Notes/Observations
- Cautious tone as US-China statement regarding recent trade talks lacked sufficient substance. US seeking ongoing verification and effective enforcement making any likelihood of such a comprehensive agreement being reached in the next 50 days as challenging
- French Nov production economic continued to paint a picture the Euro Zone was softening
Asia:
- China Commerce Ministry (MOFCOM) commented on recent talks with the US: China and US agreed to continue close communication on trade; had ‘broad, deep, detailed’ communication with the US
- China Dec CPI Y/Y: 1.9% v 2.1%e
Europe:
- PM May said to hold private meetings with Labour MPs to try and secure backing for her Brexit deal. PM said to be openly contemplating a Brexit plan B as a result of growing signs Parliament will reject her Brexit deal next week
- UK Labour Leader Corbyn (opposition) to call for UK election if PM May loses Brexit vote
- UK Dec BRC LFL Sales Y/Y: -0.7% v -0.3%e; Total sales growth for period was flat for its worst performance for the month since 2008
- UK Dec Barclaycard Consumer Spending Y/Y: 1.8% v 3.3% prior (slowest growth since March 2016)
Americas:
- The talks between President Trump and congressional Democrats aimed at ending the partial government shutdown collapsed in acrimony and disarray Wednesday, with the president walking out of the White House meeting and calling it “a total waste of time”
- FOMC Dec Minutes highlighted that officials expressed less certainty about the timing and size of future rate increases. Many Fed Members believed they could afford to be patient about further policy tightening given muted inflation pressures of Dec meeting with a few noting that should assess impact of risks that had become more pronounced in recent months
- Fed’s Rosengren (moderate, voter): Fed could wait for clarity before next rate move; appropriate for now to have no bias toward higher or lower rates
Macro
- (CN) China: PPI fell sharply in December to hit it’s lowest in 2 yearrs, bringing threat of factory deflation even closer. The breakdown showed metals and automobiles experienced deflation in PPI, which is alarming, and telecommunication-related industries also experienced very low inflation. Manynow believe that the government should take more aggressive steps to arrest sharp slowdown and interest rate cut should be put on the agenda as a result.
- (FR) France: Industrial production dropped -1.3% m/m in November, much more than expected and erasing completely the similar gain in October. The Yellow Vest protests against government policies are impacting the numbers leaving the risk of disappointing Q4 GDP print, which would further back the arguments of those at the ECB that don’t want to discuss policy normalization.
- (EU) ECB: The minutes are likely to confirm growing unease and while there will have been broad support for the decision to phase out net asset purchases. Hansson’s comments yesterday highlighted that the ECB’s central scenario remains cautiously optimistic for now, which keeps a possible rate hike in the last quarter of the year on deck for the time being.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.26% at 346.78, FTSE -0.17% at 6,894.75, DAX -0.36% at 10,854.07, CAC-40 -0.69% at 4,780.18, IBEX-35 +0.27% at 8,847.00, FTSE MIB +0.08% at 19,194.50, SMI +0.07% at 8,682.80, S&P 500 Futures -0.43%]
- Market Focal Points/Key Themes: European Indices trade mostly lower on profit taking after recent strength following on from weakness in Asia and lower US futures. On the corporate front UK Supermarket retail giant Tesco trades higher after the company reported better than expected Christmas trading figures, while Marks & Spencer also trades higher after affirming its outlook. Elsewhere UK retailers Halfords, Debenhams and Card Factory trades lower after trading updates; FNAC Darty trades lower on a profit warning blaming the yellow vest protests; Mitchell & Butlers on the otter hand trades higher following a 4.7% rise in Q1 comp sales,; while Suedzucker and Sodexo trade higher following earnings. In M&A news Scout24 trades lower on reports of a potential takeover by PE firms have stalled. Looking agreed notable earners include Emmis and FuelCell Energy.
- Consumer discretionary: Tesco [TSCO.UK] +2.5% (trading update), Marks & Spencer Group [MKS.UK] +1% (earnings), Halfords [HFD.UK] -16% (trading update), FNAC [FNAC.FR] -4.5% (estimates yellow vests protests losses), Card Factory [CARD.UK] -8.5% (trading update), Debenhams [DEB.UK] -7% (trading update)
- Energy: DNO International [DNO.NO] +2.5% (acquires additional stake in Faroe Petroleum)
- Financials: Danske Bank [DANSKE.DK] -2.5% (said to be sued in U.S.)
- Technology: OSRAM Licht [OSR.DE] -6% (CEO comments on Q4 performance)
- Telecom: Nokia [NOKIA.FI] -1%, Ericsson [ERICB.SE] -4.5% (Norway reportedly considering excluding Huawei from building 5G network; Ericsson updates on provisions), Proximus [PROX.BE] -1.5% (restructuring plan)
Speakers
- Spain Fin Min Calvino: To send budget to parliament during week of Jan 14th. 2018 GDP seen at 2.6% with 2-19 growth forecasted at 2.2%
- China Commerce Ministry (MOFCOM) Spokesman Gao reiterated thats trade talks with the US lasted ‘long’ because both sides were ‘serious’ and ‘honest’. Declined to answer question on specifics of the trade talks but noted was in close contact with US over the next stage of talks (**Note: would not confirm if China Vice Premier Lui would travel to Washington). Structural issues (such as forced tech transfer, IP rights) have made progress during the talks
Currencies/Fixed Income
- USD began the EU session on some soft footing on rising bets that the Fed would soon implement a pause in the current tightening cycle or significantly reduce its pace of rate increases this year. Fed Chair Powell was due to speak again on Thursday at the Economic Club in Washington
- EUR/USD at highest level since Oct and holding above the 1.15 level. Dealers note that the currency seems to be defying gravity as the region’s economic picture appears softening on the back of recent data. Focus turns to the ECB Dec minutes.
- Large January euro zone government bond supply being met with strong demand but the French bond auction saw the overall demand at the lower end of the range
Economic Data
- (DK) Denmark Dec CPI M/M: -0.3% v -0.2%e; Y/Y: 0.8% v 0.9%e
- (DK) Denmark Dec CPI EU Harmonized M/M: -0.4% v -0.2%e; Y/Y: 0.7% v 0.9%e
- (NO) Norway Dec CPI M/M: 0.0% v -0.1%e; Y/Y: 3.5% v 3.4%e
- (NO) Norway Dec CPI Underlying M/M: 0.0% v -0.1%e; Y/Y: 2.1% v 2.0%e
- (NO) Norway Dec PPI (including Oil) M/M: -3.5% v -3.2% prior; Y/Y: 7.8% v 14.9% prior
- (FI) Finland Nov Industrial Production M/M: +0.4% v -1.8% prior; Y/Y: 1.6% v 2.3% prior
- (FR) France Nov Industrial Production M/M: -1.3% v 0.0%e; Y/Y: -2.1% v -0.2%e
- (FR) France Nov Manufacturing Production M/M: -1.4% v +0.4%e; Y/Y: -2.2% v -1.1% prior
- (CZ) Czech Dec CPI M/M: 0.1% v 0.1%e; Y/Y: 2.0% v 2.1%e
- (SE) Sweden Nov Private Sector Production M/M: 0.0% v -0.5%e; Y/Y:2.2% v 1.5%e
- (SE) Sweden Nov Industrial Orders M/M: -2.7% v +1.0% prior; Y/Y: -2.4% v +4.0% prior
- (SE) Sweden Nov Industry Production Value Y/Y: 3.2% v 3.6% prior; Service Production Value Y/Y: 2.9% v 5.4% prior
- (IT) Italy Nov Retail Sales M/M: 0.7% v 0.2% prior; Y/Y: 1.6% v 1.5% prior
- (ZA) South Africa Dec SACCI Business Confidence: 95.2 v 95.5e
- (BR) Brazil Jan IGP-M Inflation (1st Preview): 0.0% v -0.1%e – (GR) Greece Oct Unemployment Rate: 18.6% v 18.6% prior
Fixed Income Issuance
- (FR) France Debt Agency (AFT) sold total €B vs. €8.0-9.0B indicated arnge in 2028, 2034 and 2048 bonds
- Sold €4.855B in 0.75% Nov 2028 Oat; Avg Yield: 0.68% v 0.82% prior; Bid-to-cover: 1.71x v 1.81x prior (Nov 8th 2018)
- Sold €1.88B in 1.25% May 2034 Oat; Avg Yield: 1.11% v 1.23% prior; Bid-to-cover: 1.72x v 1.59x prior (Oct 4th 2018)
- Solds €1.50B in 2.00% May 2048 Oat; Avg Yield: 1.60% v 1.70% prior, Bid-to-cover: 1.72x v 1.39x prior (Oct 4th 2018)
- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: 0.285% v 0.370% prior; Bid-to-cover: 1.54x v 1.62x prior
Looking Ahead
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 12-month Bills
- 05:30 (PL) Poland to sell PLN3.0-6.0B in bonds
- 06:00 (IE) Ireland Dec Live Register Monthly Change: No est v -3.1K prior; Live Register Level: No est v 207.2K prior
- 06:00 (ZA) South Africa Nov Manufacturing Production M/M: 0.3%e v 1.1% prior; Y/Y: 1.6%e v 3.0% prior
- 06:00 (BR) Brazil CONAB Corp Report
- 06:00 (RO) Romania to sell RON400M in 4.85% 2026 bonds
- 07:00 (CZ) Czech Central Bank to comment on CPI data
- 07:30 (EU) ECB Account of Dec Governing Council Meeting (Dec Minutes)
- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 4th: No est v $466.0B prior
- 08:00 (UK) Baltic Dry Bulk Index
- 08:30 (US) Initial Jobless Claims: 226Ke v 231K prior; Continuing Claims: 1.74Me v 1.740M prior
- 08:30 (CA) Canada Nov New Housing Price Index M/M: 0.0%e v 0.0% prior; Y/Y: 0.0%e v +0.1% prior
- 08:30 (CA) Canada Nov Building Permits M/M: -0.5%e v -0.2% prior
- 08:35 (US) Fed’s Barkin (hawk, voter)
- 09:00 (MX) Mexico Dec Consumer Confidence Index: 101.8e v 100.9 prior
- 09:00 (MX) Mexico Nov Leading Indicators M/M: No est v -0.06 prior
- 09:00 (MX) Mexico Vehicle Production: No est v 345.0K prior; Vehicle Exports: No est v 273.8K prior
- 10:00 (US) Postponed: Nov Final Wholesale Inventories M/M: 0.5%e v 0.5% prelim; Wholesale Trade Sales M/M: No est v -0.2% prior
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 12:00 (US) Fed Chair Powell
- 12:30 (FR) ECB’s Villeroy (France) at event
- 12:40 (US) Fed’s Bullard (dove, voter)
- 13:00 (US) Fed’s Evans (hawk, non-voter)
- 13:00 (US) Treasury to sell 30-year bonds
- 16:30 (AU) Australia Dec AiG Performance of Construction Index: No est v 44.5 prior
- 17:30 (US) Fed’s Vice Chair Clarida (voter, moderate)
- 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 2.75%
