Euro Zone PMI Data Mixed In Session

Notes/Observations

• ECB Lagarge gives 1st major speech as central bank chief; Echoes the Draghi theme of accommodative policy needed with help from the fiscal end
• Major Continental European Manufacturing PMI data planting the green shoots of stabilization but both Services and Composite reading miss expectations across the board (Beats: France, Germany, France; Misses: UK)
• Asian PMI data saw contractions for both Japan and Australia
• Some relief from the “cautious optimism” of China’s top negotiator about reaching a phase one trade deal with the US

Asia:

• Australia Nov Preliminary PMI Manufacturing: 49.9 v 50.0 prior (1st contraction ever since survey began in May 2016)
• Japan Nov Preliminary PMI Manufacturing registered its 7th straight contraction (48.6 v 48.4 prior)
• Japan Oct National Inflation data was stagnant despite tax hike increase (CPI Y/Y: 0.2% v 0.3%e; CPI Ex-fresh food (core) Y/Y: 0.4% v 0.4%e; CPI Ex-fresh food/energy Y/Y: 0.7% v 0.6%e)
• China National Bureau of Statistics (NBS): revised its 2018 GDP upwards by 2.1% to CNY91.93T (~$13.1T). Revision would not have ‘major’ impact on 2019 GDP growth [Note: 2019 official GDP target is between 6.0-6.5%]
• PBOC Adviser Ma Jun reiterated that China still had policy space and saw room to adjust its fiscal, monetary and property market policies if uncertainty related to US trade dispute added further downward economic pressure.
• Press reports circulated that the Hong Kong issue had the potential to influence the process of the trade talks (Reminder: Both houses of Congress have passed the Hong Kong Human Rights and Democracy Act by a veto-proof majority)

Europe/Mideast:

• Trump administration said to be considering new and broader trade probe in order to justify tariffs on the EU. White House considering opening a Section 301 trade inquiry that would take a much broader look at European industries as the door is closing on implementing tariffs based on the Section 232 probe that looked more narrowly at ‘national security’ concerns.

Brexit:

• PM Johnson’s conservatives pledge an additional 3% levy on property purchases by non-UK tax residents

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.4% at 404, FTSE +1.1% at 7315, DAX +0.3% at 13170, CAC-40 +0.30% at 5898, IBEX-35 +0.5% at 9257, FTSE MIB +0.2% at 23330, SMI +0.3% at 10370, S&P 500 Futures +0.2%]
• Market Focal Points/Key Themes: European indices trading in the green following mostly higher indices in Asia and slightly higher US futures. DIA rallying 27% following capital increase of €605M on Wednesday after market close. Astrazeneca up on receiving US FDA NDA supplemental 6, 7 approval for Calquence. Coats dives 10% following a trading update that revealed disappointing sales and the company cut its FY outlook. Aryzta down after the company reported a fall in Q1 revenues. Playtech shares lower after issuing trading update and guiding FY EBITDA below current consensus. Record also underperforming after reporting soft earnings results. Edenred down following news of a malware attack, Brooks MacDonald lower on news of acquisition of Edinburgh asset manager and accompanying share placing, St. Modwen down after Land Securities announced that its current CEO Mark Allan will serve as its new CEO; Land Securities just slightly up on the news. Rightmove rising a tad after naming a new Chairman. Notable upcoming earners today include Foot Locker and JM Smucker.

Equities

• Consumer discretionary: DIA [DIA.ES] +22%, Coats Group [COA.UK] -8.5% (trading update, profit warning), Science Group [SAG.UK] +1.7% (trading update), Aryzta [ARYN.CH] -5.0% (Q1 Rev), Edenred [EDEN.FR] -3% (Discovered malware infection)
• Financials: Rightmove [RMV.UK] +1.2% (Confirms new chairman), Record [REC.UK] -5.9% (Earnings)
• Aryzta [ARYN.CH] -5.0% (Q1 Rev)
• Edenred [EDEN.FR] -3% (Discovered malware infection)
• Healthcare: Astrazeneca [AZN.UK] +1.4% (Calquence approved in the US)

Speakers

• ECB President Lagarde inaugural speech as the central bank chief noted that it faced a global environment that was marked by uncertainty; Europe needed a new policy mix and ECB would undergo a strategic review in the near future. She stressed that ECB would maintain an accommodative policy stance as it had been a key driver of domestic demand during the recovery. Monetary policy would continue to support the economy and respond to future risks in line with ECB’s price stability mandate; and would continuously monitor side-effects of policy. Monetary policy could achieve its goal faster and with fewer side effects if other policies were supporting growth alongside it
• Germany Dep Fin Min Kukies: Germany wants results on banking union; topic urgently needs deepening
• Sweden Central Bank (Riksbank) Dep Gov Jansson (dove, dissenter) stated that was pretty sure that inflation would rise but had doubts on the need for Dec rate hike as inflation to remain below target for forecast horizon. Would not be concerned if inflation went over the 2% mark; needed a material change in inflation to change view
• South Korea to tell Japan it would not end the GSOMIA intelligence sharing pact
• Japan Trade Min Motegi: No change to export restrictions on materials for South Korea; would not put country immediately back on White List. Hoped to hold talks with South Korea on export controls. Stated that Korea had dropped the WTO complaint against Japan
• Japan Cabinet Office (Govt) Nov Monthly Economic Report maintained overall assessment that domestic economy was recovering at a moderate pace despite weak exports. Cut its assessment on jobs and corporate profits while raising the assessment on public investment
• China President Xi reiterated stance that China was not afraid of a trade war and would not flinch from such a fight
• China Foreign Ministry spokesperson Geng Shuang reiterates stance that US was meddling in its internal affairs

Currencies/Fixed Income

• The session saw a number of events that could provide some volatility in the FX markets. Major EU PMI releases, ECB Lagarde 1st policy speech and continued trade winds all had potential.
• EUR/USD failed to sustain any positive momentum after the major European PMI Manufacturing data beat expectations. The other components (Service and Composite PMI) missed expectations to negate any good vibes. ECB chief Lagarde also indicated that she would carry the Draghi accommodative policy baton into her ECB reign . Pair remained locked within recent 1.10-1.12 trading range.
• GBP/USD saw some weakness after its PMI reading missed across the board. Pair back below the 1.29 level ahead of the mid-session.

Economic Data

• (DE) Germany Q3 Final GDP Q/Q: 0.1% v 0.1%e; Y/Y: 0.5% v 0.5%e; GDP NSA Y/Y: % v 1.0%e
• (DE) Germany Q3 Private Consumption Q/Q: 0.4% v 0.4%e; Government Spending Q/Q: 0.8% v 0.3%e; Capital Investment Q/Q: -0.1% v -0.4%e
• (MY) Malaysia mid-Nov Foreign Reserves: $103.2B v $103.2B prior
• (CN) Weekly Shanghai copper inventories (SHFE): 135.0K v 135.5K tons prior
• (NG) Nigeria Q3 GDP Y/Y: 2.3% v 1.9% prior
• (RU) Russia Narrow Money Supply w/e Nov 15th (RUB): 10.67T v 10.58T prior
• (TW) Taiwan Oct Unemployment Rate: 3.7% v 3.7%e
• (FR) France Nov Preliminary Manufacturing PMI: 51.6 v 50.9e (4th consecutive month of expansion); Services PMI: 52.9 v 53.0e; Composite PMI: 52.7 v 52.8e
• (DE) Germany Nov Preliminary Manufacturing PMI: 43.8 v 42.9e (11th straight contraction); Services PMI: 51.3 v 52.0e; Composite PMI: 49.2 v 49.3e
• (EU) Euro Zone Manufacturing PMI: 46.6 v 46.4e (10th straight month of contraction); Services PMI: 51.5 v 52.4e; Composite PMI: 50.3 v 50.9e
• (PL) Poland Oct Sold Industrial Output M/M: 7.8% v 6.5%e; Y/Y: 3.5% v 2.5%e; Construction Output Y/Y: -4.0% v +6.3%e
• (PL) Poland Oct PPI M/M: -0.4% v -0.3%e; Y/Y: -0.1% v +0.2%e
• (IS) Iceland Oct Wage Index M/M: 0.4% v 0.5% prior; Y/Y: 4.2% v 4.3% prior
• (UK) Nov Preliminary Manufacturing PMI: 48.3 v 48.8e (7th straight month of contraction); PMI Services: 48.6 v 50.0e; PMI Composite: 48.5 v 50.2e

Fixed Income Issuance

• (IN) India sold total INR160B vs. INR160B indicated in 2021, 2026, 2029, 2039 and 2059 bonds
• (ZA) South Africa sold total ZAR1.04B vs. ZAR1.04B indicated in 2029, 2038 and 2046 I/L bonds

Looking Ahead

• 06:00 (IE) Ireland Oct PPI M/M: No est v 0.4% prior; Y/Y: No est v -1.7% prior
• 06:00 (UK) DMO to sell €6.5B in 1-month, 3-month and 6-month bills (£0.5B, £3.0B and £3.0B respectively)
• 06:30 (IN) India Weekly Forex Reserve w/e Nov 15th: No est v $447.8B prior
• 07:00 (BR) Brazil Mid-Nov IBGE Inflation IPCA-15 M/M: 0.2%e v 0.1% prior; Y/Y: 2.7%e v 2.7% prior
• 07:00 (CL) Chile Oct PPI M/M: No est v 0.7% prior
• 07:00 (IN) India announces upcoming bill issuance (held on Wed)
• 07:30 (IS) Iceland Bond exchange
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (DE) ECB’s Weidmann (Germany) in Frankfurt
• 08:30 (CA) Canada Sept Retail Sales M/M: -0.3%e v -0.1% prior; Retail Sales (ex-auto) M/M: -0.1%e v -0.2% prior
• 09:45 (US) Nov Preliminary Markit Manufacturing PMI: 51.5e v 51.3 prior; Services PM: 51.2e v 50.6 prior; Composite PMI: No est v 50.9 prior
• 10:00 (US) Nov Final University of Michigan Confidence: 95.7e v 95.7 prelim
• 11:00 (US) Nov Kansas City Fed Manufacturing Activity: -2e v -3 prior
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Latvia, Ukraine sovereign ratings; S&P on South Africa sovereign rating; Fitch on Portugal, Austria and Iceland sovereign ratings; Canadian rating agency DBRS on Estonia sovereign rating)
• 13:00 (US) Weekly Baker Hughes Rig Count