Germany Avoids A Technical Recession, US-China Trade Concerns Continue To Simmer

Notes/Observations

• Germany avoids a technical recession
• UK Oct Retail Sales data misses expectations
• Trade concerns still simmer; Chines latest weekly purchases of US Soybeans appeared to be well below market expectation
• Soft China data raised the perception that its 2020 GDP growth could be under 6.0%

Asia:

• Japan Q3 Preliminary GDP Q/Q: 0.1% v 0.2%e; GDP Annualized Q/Q: 0.2% v 0.9%e; GDP
• Australia Nov Consumer Inflation Expectation Survey: 4.0% v 3.6% prior
• Australia Oct Employment Change registered its(1st decline in 14 months and largest in 3 years (-19.0K v +15.0Ke); Unemployment Rate: 5.3% v 5.2%e
• China Oct Industrial Production Y/Y: 4.7% v 5.4%e
• China Oct Retail Sales Y/Y: 7.2% v 7.8%e – China President Xi: growing protectionism was threatening international trade and investment and leading to a global economic slowdown

Brexit:

• Conservatives reportedly offer electoral pact to Nigel Farage that would see Brexit Party targeting just 40 key seats but Farage turned it down. Farage stated they would have the withdraw their candidates altogether

Americas:

• Fed Chair Powell Congressional testimony noted that rates to remain on hold barring material change in outlook.. Saw a sustained expansion of economic activity, strong labor market and inflation near symmetric 2% goal as most likely -Fed’s Harker (hawk, non-voter): Time for fed to hold steady on rates; consumer is a hero but can’t be the sole engine of US economy
• Impeachment hearings on President Trump began with new evidence of phone call implicating Trump in Ukraine controversy. Acting ambassador to Ukraine William B. Taylor Jr. testified about a previously undisclosed July 26 phone call between Trump and Gordon Sondland, the U.S. ambassador to the European Union, in which the president asked about “the investigations” he had sought into political rival

Energy:

• Weekly API Oil Inventories: Crude: -0.5M v +4.3M v prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.07% at 405.58, FTSE -0.36% at 7,324.68, DAX -0.18% at 13,206.58, CAC-40 +0.07% at 5,911.04, IBEX-35 +0.07% at 9,201.00, FTSE MIB +0.10% at 23,601.50, SMI -0.25% at 10,273.50, S&P 500 Futures -0.04%]
• Market Focal Points/Key Themes: European indices trading down following mixed indices in Asia and slightly lower US futures. On a very busy corporate earnings front, luxury goods house Burberry up ~5% following H1 earnings and improvement in retail SSS; Premier Oil outperforming following trading update and higher production y/y. Other risers on earnings include KBC, Bouygues and Hapag Lloyd pointing out higher transport volumes and better fright rates. Scandinavian Tobacco Group down almost 5% missing on Q3 topline. Germany-traded Merck down despite top line beat; states taking break from M&A over next 2 yrs. Henkel underperforming following earnings with top line miss and margin erosion; company does not see near term recovery in auto adhesives market, with FirstGroup diving 18% with H1 PBT sharply lower y/y. Further notable decliners following earnings include RWE, K+S and Indus. In other news, Zurich Insurance mostly flat following issuing 2020-2022 targets and German; French utility EDF up following nuclear update; cites no anomalies in Cruas nuclear reactors, while Qiagen rallying ~13% on speculation of a potential takeover from Thermo Fisher. Furthermore, Daimler down 3% following announcement of cost cutting strategy at CMD; group to cut 10% of management positions. Looking ahead notable earners include Wal-Mart, Brookfield Asset Management and Weibo.

Equities

• Consumer discretionary: Burberry [BRBY.UK] +5.5% (earnings; partners with Tencent)
• Consumer staples: Scandinavian Tobacco Group [STG.DK] -7% (earnings)
• Utilities: EDF [EDF.FR] +2.5% (earnings; nuclear update)
• Financials: FirstGroup [FGP.UK] -15% (earnings)
• Healthcare: Qiagen [QIA.DE] +14% (potential deal), Merck KGaa [MRK.DE] -1% (earnings)
• Industrials: Daimler [DAI.DE] -3% (CMD; cost-cut strategy), Hapag-Lloyds [HLAG.DE] +2.5% (earnings), National Grid [NG.UK] +1.5% (earnings), Henkel [HEN3.DE] -1.5% (earnings)
• Telecom: Bouygues [EN.FR] +1.5% (earnings)

Speakers

• ECB’s De Guindos (Spain): Data showing region to avoid recession but growth to remain below potential. Still had ammunition but side effects of policy were growing more evident
• ECB’s Rehn (Finland): reiterated Council stance that fiscal, monetary policy should align
• Germany Econ Min Altmaier stated that the country avoided a technical recession but economic developments remain fragile
• German Economic Ministry Report: Domestic economic growth remained week in Q3, indicators did not signal a recovery. Q3 Business Climate data was a ray of hope. Q3 Exports rose 1.1% in quarter not expecting a noticeable recovery in the coming months
• Philippines Central Bank (BSP) Policy Statement noted that a prudent pause would enable easing to be felt. Saw CPI within 2-4% range for 2019-2021 period as it remained well anchored in range
• Hong Kong police stated that it could not comment on curfews adding that such decision rests with Chief Executive Lam (*note: speculation that Hong Kong might institute a curfew over the weekend)
• China Commerce Ministry (MOFCOM) spokesperson Gao Feng: China, US in thorough talks on Phase 1 trade deal. Cancelling tariffs was important condition for reaching trade agreement between China and US; Level of tariff cuts should reflect significance of 1st deal. Trade war began with tariffs and should end by removing them
• China reportedly purchased ~5 cargoes of US soybeans in latest week amid trade talk uncertainty (**Insight: The purchases we said to be for shipments for December and January but the size of the purchases appeared to be approx. 15% of what the market expected

Currencies/Fixed Income

• EUR/USD recovered from its worst level after Germany Q3 GDP beat expectations and saw the country avoid a technical recession. Euro Zone 2nd reading of its GDP data saw a slight upward revision to the YoY print. USD/JPY was holding below the pivotal 109 level as some risk aversion continued to simmer on both the US-China trade front and the Hong Kong protest situation.
• USD/TRY was higher by over 0.5% after a long-awaited meeting between President Trump and Turkey’s President Erdogan ended Wednesday without a resolution on key issues

Economic Data

• (FI) Finland Oct CPI M/M: 0.1% v 0.0% prior; Y/Y: 0.7% v 0.9% prior
• (FI) Finland Sept GDP Indicator Y/Y: 0.8% v 2.1% prior
• (FR) France Q3 ILO Unemployment Rate: 8.6% v 8.4%e; Mainland Unemployment Rate: 8.3% v 8.1%e; Mainland Unemployment Change: +10K v -70K prior
• (IN) India Oct Wholesale Prices (WPI) Y/Y: +0.2% v -0.2%e
• (DE) Germany Q3 Preliminary GDP Q/Q: 0.0% v -0.1%e (avoids a technical recession); Y/Y: 0.5% v 0.5%e; GDP NSA (unadj) Y/Y: 1.0% v 0.8%e
• (DK) Denmark Q3 GDP Indicator Q/Q: 0.3% v 0.8% prior
• (RO) Romania Q3 Advance GDP Q/Q: 0.6% v 0.8%e; Y/Y: 3.0% v 3.8%e
• (TR) Turkey Sept Industrial Production M/M: +3.2% v -2.7% prior; Y/Y: 3.4% v 3.3%e
• (CH) Swiss Oct Producer & Import Prices M/M: -0.2% v -0.1%e; Y/Y: -2.4% v -2.2%e
• (FR) France Oct Final CPI M/M: 0.0% v -0.1%e; Y/Y: 0.8% v 0.7%e; CPI Ex-Tobacco Index: 103.99 v 103.98e
• (FR) France Oct Final CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 0.9% v 0.9%e
• (ES) Spain Oct Final CPI M/M: 1.0% v 1.0%e; Y/Y: 0.1% v 0.1%e
• (ES) Spain Oct Final CPI EU Harmonized M/M: 0.7% v 0.6%e; Y/Y: 0.2% v 0.2%e
• (ES) Spain Oct CPI Core M/M: 0.8% v 0.1% prior; Y/Y: 1.0% v 1.1%e
• (HU) Hungary Q3 Preliminary GDP Q/Q: 1.1% v 0.9%e; Y/Y: 5.0% v 4.4%e
• (CZ) Czech Q3 Advance GDP Q/Q: 0.3% v 0.4%e; Y/Y: 2.5% v 2.6%e
• (PH) Philippines Central Bank (BSP) left the Overnight Borrowing Rate unchanged at 4.00% (as expected)
• (NL) Netherlands Q3 Preliminary GDP Q/Q: 0.4% v 0.3%e; Y/Y: 1.9% v 1.7%e
• (NL) Netherlands Sept Trade Balance: €5.3B v €3.8B prior
• (SE) Sweden Oct Unemployment Rate: 6.0% v 6.0% prior; Unemployment Rate (Seasonally Adj): 6.6% v 6.6% prior; Unemployment Rate Trend: 6.8% v 6.8% prior
• (PL) Poland Q3 Preliminary GDP Q/Q: 1.3% v 1.1%e; Y/Y: 3.9% v 4.0%e
• (PL) Poland Oct Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 2.5% v 2.5% prelim
• (UK) Oct Retail Sales (ex-auto/fuel) M/M: -0.3% v +0.2%e; Y/Y: 2.7% v 3.4%e
• (UK) Oct Retail Sales M/M: -0.1% v +0.2%e; Y/Y: 3.1% v 3.7%e
• (PT) Portugal Q3 Preliminary GDP Q/Q: 0.3% v 0.4%e; Y/Y: 1.9% v 1.9% prior
• (ZA) South Africa Sept Total Mining Production M/M: 1.5% v 0.0%e; Y/Y: +0.2% v -2.4%e; Gold Production Y/Y: -2.3% v -5.3% prior; Platinum Production Y/Y: -2.0% v -12.4% prior
• (EU) Euro Zone Q3 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.2% v 1.1%e
• (EU) Euro Zone Q3 Preliminary Employment Q/Q: 0.1% v 0.2% prior; Y/Y: 1.0% v 1.2% prior

Fixed Income Issuance

• (SE) Sweden sold SEK500M vs. SEK500M indicated in 0.125% I/L 2032 Bonds; Avg Yield: -1.7187% v -1.8331% prior; Bid-to-cover: 3.80x v 1.94x prior

Looking Ahead

• (UR) Ukraine Q3 Preliminary GDP Q/Q: 0.6%e v 1.6% prior; Y/Y: 3.7%e v 4.6% prior
• (NG) Nigeria Oct CPI Y/Y: 11.2%e v 11.2% prior
• (EG) Egypt Central Bank Interest Rate Decision: Expected to cut Deposit Rate by 100bps to 12.25%; Current Lending Rate at 14.25%;
• 05:30 (HU) Hungary Debt Agency (AKK) 12-month bills
• 05:30 (UK) DMO to sell £2.25B in 1.75% Jan 2049 Gilts
• 06:00 (IL) Israel Oct Consumer Confidence: No est v 128 prior
• 06:00 (IE) Ireland Sept Property Prices M/M: No est v 0.3% prior; Y/Y: No est v 2.0% prior
• 06:00 (BR) Brazil Nov FGV Inflation IGP-10 M/M: 0.4%e v 0.8% prior
• 06:00 (IE) ECB’s Lane (Ireland, chief economist) in Frankfurt
• 06:00 (RO) Romania to sell RON75M in 5% 2029 Bonds
• 06:45 (US) Daily Libor Fixing
• 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 8th: No est v $542.9B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Oct PPI Final Demand M/M: +0.3%e v -0.3% prior; Y/Y: 0.9%e v 1.4% prior
• 08:30 (US) Oct PPI Ex Food and Energy M/M: +0.2%e v -0.3% prior; Y/Y: 1.5%e v 2.0% prior
• 08:30 (US) Oct PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.0% prior; Y/Y: No est v 1.7% prior
• 08:30 (US) Initial Jobless Claims: 215Ke v 211K prior; Continuing Claims: 1.69Me v 1.689M prior
• 08:30 (CA) Canada Sept New Housing Price Index M/M: 0.1%e v 0.1% prior; Y/Y: -0.2%e v -0.3% prior
• 08:30 (US) Weekly USDA Net Export Sales
• 09:00 (US) Fed Vice Chair Clarida (moderate, voter) at Cato Institute in Washington
• 09:00 (NL) ECB’s Knot (Netherlands) in Frankfurt
• 09:10 (US) Fed’s Evans (dove, voter) at Fintech Event in Philadelphia
• 10:00 (CO) Colombia Sept Manufacturing Production Y/Y: No est v 0.1% prior; Retail Sales Y/Y: No est v 9.5% prior
• 10:00 (CO) Colombia Sept Trade Balance: -$0.8Be v -$1.4B prior; Total Imports: $4.0Be v $4.9B prior
• 10:00 (US) Fed Chair Powell before House budget committee
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) Weekly DOE Oil Inventories
• 11:00 (CO) Colombia Q3 GDP Q/Q: 1.1%e v 1.4% prior; Y/Y: 3.3%e v 3.0% prior
• 11:00 (US) Treasury announcement for upcoming 10-year TIPS auction for Thursday, Nov 21st
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
• 11:45 (US) Fed’s Daly (dove, non-voter) gives opening remarks at Economic Policy Conference
• 12:00 (CA) Canada to sell 30 Year Bonds
• 12:00 (CH) SNB’s Maechler in Geneva
• 12:00 (US) Fed’s Williams (moderate, voter) at Economic Policy Conference
• 12:20 (US) Fed’s Bullard (voter, dovish dissenter) in Louisville
• 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: expected to cut Overnight Rate by 25bps to 7.50%
• 14:00 (CO) Colombia Sept Industrial Production Y/Y: No est v 0.4% prior
• 14:00 (AR) Argentina Oct National CPI M/M: 3.9%e v 5.9% prior; Y/Y: 51.4%e v 53.5% prior
• 16:30 (NZ) New Zealand Oct PMI Manufacturing: No est v 48.4 prior
• 20:30 (CN) China Oct New Home Prices M/M: No est v 0.5% prior
• 20:30 (AU) RBA’s Debelle in Sydney
• 21:00 (SL0) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Standing Deposit Rate at 7.00%; Current Standing Lending Rate at 8.00%
• 21:10 (JP) BOJ Outright Bond Purchase operation in 10-25 year and over 25-year maturities
• 21:15 (US) Bank of Canada (BOC) Gov Poloz in San Francisco for Fed Conference
• 22:00 (CN) China to sell 30-Year Upsized Government Bond
• 22:30 (JP) Japan to sell 3-Month Bills
• 23:00 (MY) Malaysia Q3 GDP Q/Q: 0.9%e v 1.0% prior; Y/Y: 4.4%e v 4.9% prior
• 23:00 (MY) Malaysia Q3 GDP Current Account Balance (MYR): 15.0Be v 14.3B prior
• 23:00 (ID) Indonesia Oct Trade Balance: -$0.3Be v -$0.2B prior; Exports Y/Y: -8.3%e v -5.7% prior; Imports Y/Y: -15.7%e v -2.4% prior
• 23:30 (JP) Japan Sept Final Industrial Production M/M: No est v 1.4% prelim; Y/Y: No est v 1.1% prelim; Capacity Utilization M/M: No est v -2.9% prior