Awaiting US Jobs Report, Continued Dovish Tones From BOE

Notes/Observations

• Focus on US jobs data
• Continued dovish tones from BOE members
• Italian Gross NPLs at 10-year low

Asia:

• Japan Nov Household Spending Y/Y: -2.0% v -1.8%e (2nd straight decline). Reminder: Japan’s sales tax was raised from 8% to 10% on Oct 1st
• Australia Nov Retail Sales registered its largest rise in 2 years (M/M: +0.9% v +0.4%e)

Europe:

• German Bundesbank’s Buch: Euro Zone monetary policy needed to continue providing support for inflationary pressures in the euro area to consolidate sufficiently
• ECB’s Villeroy (France): Monetary policy was not only reason for low rates; inflation objective should be symmetrical

Brexit:

• House of Commons voted in favor of Brexit Withdrawal bill (as expected). Vote was 330 to 231. Brexit legislation now moves to the upper House of Lords (Note: PM Johnson wants the measures passed into law before the end of the month so the UK can leave the European Union on Jan. 31st)
• British and Irish governments said to publish the text of a draft deal aimed at restoring power sharing in Northern Ireland. UK Northern Ireland Min believed parties were looking very seriously at a draft agreement to restore devolved govt. DUP leader: believed there was a basis on which the Northern Ireland Assembly could be reestablished in a fair and balanced manner

Americas:

• President Trump: I think the China trade deal will be signed on Jan 15th but maybe shortly thereafter. To start negotiating the Phase 2 U.S.-China trade agreement soon but that he might wait to complete any agreement until after November’s U.S. presidential election.
• House voted to adopt war powers measure with limiting President Trump to attack Iran; vote was 224 to 194. Measure directed the President to stop military force against Iran unless he received approval from Congress
• Bank of Canada Gov Poloz stated that the damage from the global trade conflict was likely permanent. Seen some improvement on the trade front lately with USMCA and US-China but remained to be seen whether this will lead to a recovery in trade and investment.

Mid-East/ Energy:

• IEA Chief Birol: Does not expect oil prices to sky rocket; global oil demand is weak compared to historic numbers

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.15% at 420.26, FTSE -0.01% at 7,597.42, DAX +0.22% at 13,524.42, CAC-40 -0.02% at 6,041.08, IBEX-35 +0.12% at 9,593.00, FTSE MIB +0.26% at 24,079.38, SMI +0.23% at 10,675.00, S&P 500 Futures +0.19%]
• Market Focal Points/Key Themes: European indices mixed following Asia indices mostly higher and higher US futures. Hapag-Lloyd down as CEO stated that additional costs due to low sulphur rules will make achieving FY20 profit growth difficult. Ryanair rallying following raised FY20 profit and passenger traffic guidance with Easyjet and Wizz Air up in sympathy. Spar Nord Bank trading higher after raising FY19 profit guidance. B&M and JD Sports trading down following trading updates and Superdry and Joules both tank on profit warnings after weak Christmas sales. Abcam also down after lowering FY19 forecasts. Basilea Pharmaceuticals up after reporting higher than forecast prelim FY19 revenues. Watches of Switzerland dives after shareholder Apollo sells block of 33M shares. Evolution Gaming trading higher after signing agreement to power online casinos in two US states. Idorsia shares up after amending an option on a licensing agreement with Neurocrine for ACT-709478, for treatment of rare pediatric epilepsy. Notable earners today include Corus Entertainment and Infosys.

Equities

• Consumer discretionary: Ryanair [RYA.UK] +7%, EasyJet [EZJ.UK] +4% (Ryanair raises outlook), JD Sports Fashion [JD.UK] -2.5% (Christmas update), Superdry [SDRY.UK] -17% (profit warning), Joules [JOUL.UK] -24% (profit warning)
• Energy: Uniper [UN01.DE] -2% (analyst downgrade)
• Financials: B&M European Value Retail [BME.UK] -8% (earnings)
• Healthcare: Basilea Pharmaceutica [BSNL.CH] +3% (prelim earnings)
• Industrials: RWE [RWE.DE] +3% (could receive compensation for coal exit)

Speakers

• BoE Tenreyro: More stimulus might be necessary if growth did not rebound; her inclination was towards a cut in rates if downside risks emerged
• Italy Econ Min Gualtieri: New EU rules on bank crises have reduced margins for public intervention
• Italy Stats Agency (Istat) Monthly Economic Note: Leading indicator pointing to continued economic weakness in Dec
• Iran aviation official said to be confident that Ukrainian operated 737 aircraft was not downed by a missile. Might asked Russia, Ukraine and France to decode the black box

Currencies/Fixed Income

• USD was holding steady ahead of Dec US jobs report. Recent US data has painted a picture of a brighter domestic economy.
• EUR/USD slightly lower just below the 1.11 level while USD/JPY probed 109.70 where buy-stops orders said to lurk.
• GBP/USD was slightly lower in the aftermath of recent dovish BOE comments. BOE MPC member Tenreyro echoed recent dovish tone from Gov Carney that more stimulus might be necessary if growth did not rebound. Traders noted that attention was now focused on the risks of EU-UK trade negotiations after House of Commons passed PM Johnson’s Withdrawal bill to pave the way for the Jan 31st exit from the EU
• AUD/USD registered its 1st gains of the new year after retail sales beat expectations. Pair trading at 0.6610 just ahead of the US morning.

Economic Data

• (CH) Swiss Dec Unemployment Rate: 2.5% v 2.5%e; Unemployment Rate (Seasonally Adj): 2.3% v 2.3%e
• (NO) Norway Dec CPI M/M: -0.3% v -0.1%e; Y/Y: 1.4% v 1.6%e
• (NO) Norway Dec CPI Underlying M/M: -0.2% v 0.0%e; Y/Y: 1.8% v 2.0%e
• (NO) Norway Dec PPI (including oil) M/M: 4.1% v 1.7% prior; Y/Y: -2.2% v -9.5% prior
• (FI) Finland Nov Industrial Production M/M: % v -0.5% prior; Y/Y: % v 1.6% prior
• (DK) Denmark Dec CPI M/M: -0.2% v -0.2% prior; Y/Y: 0.8% v 0.7% prior
• (DK) Denmark Dec CPI EU Harmonized M/M: -0.2% v -0.3% prior; Y/Y: 0.8% v 0.6% prior
• (DK) Denmark Nov Industrial Production M/M: -5.2% v -0.5% prior
• (TR) Turkey Oct Unemployment Rate: 13.4% v 13.8% prior
• (FR) Bank of France Dec Industrial (Business) Sentiment: 97 v 97e
• (CN) Weekly Shanghai copper inventories (SHFE): 133.7K v 141.3K tons prior
• (FR) France Nov Industrial Production M/M: 0.3% v 0.1%e; Y/Y: 1.3% v 0.4%e
• (FR) France Nov Manufacturing Production M/M: -0.1% v 0.6% prior; Y/Y: 1.2% v 0.4%e
• (ES) Spain Nov Industrial Output NSA Y/Y: -0.5% v +0.9% prior; Industrial Output SA Y/Y: 2.1% v 0.5%e; Industrial Production M/M: 1.0% v 0.2%e
• (CZ) Czech Q3 Final GDP Q/Q: 0.4% v 0.4%e ; Y/Y: 2.5% v 2.5%e
• (CZ) Czech Nov Industrial Output Y/Y: -5.7% v -4.0%e; Construction Output Y/Y: +4.5% v -0.3% prior
• (SE) Sweden Nov Private Sector Production M/M: 0.5% v 0.4% prior; Y/Y: 1.8% v 0.8% prior
• (SE) Sweden Nov Industrial Orders M/M: +0.8% v -1.9% prior; Y/Y: -1.2% v -5.4% prior
• (SE) Sweden Nov Industry Production Value Y/Y: +0.4% v -2.5% prior; Service Production Value Y/Y: % v 1.2% prior
• (SE) Sweden Dec Budget Balance (SEK): -98.4B v +25.2B prior
• (IT) Italy Nov Industrial Production M/M: 0.1% v 0.0%e; Y/Y: -0.6% v -0.6%e; Industrial Production NSA Y/Y: -3.7% v -2.4% prior
• (IS) Iceland Dec Preliminary Trade Balance (ISK): -8.3B v -4.4B prior
• (IT) Italy Nov Gross Non-performing loans (NPLs): €80.3B v €85.2B m/m (lowest level since Dec 2010)

Fixed Income Issuance

• (IN) India sold total INR160B vs. INR160B indicated in 2024, 2033, 2043 and 2049 bonds
• (ZA) South Africa sold total ZAR1.04B vs. ZAR1.04B indicated in 2029, 2033 and 2046 I/L bonds
• (IT) Italy Debt Agency (Tesoro) sold €7.0B v €7.0B in 12-month Bills; Avg Yield: -0.242% v -0.191% prior; Bid-to-cover: 1.51x v 1.50x prior

Looking Ahead

• 06:00 (BR) Brazil Jan IGP-M Inflation (1st Preview): 1.1%e v 1.8% prior
• 06:00 (UK) DMO to sell €3.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.5B and £3.0B respectively)
• Sells £0.5B in 1-month bills; Yield: % v 0.6703% prior; bid to cover: x v 4.40x prior
• Sells £1.0B in 3-month bills; Yield: % v 0.6972% prior; bid to cover: x v 4.29x prior
• Sells £2.0B in 6-month bills; Yield:% v 0.7483% prior; bid to cover: x v 3.67x prior
• To sell combined £B in 1-month, 3-month and 6-month Bills on Fri, Jan 17th, 2020 (£0.5B, £1.0B and £2.0B respectively) http://www.dmo.gov.uk/data/pdfdatarheport?reportCode=D2.2A
• 06:30 (CL) Chile Central Bank Economist Survey
• 06:30 (IN) India Weekly Forex Reserve w/e Jan 3rd: No est v $457.5B prior
• 06:30 (IS) Iceland to sell 5% Nov 2028 RIKB bond; Avg Yield: % v 5.38% prior; Bid-to-cover: x v 2.08x prior
• 07:00 (MX) Mexico Dec Consumer Confidence Index: 43.5e v 43.5 prior
• 07:00 (MX) Mexico Nov Industrial Production M/M: +1.0%e v -1.6% prior; Y/Y: -1.6%e v -3.0% prior; Manufacturing Production Y/Y: -1.5%e v -1.2% prior
• 07:00 (BR) Brazil Dec IBGE Inflation M/M: 1.1%e v 0.5% prior; Y/Y: 4.2%e v 3.3% prior
• 07:00 (IN) India Nov Industrial Production Y/Y: +0.2%e v -3.8% prior
• 07:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (RU) Russia Dec Final CPI M/M: No est v 0.4% prelim; Y/Y: No est v 3.0% prelim
• 08:00 (RU) Russia Dec CPI Core M/M: 0.3%e v 0.2% prior; Y/Y: 3.4%e v 3.5% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Dec Change in Nonfarm Payrolls: +160Ke v +266K prior; Change in Private Payrolls: +153Ke v +254K prior; Change in Manufacturing Payrolls: +5Ke v +54K prior
• 08:30 (US) Dec Unemployment Rate: 3.5%e v 3.5% prior; Underemployment Rate: No est v 6.9% prior; Labor Force Participation Rate: No est v % prior
• 08:30 (US) Dec Average Hourly Earnings M/M: 0.3%e v 0.2% prior; Y/Y: 31%e v 3.1% prior; Average Weekly Hours: 34.4e v 34.4 prior
• 08:30 (CA) Canada Dec Net Change in Employment: +25.0Ke v -71.2K prior; Unemployment Rate: 5.8%e v 5.9% prior; Full Time Employment Change: +20.8Ke v -38.4K prior; Part Time Employment Change: +10.0Ke v -32.8K prior; Participation Rate: 65.6%e v 65.6% prior; Hourly Wage Rate: 4.2%e v 4.4% prior
• 10:00 (US) Nov Final Wholesale Inventories M/M: 0.0%e v 0.0% prelim; Wholesale Trade Sales M/M: +0.2%e v -0.7% prior
• 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE)
• 13:00 (US) Weekly Baker Hughes Rig Count