Major European PMI Manufacturing Data Provides Signs Of Stabilization

Notes/Observations

• Major European PMI data suggest stabilization in sector (Beats: France, Germany, Euro Zone; UK Spain, Italy; Misses: Netherlands)
• More election polls showed the Conservatives’ lead narrowing over the opposition Labour Party but margins overall remain healthy
• German govt coalition dealt a blow in SPD leadership election; ups the possibility of an early election
• China’s official manufacturing unexpectedly rebounded in November

Asia:

• China Nov PMI Manufacturing (govt official reading) registered its 1st expansion in 7 months
• China Nov Caixin PMI Manufacturing registered its 4th consecutive month of expansion and fastest pace in almost 3-years (51.8 v 51.5e)
• China deal said to be ‘stalled’ because of the US’ new law on Hong Kong, Article noted that time was needed to allow China President Xi’s domestic politics to ‘calm’; Notes phase 1 deal with China would probably happen by the end of 2019 at the earliest, Trump expected to delay tariffs planned for Dec
• Japan’s govt was considering compiling an economic stimulus package with fiscal spending >10 T yen and included ¥3-4 T of public works spending which will be funded by debt issuance; govt would issue more deficit covering bonds to make up for expected tax revenue shortfall; govt to finalize package early Dec after consultations with ruling collation

Europe/Mideast:

• Germany Social Democrats (SPD) party vote named Norbert Walter-Borjans and Saskia Esken as its new leaders, moved said to put at risk coalition with Merkel (Note: Fin Min Olaf Sholz and running partner Klara Geywitz suffered a defeat in SPD leadership vote)
• S&P raised Ireland sovereign rating one notch to AA- from A+; outlook Stable

Brexit:

• Weekend polls show Labour Party gaining on ruling Conservatives in 4 of the 5 major polls. BMG/Independent: Tories 39 (-2); Labour 33 (+5) (insight: Tory lead has been cut in half from 13 to 6 since past few weeks

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.35% at 408.86, FTSE +0.38% at 7,374.29, DAX +0.54% at 13,307.55, CAC-40 +0.35% at 5,925.65, IBEX-35 +0.29% at 9,379.00, FTSE MIB +0.28% at 23,325.33, SMI +0.28% at 10,522.50, S&P 500 Futures +0.34%]

Market Focal Points/Key Themes:

• European indices trading in the green following indices in Asia in higher and higher US futures. On a quiet corporate front, Lufthansa up as Qatar Airways CEO reportedly interested in taking a stake in the company or forming a partnership as a first step. Opus shares rallying 29% as Ograi Bidco made a bid for the company at SEK 7.75/shr. Astaldi higher after starting the sale of a stake in Turkey’s Third Bridge to Ictas and Tullow Oil up as Uganda reportedly agrees to allow the company to sell a stake to other oil majors. Ocado down following £500M convertible bond offering. Hurricane Energy dives 17% after issuing testing results from well 204/30b-4 and providing an update on the Lancaster Early Production System. Ted Baker plunges on announcement that company overstated value of inventories by £20-25M. Fresnillo declining after the company narrowed its FY19 silver and gold production ranges .

Equities

• Consumer discretionary: Lufthansa [LHA.DE] +2% (Qatar Airways partnership), Opus Group [OPUS.SE] +29% (notes offer), Puma [PUM.DE] +1% (analyst action), Ted Baker [TED.UK] -7% (overstatement), Ocado [OCDO.UK] -6% (convertible bonds)
• Energy: Hurricane Energy [HUR.UK] -17% (update on testing)
• Industrials: Astaldi [AST.IT] +6% (prelim sale agreement)

Speakers

• ECB’s De Guindos (Spain): Better to be united on ECB decisions (Reminder: On Sept 12th reports circulated that ECB’s QE motion was opposed by a total of 7 out of 25 Governing Council members (6 of 21 voting members) and the motion passed with relatively narrow majority)
• France Fin Min Le Marie: No question about lowering pensions; raising the retirement age was an option. Government planned minimal pension of €1K/month. Expected massive strike action on Thursday, Dec 5th
• Spain political party Podemos said to have eased economic demands in govt program (**Reminder: On Nov 12th Spain acting PM Sanchez confirmed preliminary coalition agreement with Podemos; needed to unblock political stalemate. Aimed to have coalition last four years)
• Russia Central Bank (CBR) Gov Nabiullina: Monetary policy is now in a neutral zone; further rate cuts to be based upon incoming data
• China said to sanction several US non-governmental organizations and suspended a requested review of US warship Hong Kong visit (**Note: Response to Trump signing the Hong Kong Democracy bill into law

Currencies/ Fixed Income

• Major Asian European PMI manufacturing data provided signs of stabilization for the global economy which aided risk-on appetite (higher equity prices and higher bond yields).
• EUR/USD was steady and holding above the 1.10 level in a quiet price action session.
• GBP/USD steady at 1.2900 area despite some additional polls out over the weekend showing the Conservatives’ lead narrowing over the opposition Labour Party. However, dealers noted that the Tory’s overall lead margins remained healthy.
• USD/JPY higher by 0.2% on rising risk appetite despite reports that China deal was said to be ‘stalled’ because of the US’ new law on Hong Kong. Nonetheless the markets still expect a phase-1 deal to emerge in writing around year-end.

Economic Data

• (IN) India Nov Manufacturing PMI: 51.2 v 50.6 prior (26th month of expansion)
• (RU) Russia Nov PMI Manufacturing: 45.6 v 48.1e (7th month of contraction and lowest since May 2009)
• (TR) Turkey Nov PMI Manufacturing: 49.5 v 49.0 prior (2nd month of contraction)
• (TR) Turkey Q3 GDP Q/Q: 0.4% v 1.1%e; Y/Y: 0.9% v 1.0%e
• (SE) Sweden Nov PMI Manufacturing: 45.4 v 46.9e (3rd straight contraction)
• (TH) Thailand Nov Business Sentiment Index: 47.4 v 48.1 prior
• (NL) Netherlands Nov Manufacturing PMI: 49.6 v 50.5e (1st contraction in 76 months)
• (NO) Norway Nov PMI Manufacturing: 53.7 v 53.3e (4th month of expansion) 3e
• (HU) Hungary Nov Manufacturing PMI: 53.0 v 52.7e (47th month of expansion)
• (PL) Poland Nov PMI Manufacturing: 46.7 v 46.3e (13th straight contraction
• (HU) Hungary Oct PPI M/M: -0.1% v +1.2% prior; Y/Y: 1.5% v 2.2% prior
• (HU) Hungary Sept Final Trade Balance: €0.5B v €0.6B prior
• (ES) Spain Nov Manufacturing PMI: 47.5 v 46.5e (6th straight contraction)
• (CH) Swiss Nov PMI Manufacturing: 48.8 v 48.8e (8th straight contraction)
• (CZ) Czech Republic Nov PMI Manufacturing: 43.5 v 45.5e (12th straight contraction)
• (HK) Hong Kong Oct Retail Sales Value Y/Y: -24.3% v -22.6%e; Retail Sales Volume Y/Y: -26.2% v -25.6%e
• (IT) Italy Nov Manufacturing PMI: 47.6 v 47.5e(13th straight contraction)
• (FR) France Nov Final Manufacturing PMI: 51.7 v 51.6e (confirms 4th month of expansion)
• (DE) Germany Nov Final Manufacturing PMI: 44.1 v 43.8e (confirms 11th straight contraction)
• (EU) Euro Zone Nov Final Manufacturing PMI: 46.9 v 46.6e (confirms 10th month of contraction)
• (GR) Greece Nov Manufacturing PMI: 54.1 v 53.5 prior (30th month of expansion)
• (CH) Swiss Weekly Total Sight Deposits (CHF): 589.4B v 590.6B prior; Domestic Sight Deposits: 504.2B v 503.2B prior
• (ZA) South Africa Nov Manufacturing PMI: 47.7 v 48.1 prior (7th month of contraction)
• (IS) Iceland Q3 Current Account Balance (ISK): 63.0B v 15.0B prior
• (UK) Nov Final PMI Manufacturing: 48.9 v 48.3e (confirms 7th month of contraction)

Fixed Income Issuance

• (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 1.19% v 1.22% prior; Bid-to-cover: 2.77x v 3.07x prior

Looking Ahead

• (ZA) South Africa Nov Naamsa Vehicle Sales Y/Y: No est v 0.2% prior
• (IT) Italy Nov Budget Balance: No est v €2.5B prior
• (RO) Romania Nov International Reserves: No est v $39.4B prior
• (RU) Russia Oct Sovereign Wealth Funds: Wellbeing Fund: No est v $124.5B prior
• (BR) Brazil Jan CNI Consumer Confidence: No est v 114.3 prior
• (BR) Brazil Oct CNI Capacity Utilization: No est v 78.0% prior
• (BR) Brazil Nov Vehicle Sales: No est v 253.4K prior
• (AR) Argentina Nov Government Tax Revenue (ARS): No est v 446.2B prior
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month Bills
• 06:25 (BR) Brazil Central Bank Weekly Economists Survey
• 06:30 (CL) Chile Oct Economic Activity Index (Monthly GDP) M/M: No est v -0.6% prior; Y/Y: -0.5%e v +3.0% prior; Economic Activity Index (ex-mining Y/Y: No est v 3.5% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Nov PMI Manufacturing: No est v 52.2 prior
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:00 (CZ) Czech Nov Budget Balance (CZK): No est v -19.6B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance
• 08:30 (CA) Canada Oct MLI Leading Indicator M/M: No est v 0.2% prior
• 09:00 (EU) ECB chief Lagarde in EU parliament
• 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 (CA) Canada Nov Manufacturing PMI: No est v 51.2 prior
• 09:45 (US) Nov Final Markit Manufacturing PMI: 52.2e v 52.2 prelim
• 10:00 (US) Nov ISM Manufacturing: 49.5e v 48.3 prior; Prices Paid: 47.0e v 45.5 prior
• 10:00 (US) Oct Construction Spending M/M: 0.4%e v 0.5% prior
• 10:00 (MX) Mexico Oct Total Remittances: No est v $3.1B prior
• 10:00 (MX) Mexico Central Bank Economist Survey
• 10:00 (CO) Colombia Nov PMI Manufacturing: No est v 51.1 prior
• 10:30 (MX) Mexico Nov PMI Manufacturing: no est v 50.4 prior
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 12:00 (IT) Italy Nov New Car Registrations Y/Y: No est v 6.7% prior
• 12:00 (BR) Brazil Nov Trade Balance: No est v $1.2B prior; Total Exports: No est v $18.2B prior; Total Imports: No est v $17.0B prior
• 13:00 (MX) Mexico Nov IMEF Manufacturing Index: No est v 46.7 prior; Non-Manufacturing Index: No est v 48.1 prior
• 14:00 (AR) Argentina Sept Wages M/M: No est v 2.4% prior
• 15:00 (US) Weekly USDA Corp Report
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 106.8 prior
• 18:00 (KR) South Korea Q3 Final GDP Q/Q: 0.4%e v 0.4% prelim; Y/Y: 2.0%e v 2.0% prelim
• 18:50 (JP) Japan End-Nov Monetary Base: ¥517.2Te v ¥523.0T prior; Y/Y: No est v 3.1% prior
• 19:01 (UK) Nov BRC Sales Like-For-Like Y/Y: No est v 0.1% prior
• 19:30 (AU) Australia Q3 Current Account Balance: A$6.1Be v A$5.9B prior; Net Exports to GDP: 0.2%e v 0.6 prior
• 22:30 (AU) Reserve bank of Australia (RBA) Interest Rate Decision: expected to leave Rate Target unchanged at 0.75%
• 22:35 (JP) Japan to sell 10-Year JGB Bonds
• 23:30 (TW) Taiwan to sell TWD170B in 12-month