Notes/Observations
- Speculation that US-China are making progress in trade talks; current mid-level of talks extended an additional day as President Trump hails progress
- Focus on upcoming FOMC minutes; Fed at odds with the market is still very possible
Asia:
- China may set higher budget deficit to GDP target for 2019, speculated at 2.8% (vs 2.6% expected for 2018)
- Japan Nov wage data better than expected and seen as a positive sign for consumption (Labor Cash Earnings 2.0% v 1.2% prior; Real Cash earnings YoY: 1.1% v 0.4%e)
Europe:
- UK Parliament voted 303-296 for amendment that will restrict tax powers in a ‘no deal’ Brexit
- UK govt spokesperson: the defeat on the ‘no-deal’ Brexit amendment vote today does not change the fact that the UK will leave the EU on March 29th
Americas:
- President Trump: There is a growing security crisis at the US southern border, all Americans are hurt by uncontrolled illegal immigration, strains resources, impacts African Americans and Hispanics the most; border wall will very quickly pay for itself. Govt remains shut down only because Democrats will not fund border security. situation could be solved in 45 minute meeting, have invited parties to White House on Wednesday
- World Bank cuts 2019 global growth forecast from 3.0% to 2.9%
Macro
- (AU) Australia: Building approvals saw a sharp drop in November collapsing -32.8% y/y. The weakness was reported to be linked to softer demand, additional supply and tighter lending standards. The ongoing fall in trend terms was also seen weighing on residential construction activity – and by extension GDP growth – in 2019.
- (DE) Germany: Despite a drop in exports Germany’s November trade surplus widened. Exports fell -0.4% m/m, while contracted -1.6% m/m, likely driven by lower oil prices, which cut the nominal import bill. The total trade surplus for the first 11 months of 2018 at EUR 214.2B, -6.7% y/y.
- (DE) Germany: VDMA machinery orders saw a 2% y/y rise in export orders in November counterbalancing a -3% y/y correction in import orders. The three month trend rate fell back to 4% from 6%, confirming the weak trend in the official manufacturing orders.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.76% at 348.50, FTSE +0.77% at 6,914.25, DAX +0.91% at 10,901.79, CAC-40 +1.09% at 4,825.08, IBEX-35 +0.15% at 8,861.15, FTSE MIB +1.14% at 19,220.50, SMI +0.36% 8,652.50, S&P 500 Futures +0.35%]
- Market Focal Points/Key Themes: European Indices trade higher once again as Indices rally from Decmber lows on continued trade optimism. The Dax and French CAC outperform as Asian Indices also posted gains across the board led by the Kospi and Hang Seng, while US futures point to another higher open after gains yesterday.. On the corporate front Export names continue to rise with the like of Daimler up over 3% on strong December car sales. Ted Baker, Majestic Wines, Shoe Zone, Softcat, Greegs, CGG and Taylor Wimpey are among the names trading higher after positive Earnings and Trading updates. In other news Fincantieri trades lower as the EU is to looking into proposed acquisition of Chantiers de L’Atlantique; Safilo rises on a licensing agreement with Levi Strauss, while Fiat Chryler rises on talk of a settlement with the US on diesel emission this week. Looking ahead notable earners include Greenbrier, Lennar, Actuity Brandsm Constellation Brands and Plug Power.
- Consumer discretionary: Ted Baker [TED.UK] +11.5% (trading update), Majestic Wine [WINE.UK] +1.5% (trading update), Air France-KLM [AF.FR] -1.5% (load factor)
- Consumer staples: Sainsbury [SBRY.UK] +0.5% (sales), Shoe Zone [SHOE.UK] +12% (earnings), Safilo Group [SFL.IT] +5% (collaboration)
- Energy: Faroe Petroleum [FPM.UK] +2% (DNO increases offer and stake)
- Healthcare: Medigene [MDG.DE] +3.5% (awarded patent), Fresenius [FRE.DE] +3% (analyst action)
- Industrials: Daimler [DAI.DE] +3.5% (sales), Taylor Wimpey [TW.UK] +6% (reports stats), Softcat [SCT.UK] +19.5% (trading update), Tecnicas Reunidas [TRE.ES] +4.5% (awarded contract)
Speakers
- UK Govt official Lidington (de facto Dep PM): Idea of alternative Brexit deal is fantasy. Govt to publish specific proposals around the Irish backstop
- Northern Ireland DUP Brexit Spokesman Wilson: No EU assurances to the British govt can change the legalities of the Brexit deal. Views the current deal as ruinous
- UK Junior Brexit Min Heaton-Harris: Do not believe there is a Parliamentary route in which the Brexit could be stopped
- Sweden Central Bank (Riksbank) Dec Minutes noted that conditions were still good for CPIF to be close to target
- Sweden Central Bank (Riksbank) Gov Ingves noted within the Dec minutes that saw cautious and slow rate increases with inflation being stable and close to target
- Sweden Central Bank (Riksbank) member Skingsley noted that If outlook for inflation were to change significantly, he would support adjusting the timing and scope of the forecasted increases
- Sweden Central Bank (Riksbank) Member Jansson (dissenter) reiterated his opposition to rate hike in Dec as inflation risks seemed to be on the downside
- Turkey Fin Min Albayrak reiterated stance that have made headway in rebalancing the domestic economy
- China Foreign Ministry Spokesman Lu confirmed recent trade talks with the US have concluded, statement was due ‘soon’
- China PBoC Gov Yi Gang reiterated stance to implement prudent monetary policy
- Fitch: Debt ceiling is more important than govt shutdown for US sovereign rating
Currencies/Fixed Income
- Focus turns to the upcoming release of FOMC Dec Minutes. Analysts note that Fed being at odds with the market remained a possibility especially after last Friday’s strong payroll and earnings data. Markets did like Powell’s speech last week which indicated a more dovish approach
- GBP/USD higher by 0.2% at 1.2735 area as PM May sought EU assurances on the backstop provision. Markets noting that UK Govt not appear to make any meaningful progress. UK government lost a vote on funding a no-deal Brexit last night which complicates things a little for them as Parliament tries to stop a no-deal Brexit.
- USD/JPY higher for a 4th straight session as risk appetite picks up as speculation that US-China are making progress in trade talks
Economic Data
- (NL) Netherlands Nov Manufacturing Production M/M: 0.5 v 0.4% prior; Y/Y: 2.1% v 3.5% prior; Industrial Sales Y/Y: 3.9% v 10.6% prior
- (DE) Germany Nov Current Account Balance: €21.4B v €24.8Be; Trade Balance: €20.5B v €18.6Be; Exports M/M: -0.4% v -0.5%e; Imports M/M:-1.6 % v 0.0%e
- (DK) Denmark Nov Current Account (DKK): 13.7B v 11.9B prior; Trade Balance: 7.0B v 5.7B prior
- (NO) Norway Nov GDP M/M: -0.3% v +0.8% prior; GDP Mainland M/M: 0.0% v 0.2%e
- (CH) Swiss Dec CPI M/M: -0.3% v -0.2%e; Y/Y: 0.7% v 0.8%e; CPI Core Y/Y: 0.3% v 0.2%e
- (CH) Swiss Dec CPI EU Harmonized M/M:0.0 % v -0.2%e; Y/Y: 0.8% v 0.7%e
- (FR) France Dec Consumer Confidence: 87 v 90e
- (CH) Swiss Dec Foreign Currency Reserves (CHF): 729.0B v 750.0Be
- (CZ) Czech Nov National Trade Balance (CZK):20.2B v 4.9Be
- (CZ) Czech Dec Unemployment Rate: 3.1% v 3.1%e
- (HU) Hungary Nov Preliminary Trade Balance: €0.5B v €0.3B prior
- (SE) Sweden Dec Budget Balance (SEK): -78.3B v +15.6B prior
- (IT) Italy Nov Preliminary Unemployment Rate: 10.5% v 10.5%e
- (IS) Iceland Dec Preliminary Trade Balance (ISK): -10.7B v -18.8B prior
- (ZA) South Africa Dec Manufacturing PMI: 50.7 v 49.0e (1st expansion in 6 months)
- (CN) China Dec retail passenger vehicle sales at 2.26M units, -19% y/y; Overall 2018 retail passenger vehicle sales at 22.7M units; -6.0% y/y (1st annual decline since
- (UK) Q3 Unit Labour Costs Y/Y: 2.8% v 2.0% prior
- (EU) Euro Zone Nov Unemployment Rate: 7.9% v 8.1%e (lowest level since Dec 2008)
- (GR) Greece Nov Industrial Production Y/Y+3.1: % v -1.1% prior
- (BE) Belgium Nov Unemployment Rate: 5.5% v 5.5% prior
Fixed Income Issuance
- (IE) Ireland Debt Agency (NTMA) opened its book to sell EUR-denominated May 2029 bond via syndicate; guidance seen +29bps to mid-swaps
- (PT) Portugal Debt Agency (IGCP) opens book to sell EUR-denominated Jun 2029 bond via syndicate; guidance seen +116bps to mid-swaps
- (SA) Saudi Arabia opened its book to sell USD-denominated 2029 and 2050 bonds via syndicate
- (IL) Israel opened its book to sell EUR-denominated 10-year and 30-year bonds via syndicate
- (IN) India sold total INR90B vs. INR90B indicated in 3-month, 6-month and 12-month bills
- (DK) Denmark sold total DKK2.48B in 2020 and 2027 DGB bonds
- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month bills; Avg Yield: -0.4652% v -0.7757% prior; Bid-to-cover: 2.08x v 2.09x prior
Looking Ahead
- (UR Ukraine Dec CPI M/M: 1.2%e v 1.4% prior; Y/Y: 10.2%e v 10.0% prior
- 05:30 (DE) Germany to sell €4.0B in new 0.25% Feb 2029 Bunds
- 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 13-week bills
- 06:00 (IE) Ireland Nov Industrial Production M/M: No est v 0.0% prior; Y/Y: No est v 5.5% prior
- 06:00 (PT) Portugal Nov Trade Balance: No est v -€1.6B prior
- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Jan 4th: No est v -8.5% prior
- 08:00 (HU) Hungary Central Bank (NMB) Dec Minutes
- 08:00 (UK) Baltic Dry Bulk Index
- 08:15 (CA) Canada Dec Annualized Housing Starts: 205.5Ke v 216.0K prior (revised from 215.9K)
- 08:20 (US) Fed’s Bostic (dove, voter) on economic outlook
- 09:00 (MX) Mexico Dec CPI M/M: 0.7%e v 0.9% prior; Y/Y: 4.9%e v 4.7% prior; CPI Core M/M: 0.5%e v 0.3% prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (US) Fed’s Evans (non-voter)
- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 1.75%
- 10:00 (PL) Poland Central Bank Gov Glapinski holds post Rate Decision press conference
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 10:30 (UK) BOE Gov Carney participates in an online discussion
- 12:00 (US) Trump at Senate policy lunch
- 13:00 (US) Treasury to sell 10-Year Notes Reopening
- 14:00 (US) FOMC Dec Minutes
- 15:00 (US) President Trump meeting with Congressional Leaders
