HomeContributorsFundamental AnalysisUK Monthly GDP Data Builds The Case For A BOE Rate Cut

UK Monthly GDP Data Builds The Case For A BOE Rate Cut

Notes/Observations

  • Continued BOE members hints of a possible rate cut coming; Monthly GDP hots its weakest annual pace since 2012
  • Awaiting formal signing of US-China phase -1 trade agreement; details to be released after signing

Asia:

  • US and China said to agree to semi-annual talks aimed at reforms, resolving disputes (Reminder: the process abandoned at the start of the Trump administration as a trade conflict between the countries escalated)
  • Taiwan President Tsai Ing-Wen won reelection by a large margin of victory (as expected). Outcome seen as a rejection of China’s ‘one country, two systems’
  • Chinese govt statement on Taiwan election: China to uphold its ‘one country, two systems’ policy and sought ‘peaceful reunification’ with Taiwan

Europe:

  • BOE member Vlieghe: Will vote for a rate cut in Jan if there are no signs the economy is improving after general election
  • Germany Bundesbank Official Balz: Pace of economic expansion in EU expected to stabilize in 2020; reiterates sees 2020 EU GDP at 1.1%
  • France govt said to offers concession to unions protesting about pension overhaul and to have provisionally pulled proposed retirement age that has been at the core of protesting
  • Ireland PM Varadkar said to have made a decision on the timing of a general election (Note: Feb 7th seen as the likely date)

Americas:

  • Treasury Sec Mnuchin: China’s commitments in the Phase 1 trade deal with the United States were not changed during a lengthy translation process and will be released this week after being signed. deal reached on Dec 13th still calls for China to buy $40-50B in US agriculture products annually and a total of $200B of US goods over 2-years Mid-East/

Energy:

  • Iranian Republican Guard Commander Hajizadeh said to accept full responsibility for shooting down of Ukrainian Boeing, apologizes to the nation. Stated that the Ukrainian Boeing 737 aircraft was miss identified as a cruise missile by air defense operators

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.09% at 419.50, FTSE +0.55% at 7,629.84, DAX +0.06% at 13,490.73, CAC-40 +0.31% at 6,055.81, IBEX-35 -0.27% at 9,548.00, FTSE MIB -0.13% at 23,990.77, SMI +0.25% at 10,666.50, S&P 500 Futures +0.39%]
  • Market Focal Points/Key Themes: European indices mostly in the green following Asia indices higher and higher US futures. Aston Martin up on press rumors that the company is holding funding discussions with Geely and Stroll. Renault down on press speculation that Nissan is accelerating plans for a potential split of the collaboration between the two companies. ThyssenKrupp higher on press reports that the company is exploring a merger of the steel unit with Salzgitter. Casino Guichard up on rumors that Aldi is expected to acquire discount chain Leader Price. Pennon Group rallying on press speculation that KKR made a bid for company’s Viridor unit. Wirecard up after Chairman resignation on the weekend. William Hill up on solid trading update, raised FY19 profit guidance and CFO stepping down. Other risers on UK trading updates include Savills, Spirent Communications, XP Power, Quartix and Ferrexpo on production update. City Pub Group shares tank after profit warning. Clipper Logistics up on award of 5 year contract with Joules. Medigene jumps 28% on study update. Morphosys up after signing global license pact with Incyte for Tafasitamab. Richland Resources dives on discounted share offering.

Equities

  • Consumer discretionary: William Hill [WMH.UK] +1% (trading update; CFO steps down)
  • Financials: Savills [SVS.UK] +4.5% (trading update)
  • Healthcare: Medigene [MDG.DE] +20% (positive results), Astrazeneca [AZN.UK] +1% (closes trial), Morphosys [MOR.DE] -1% (agreement with Incyte)
  • Industrials: Renault [RNO.FR] -3.5% (report that Nissan stepping up plans for potential alliance split)
  • Materials: Salzgitter [SZG.DE] +1% (merger speculation), Ferrexpo [FXPO.UK] +3% (production)

Speakers

  • Italy PM Conti: Upcoming regional elections were important but not decisive for national govt (**Note: Regional elections planned for Emilia-Romagna)
  • Sweden Central Bank (Riksbank) Dep Gov Jansson (dissenter) stated that had different opinions on policy but not on forecasts. He noted that inflation was the main reason for his dissent
  • Saudi Energy Min Abdulaziz reiterated stance that Kingdom will ensure a stable oil market

Currencies/Fixed Income

  • GBP continued to exhibit weakness as continued dovish speak emulated from the BOE. Vlieghe stated that he would vote for an interest-rate cut this month if there were no signs of the economy improving after the general election. The latest monthly GDP data did build the case for a rate cut with market expectations now roughly 50-50 of a BOE cut rate later this month.
  • USD/JPY finally found the momentum to break above the 109.70 level for its highest level since late May as the 1st phase of the US-China trade agreement was expected to be signed mid-week.

Economic Data

  • (FI) Finland Nov Current Account Balance: €0.5B v €1.0B prior
  • (DE) Germany Dec Wholesale Price Index M/M: 0.0% v -0.1% prior; Y/Y: -1.3% v -2.5% prior
  • (TR) Turkey Nov Current Account Balance: -$0.5B v -$0.4Be (1st deficit in 5 months)
  • (SE) Sweden Housing-Price Indicator: 43 v 43 prior
  • (CZ) Czech Dec CPI M/M: 0.2% v 0.1%e; Y/Y: 3.2% v 3.1%e
  • (CZ) Czech Nov Export Price Index Y/Y: -1.8% v -0.8% prior; Y/Y: -2.2% v -1.9% prior
  • (CZ) Czech Nov Retail Sales Y/Y: 2.7% v 1.9%e; Retail Sales (ex-auto) Y/Y: 2.9% v 3.0%e
  • (CH) Swiss Weekly Total Sight Deposits (CHF): 584.5B v 586.9B prior; Domestic Sight Deposits (CHF): 504.3B v 502.5B prior
  • (IT) Italy Nov Retail Sales M/M: -0.2% v -0.3% prior; Y/Y: -0.9% v 1.4% prior
  • (CZ) Czech Nov Current Account Balance (CZK): -3.2B v -2.5Be
  • 04:30 (UK) Nov Monthly GDP M/M: -0.3% v 0.0%e; 3M/3M: +0.1% v -0.1%e
  • (UK) Nov Industrial Production M/M: -1.2% v 0.0%e; Y/Y: -1.6% v 1.2%e
  • (UK) Nov Manufacturing Production M/M: -1.7% v -0.2%e; Y/Y: -2.0% v -1.6%e
  • (UK) Nov Construction Output M/M: 1.9% v 0.6%e; Y/Y: +2.0% v -1.4%e
  • (UK) Nov Visible Trade Balance: -ÂŁ5.3B v -ÂŁ11.8Be; Overall Trade Balance: +4.0ÂŁB v -ÂŁ2.5Be; Trade Balance Non-EU: +ÂŁ1.7B v -ÂŁ3.5Be
  • (UK) Nov Index of Services M/M: % v 0.1%e; 3M/3M: % v 0.2%e

Fixed Income Issuance

  • (EU) EFSF opened its books to sell EUR-denominated 30-year bond; guidance seen +15bps to mid-swaps
  • (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3-month bills; Avg Yield: 1.29% v 1.35% prior; Bid-to-cover: 1.84x v 2.12x prior

Looking Ahead

  • 05:30 (DE) Germany to sell €2.0B in 3-month BuBills
  • 06:00 (IL) Israel Dec Trade Balance: No est v -$1.7B prior
  • 06:00 (PT) Portugal Dec Final CPI M/M: No est v -0.1% prelim; Y/Y: No est v 0.4% prelim
  • 06:00 (PT) Portugal Dec Final CPI EU Harmonized M/M: No est v -0.3% prelim; Y/Y: No est v 0.4% prelim
  • 06:00 (RO) Romania to sell RON800M in 4.5% 2024 Bonds
  • 06:00 (IL) Israel to sell 2021, 2022, 2023, 2024, 2030 and 2045 bonds
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (IN) India Dec CPI Y/Y: 6.7%e v 5.5% prior
  • 07:00 (MX) Mexico Oct Gross Fixed Investment: No est v -6.8% prior
  • 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 07:00 (TR) Turkey to sell 2021 and 2024 bonds
  • 08:00 (PL) Poland Nov Current Account Balance: €0.5Be v €0.5B prior; Trade Balance: €0.4Be v €0.4B prior; Exports: €20.7Be v €21.8B prior; Imports: €20.4Be v €21.4B prior – 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on issuance
  • 08:50 (FR) France Debt Agency (AFT) to sell €3.5-4.7B in 3-month, 6-month and 12-month bills
  • 09:45 (EU) ECB weekly QE bond buying update
  • 10:00 (US) Fed’s Rosengren Discusses Economic Outlook
  • 10:30 (CA) Bank of Canada Q4 BoC Overall Business Outlook Survey: No est v 0.4 prior; Business Outlook for Future Sales: No est v 23 prior
  • 11:30 (US) Treasury to sell 13-Week and 26-Week Bills
  • 12:40 (US) Fed’s Bostic Discusses Economic Outlook and Monetary Policy
  • 14:00 (US) Dec Monthly Budget Statement: $0.0Be v -$208.8B prior
  • 16:45 (NZ) New Zealand Nov Building Permits M/M: No est v -1.1% prior
  • 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 106.2 prior
  • 18:50 (JP) Japan Dec Bank Lending Y/Y: No est v 2.1% prior; Bank Lending (ex-trusts( Y/Y: No est v 2.3% prior
  • 18:50 (JP) Japan Nov Current Account Balance (BOP basis): ÂĄ1.4256Te v ÂĄ1.817T prior; Adjusted Current Account Balance: ÂĄ1.786Te v ÂĄ1.732T prior; Trade Balance: ÂĄ103.8Be v ÂĄ254.0B prior
  • 20:10 (JP) BOJ Outright Bond Purchase operation for 10~25 Year and 25 Years~ maturites
  • 22:00 (TH) Thailand Central Bank to sell combined THB75B in 3-month and 6-month bills
  • 22:30 (HK) Hong Kong to sell 3-month and 6-month bills
  • 23:30 (JP) Japan Dec Bankruptcies Y/Y: No est v 1.4% prior
  • 23:30 (TW) Taiwan to sell TWD30B in 20-Year Bonds
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