Notes/Observations
- Mid-East tension remain in focus; situation continues to weigh upon risk appetite
- Major European PMI Services data continue theme of stabilization in region (Beats: Euro Zone, Germany, Italy, Spain, UK; in-line: France) Mid-East/
Energy:
- Iran lifted all limits on uranium enrichment; to no longer abide by limits of 2015 nuclear deal
- Iraq’s parliament called for US and other foreign military forces to leave (Note: move made amid a growing backlash against the US. killing of a top Iranian military commander that has heightened fears of a wider Middle East conflict)
- President Trump threatened ‘major retaliation’ on Iran if Iran retaliated. US has targeted 52 Iranian sites and that some were “at a very high level & important to Iran & the Iranian culture, and those targets, and Iran itself, WILL BE HIT VERY FAST AND VERY HARD.” President also threatened sanctions on Iraq if US troops were kicked out but not reimbursed
- President Trump tweet promised possibly ‘disproportionate’ response to any Iran attack. “These Media Posts will serve as notification to the United States Congress that should Iran strike any U.S. person or target, the United States will quickly & fully strike back, and perhaps in a disproportionate manner. Such legal notice was not required, but was given nevertheless!”
- US State Department: There’s “heightened risk” of missile attacks near military bases and energy facilities in Saudi Arabia.
- US Secretary of State Pompeo: Dismissed calls by Iraq’s caretaker prime minister for a timetable for all foreign troops to exit the country
Asia:
- China trade delegation said to travel to Washington DC on Monday, Jan 13th to sign Phase 1 trade deal (Reminder: On Dec 31st President Trump stated that he would sign ‘Phase 1’ trade deal on Jan 15th at White House ceremony with ‘high level’ Chinese representatives)
- China PBOC outlined its key policies and tasks for 2020: To maintain prudent monetary policy with moderation and flexibility; making “smooth” progress on digital currency; trade deal might lead to more policy easing
- China Dec Caixin PMI Services: 52.5 v 53.2e
- Japan Dec Final PMI Manufacturing: 48.4 v 48.8 prelim (8th consecutive contraction and lowest since Oct 2019)
- Australia Dec Final CBA PMI Services: 49.8 v 49.5 prelim (2nd consecutive month of contraction
Europe:
- ECB’s Lane (Ireland, chief economist) underlying CPI gauges were moving higher but remain too low
- France Fin Min Le Maire stated that the domestic situation had solid economic outlook; saw 1.3% GDP growth for both 2019 and 2010. Warned US against digital tax retaliation and added that EU was likely to respond in kind to aggressive trade sanctions
- Spain Acting PM Sanchez failed on in a first attempt to get parliament’s backing to form a government. Vote was 166 votes in favor and 165 against, with 18 abstentions. Aiming for another vote on Tuesday, Jan 7th (Note: Sanchez would only needed a simple majority on Tuesday and was likely to get that)
Brexit:
- UK Parliament returns this week to debate the Withdrawal Agreement; Britain on track for Jan. 31st Brexit after PM Johnson won approval for his Brexit deal in parliament
- PM Johnson to seek fast-track EU trade talks. (Note: Fears mount in Whitehall of another Brexit cliff-edge at the end of the year)
Americas:
- Fed’s Williams (moderate, voter): Low global interest rates are here to stay, which should lead Central Bankers to renew commitments to inflation goals; stresses need to stick to 2% target
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 % at #, FTSE -1.0% at 7,546, DAX -1.8% at 12,988, CAC-40 -1.2% at 5,972, IBEX-35 -1.1% at 9,536, FTSE MIB -1.6% at 23,318, SMI -1.1% at 10,580, S&P 500 Futures -0.6%]
- Market Focal Points/Key Themes: European indices in the red following Asia indices down and lower US futures. Daimler down following allegedly recalling 744K US Mercedes vehicles due to faulty sunroof. Peugeot down following press reports that the Exor and Peugeot families are discussing the shareholder pact regarding the merger with Fiat Chrysler. Atlantia down following Moody’s downgrade and statements from Italian PM of evidence of negligence on company’s part regarding Morandi bridge collapse. Compass down on Chairman stepping down. Wizz Air down after reporting December passenger traffic stats. Genel down on Taq Taq field update. Plus500 down despite trading update citing much improved 2H19 performance. Aviation jumps on news of announcement of strategic options review including sale of company. NMC Health falls on independent review update. Notable earners today include Commercial Metals Co.
Equities
- Consumer discretionary: Wizz Air [WIZZ.UK] -3% (load factor)
- Financials: Plus500 [PLUS.UK] -3% (trading update)
- Healthcare: NMC Health [NMC.UK] -3% (independent review)
- Industrials: Avation [AVAP.UK] +8% (review of strategic options), Daimler [DAI.DE] -2% (recalls vehicles; UK auto registrations), PSA [UG.FR] -3% (shareholder pact)
- Technology: Tremor International [TRMR.UK] +4% (acquisition; trading update)
Speakers
- China Foreign Ministry spokesperson Geng Shuang: highly concerned about current situation between US and Iran. US actions had increased the instability in the region. Confirmed China to send a delegation to US for signing of the 1st phase of a trade deal on Jan 15th
- South Korea Finance Ministry commented following emergency meeting that the govt could release oil reserves if necessary
Currencies/Fixed Income
- Mid-East tension remained in focus with safe-haven currencies continuing to remain firm.
- EUR/USD was higher by 0.3% at 1.1185 as the major European PMI Services data continued theme of stabilization in region (Beats: Euro Zone, Germany, Italy, Spain, UK; in-line: France)
- GBP/USD was higher by over 0.5% as the Dec Services PMI was revised higher and out of contraction territory. UK Parliament to return this week to debate the Withdrawal Agreement and put Britain on track for Jan. 31st Brexi (**Reminder: PM Johnson won approval for his Brexit deal in parliament back in Dec)
- USD/JPY was holding below the 108 level as safe-haven demand put a bid into the JPY currency.
Economic Data
- (DE) Germany Nov Retail Sales M/M: 2.1% v 1.0%e; Y/Y: 2.8% v 1.1%e
- (ZA) South Africa Dec PMI (Whole Economy): 47.6 v 48.6 prior (8th straight contraction)
- (HU) Hungary Nov PPI M/M: +0.4% v -0.1% prior; Y/Y 2.1% v 1.5% prior
- (HU) Hungary Oct Average Gross wages Y/Y: 11.6% v 11.7%e
- (ES) Spain Dec Services PMI: 54.9 v 53.9e (74th month of expansion and highest since March) ; Composite PMI: 52.7 v 52.0e
- (TW) Taiwan Dec Foreign Reserves: $478.1B v $474.1B prior
- (NG) Nigeria Dec PMI Services: # v 57.7 prior
- (IT) Italy Dec Services PMI: 51.1 v 50.9e (11th straight expansion); Composite PMI: 49.3 v 49.7e
- (FR) France Dec Final Services PMI: 52.4 v 52.4e (confirmed 10th month of expansion); Final Composite PMI: 52.0 v 52.0e
- (DE) Germany Dec Final Services PMI: 52.9 v 52.0e (confirmed 78th month of expansion); Final Composite PMI: 50.2 v 49.4e
- (EU) Eurozone Dec Final Services PMI: 52.8 v 52.4e (confirmed 79th month of expansion);; Composite PMI: 50.9 v 50.6e
- (CH) Swiss Weekly Total Sight Deposits (CHF): 586.9B v 584.6B prior; Domestic Sight Deposits: 502.5B v 499.0B prior
- (UK) Dec New Car Registrations Y/Y: +3.4% v -1.3% prior
- (DE) Germany Dec CPI Brandenburg M/M: +0.6% v -0.8% prior; Y/Y: 1.8% v 1.3% prior
- (EU) Euro Zone Jan Sentix Investor Confidence: 7.6 v 2.6e
- (UK) Dec Final Services PMI: 50.0 v 49.0e (confirmed 2nd month of contraction) ; Final Composite PMI: 49.3 v 48.5e
- (UK) Dec Official Reserves Changes: $2.1B v $0.1B prior
- (EU) Euro Zone Nov PPI M/M: 0.2% v 0.1%e , Y/Y: -1.4% v -1.5%e
- (NO) Norway Dec House Prices Y/Y: 2.6% v 3.1% prior
Fixed Income Issuance
- None seen
Looking Ahead
- (MX) Mexico Dec ANTAD Same-Store Sales Y/Y: No est v 5.7% prior
- 05:25 (BR) Brazil Central Bank Weekly Economists Survey
- 05:30 (DE) Germany to sell €3.0B in 6-month Bubills
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month Bills
- 06:30 (TR) Turkey Dec Real Effective Exchange Rate (REER): No est v 77.35 prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 08:00 (BR) Brazil Dec PMI Services: No est v 50.9 prior; PMI Composite: No est v 51.8 prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (CA) Canada Nov Industrial Product Price Index M/M: No est v 0.1% prior; Raw Materials Price Index M/M: No est v -1.9% prior
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.5-4.7B in 3-month, 6-month and 12-month Bills
- 09:45 (US) Markit Dec Final Services PMI: 52.2e v 52.2 prelim, Composite PMI: No est v 52.2 prelim
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 108.0 prior
- 18:00 (KR) South Korea Nov Current Account Balance: No est v $7.8B prior; Balance od Payments (BOP): No est v $8.0B prior
- 19:30 (AU) Dec ANZ Job Advertisements M/M: No est v 1.7% prior
- 19:30 (JP) Japan Dec Final PMI Services: No est v 50.6 prelim; PMI Composite No est v 49.8 prelim
- 20:00 (PH) Philippines Dec CPI Y/Y: 2.0%e v 1.3% prior
- 22:35 (JP) Japan to sell 10-Year JGB Bonds
- 23:30 (TW) Taiwan to sell TWD170B in 12-month Certificate of Deposits (NCD)
