German IFO Survey Adds To Hope Of Stabilization In Region

Notes/Observations

• German IFO Survey registers an improvement in Nov; adding to hopes of stabilization in region
• UK Polls show the possibility that Conservative Party could win an outright majority in Parliament
• Hong Kong district council elections saw hHuge surge of support for pro-democracy camp; results viewed as a barometer for how Hongkongers feel about the unprecedented political crisis roiling their city

Asia:

• China Govt issued guidance for increased penalties for violations of IP theft; the threshold for criminal punishments for violations would be lowered
• According to Global Times, China and US are very close to Phase 1 deal; China remained committed to continuing talks for a phase two or even phase three deal
• An ambitious ‘phase 2’ trade deal with China seen as less likely amid complications related to prelim phase one agreement
• Hong Kong District Council election results: Pro-democracy opposition candidates parties won around 390 of 452 seats in record turnout of 71.2% of registered voters (prior 47% in 2015)
• Hong Kong major Pro-China Party chief Starry Lee: Respect election loss results; our party to push HK Govt to improve governance
• China Foreign Min Wang stated that the US was the biggest source of instability in the world. US politicians were smearing China globally without providing any evidence

Europe/Mideast:

• ECB’s Lane (Ireland, chief economist): ECB policies were in good shape for the baseline scenario of improving conditions over the next 1-2 years, but additional rate cuts could be ruled out
• Switzerland SNB Chief Economist Lenz: interest rates would not remain below zero forever, Reiterates stance that SNB still had downward room to make adjustments
• Bank of Italy’s Panetta: Italy should use ongoing talks over the reform of the euro zone bailout fund (ESM) to secure something for itself
• Fitch affirmed Portugal sovereign rating at BBB; outlook Positive
• Fitch affirmed Austria sovereign rating at AA+; outlook Positive
• S&P revised South Africa sovereign rating outlook to Negative from Stable; affirms BB rating

Brexit:

• PM Johnson presented the Conservative Party manifesto which promises to get Brexit done and PM would bring his Withdrawal Agreement Bill back to Parliament before Christmas. Aiming for 80% of UK trade covered by FTA within next 3 years. Tories would not extend Brexit beyond Dec2020 or ask EU for extension to negotiate future economic relationship
• Opinium Poll for the Observer newspaper showed British Conservative Party’s lead over the opposition Labour Party had grown to its widest since 2017, ahead of Dec 12th election
• Sunday Times noted that the Conservative Party looked likely to score around 349 seats in the House of Commons, a gain of 57 seats

Americas:

• Michael Bloomberg formally launches bid for 2020 Democratic Presidential nomination

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.77% at 407.08, FTSE +0.69% at 7,377.05, DAX +0.49% at 13,228.83, CAC-40 +0.55% at 5,925.48, IBEX-35 +0.65% at 9,315.00, FTSE MIB +0.71% at 23,424.50, SMI +0.69% at 10,440.50, S&P 500 Futures +0.24%]

Market Focal Points/Key Themes:

• European indices trading in the green following indices in Asia higher and slightly higher US futures. On the M&A front, Daimler up following news that BAIC indicated that it was interested in increasing its stake in the company. LVMH up following confirmation to acquire Tiffany for $16.2B; Burberry rises on reports the company could be a potential acquisition target. Danish Veloxis Pharmaceuticals dives 10% after Asahi Kasei made an offer to acquire the company for DKK6.00/shr. SolGold rising 13% on news that BHP is reportedly planning to inrease its stake in the company. Icade shares higher following acquisition of 19 nursing homes and raising FY19 cash flow outlook. Intu Properties rises as the company announced a property sale and Euromoney down slightly on a small acquisition. Curetis jumps 27% on expectation of near-term FDA decision on 510(k) clearance of Unyvero LRT for BAL specimens. OCI and Polar Capital declines on earnings; risers following earnings results include Sirius Real Estate, Datagroup and IDOX.
• In other news, Italian motorway concession operators Atlantia and Sias slightly off today as rumors circulating that Atlantia plans to cut toll road rates and Sias down as a road bridge collapsed in Italy over the weekend.

Equities

• Consumer discretionary: LVMH [MC.FR] +2% (confirms to acquire Tiffany in $16.2B deal)
• Financials: Icade [ICAD.FR] +1.5% (investor day), UniCredit [UCG.IT] +2% (analyst action)
• Healthcare: Novartis [NOVN.CH] +0.5% (acquires the Medicines), Curetis [CURE.NL] +29% (expects FDA decision)
• Industrials: OCI [OCI.NL] -1.5% (earnings)
• Technology: Datagroup [D6H.DE] +1.5% (earnings)
• Materials: SolGold [SOLG.UK] +13% (stake)

Speakers

• Denmark Central Bank Gov Rohde: Not expecting interest rates to rise for some years ahead
• German IFO economists noted that it saw signs that business would be good this Christmas but added the manufacturing sector remained mired in recession
• Russia Fin Min Siluanov: 2019 GDP growth at be at least 1.3%
• IMF Article IV Report on Japan Economy: BOJ needed to adopt a more flexible target range; Abenomics basic strategy was sound but more was needed. Cut the 2019 GDP growth forecast from 0.9% to 0.8% while maintaining 2020 GDP growth forecast at 0.5%.
• China Foreign Ministry spokesperson Geng Shuang reiterated stance that Hong Kong affairs were purely China’s affairs; Reiterated stance that stopping violence was the top priority.

Currencies/ Fixed Income

• GBP/USD was higher by 0.4% ruling aided by the Conservative Party holding onto its lead in weekend opinion polls for the December 12th general election. Tories unveiled its manifesto which highlighted its contrast with the opposition Labour Party’s much more radical plans. Some of the polls indicated that Conservative Party could win an outright majority with around 349 seats in the House of Commons – a gain of 57 seats and above the 326 needed to gain outright control.
• EUR/USD did not benefit from a better German IFO reading for Nov. Pair holding above the 1.10 level but softer by 0.1% in the session.
• USD/JPY was steady in its price action at 108.85. The JPY currency was at one-week lows as renewed trade hopes lifted risk sentiment and kept the safe-haven plays at bay

Economic Data

• (FI) Finland Oct PPI M/M: 0.0% v 0.5% prior; Y/Y: -0.9% v -0.6% prior
• (TR) Turkey Nov Real Sector Confidence (Seasonally Adjusted): 105.9 v 104.2 prior; Real Sector Confidence NSA (unadj): 102.0 v 100.9 prior
• (TR) Turkey Nov Capacity Utilization: 77.2% v 76.4% prior
• (TW) Taiwan Oct Industrial Production Y/Y: -2.9% v -1.7%e
• (ES) Spain Oct PPI M/M: 0.5% v 0.1% prior; Y/Y: -2.8% v -3.3% prior
• (AT) Austria Sept Industrial Production M/M: +0.2% v -1.4% prior; Y/Y: -0.5% v +0.5% prior
• (CZ) Czech Nov Consumer Confidence Index: -0.3 v +1.3 prior; Business Confidence: 9.9 v 10.0 prior; Composite Confidence (Consumer & Business): # v 8.3 prior
• (TW) Taiwan Oct M2 Money Supply Y/Y: 3.8% v 3.4% prior; M1 Money Supply Y/Y: 7.0% v 7.4% prior
• (CH) Swiss Weekly Total Sight Deposits (CHF) 590.6B v 590.7B prior; Domestic Sight Deposits: 503.2B v 502.9B prior
• (DE) Germany Nov IFO Business Climate Survey: 95.0 v 95.0e; Current Assessment Survey: 97.9 v 97.9e; Expectations Survey: 92.1 v 92.5e
• (PL) Poland Oct Retail Sales M/M: 7.4% v 5.4%e; Y/Y: 5.4% v 5.3%e; Real Retail Sales Y/Y: 4.6% v 4.3%e

Fixed Income Issuance

• None seen

Looking Ahead

• 05:30 (DE) Germany to sell €2.0B in 3-month BuBills
• 06:00 (UK) Nov CBI Retailing Reported Sales: -11e v -10 prior; Total Distribution: No est v -21 prior
• 06:00 (IL) Israel Sept Manufacturing Production M/M: No est v -1.4% prior
• 06:00 (IL) Israel Oct Unemployment Rate: No est v 3.7% prior
• 06:00 (BR) Brazil Nov FGV Consumer Confidence: No est v 89.4 prior
• 06:00 (FR) ECB’s Villeroy (France) in Paris
• 06:00 (IL) Israel to sell 2022, 2023, 2029 and 2030 bonds
• 06:00 (RO) Romania to sell RON60M in 4.4% 2023 Bonds
• 06:25 (BR) Brazil Central Bank Weekly Economists Survey
• 06:45 (AT) ECB’s Holzmann (Austria) in Vienna
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Q3 Final GDP Q/Q: 0.1%e v 0.1% prelim; Y/Y: -0.3%e v -0.4% prelim; Nominal GDP Y/Y: No est v 3.0% prior
• 07:00 (MX) Mexico Sept IGEA Economic Activity Index (Monthly GDP) M/M: No est v 0.1% prior; Y/Y: -0.6%e v -0.9% prior
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:30 (BR) Brazil Oct Current Account Balance: -$5.3Be v -$3.5B prior; Foreign Direct Investment (FDI): $8.0Be v $6.3B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Chicago Fed National Activity Index: -0.20e v -0.45 prior
• 08:30 (CA) Canada Sept Wholesale Trade Sales M/M: No est v -1.2% prior
• 08:30 (BR) Brazil Oct Tax Collections (BRL): 139.0Be v 113.9B prior
• 09:00 (BE) Belgium Nov Business Confidence: -4.1e v -4.6 prior
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to cut Base Rate by 15bps to 0.10%
• 09:00 (FR) France Debt Agency (AFT) to sell combined €3.6-4.8B in 3-month, 6-month and 12-month Bills
• 09:30 (AT) ECB’s Holzmann (Austria) in Vienna on Panel Discussion
• 10:00 (MX) Mexico Q3 Current Account Balance: No est v $5.1B prior
• 10:30 (US) Nov Dallas Fed Manufacturing Activity Index: -3.8e v -5.1 prior
• 11:30 (IT) Italy Debt Agency (Tesoro) announcement for upcoming BTP and CCTeu auction for Thursday, Nov 28th
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 13:00 (US) Treasury to sell 2-Year Notes
• 16:00 (US) Weekly Crop Progress Report
• 16:45 (NZ) New Zealand Q3 Retail Sales Q/Q: 0.5%e v 0.2% prior
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 109.9 prior
• 18:50 (JP) Japan Oct PPI Services Y/Y: 1.8%e v 0.5% prior
• 18:50 (AU) RBA’s Debelle in Canberra
• 22:00 (TH) Thailand Central Bank to sell combined THB70B in 3-month and 6-month
• 22:35 (JP) Japan to sell 40-year JGB bonds