposits: 480.0B v 479.0B prior
  • (IS) Iceland Nov Final Trade Balance (ISK): -18.8B v -17.7B prelim
  • (IT) Italy Q3 YTD Budget Deficit to GDP: 1.9% v 2.0% prior
  • (SG) Singapore Dec Foreign Reserves: $287.7B v $289.5B prior
  • (EU) Euro Zone Jan Sentix Investor Confidence: -1.5 v -2.0e (lowest reading since Dec 2014)
  • (ID) Indonesia Dec Consumer Confidence: 127.0 v 122.7 prior
  • (EU) Euro Zone Nov Retail Sales M/M: 0.6% v 0.2%e; Y/Y: 1.1% v 0.4%e

Fixed Income Issuance

  • (EU) EFSF to sell €3.0B in 7-year notes via syndicate; guidance seen +2bps to mid-swaps
  • (SI) Slovenia Debt Agency to sell EUR-denominated 10-year note via syndicate; guidance seen high 40 bps area to mid-swaps
  • (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month bills; Avg Yield: 0.85% v 0.78% prior; Bid-to-cover: 1.89x v 2.94x prior

Looking Ahead

  • (IL) Israel Dec Foreign Currency Balance: No est v $115.1B prior
  • (MX) Mexico Citibanamex Survey of Economists
  • (EG) Egypt Dec Net Reserves: No est v $44.5B prior; Gross Official Reserves: No est v $44.5B prior
  • 05:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills;
  • 06:00 (IL) Israel to sell Bonds
  • 06:00 (RO) Romania to sell RON400M in 4% 2021 bonds
  • 06:30 (CL) Chile Nov Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 4.2% prior; Economic Activity (Ex-Mining) Y/Y: No est v 5.1% prior
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (CL) Chile Nov Nominal Wage M/M: No est v -0.1% prior; Y/Y: No est v 4.1% prior
  • 07:00 (IN) India 2019 GDP Annual Estimate Y/Y: 7.2%e v 6.7% prior
  • 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 07:45 (ES) ECB’s De Guindos (Spain)
  • 08:00 (PL) Poland Dec Official Reserves: No est v $113.8B prior
  • 08:00 (UK) Baltic Dry Bulk Index
  • 08:50 (FR) France Debt Agency (AFT) to sell combined €4.2-5.4B in 3-month, 4-month, 6-month and 12-month BTF Bills
  • 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.25%
  • 09:30 (EU) ECB announces Covered-Bond Purchases (**Note: program ended on Dec 31st)
  • 10:00 (US) Nov Final Factory orders/durables data postponed by government shutdown
  • 10:00 (US) Dec ISM Non-Manufacturing Index: 59.0e v 60.7 prior
  • 10:00 (CA) Canada Dec Ivey Purchasing Managers Index (Seasonally Adj): No est v 57.2 prior; PMI (unadj): No est v 57.3 prior
  • 11:30 (US) Treasury to sell 13-week and 26-week bills
  • 12:40 (US) Fed’s Bostic (dove, voter)
Trade The News
Trade The Newshttp://www.tradethenews.com/
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Featured Analysis

Learn Forex Trading