Optimism Abound On Brexit, US Stimulus And Data Fronts

Notes/Observations

• Risk appetite continues to get a shot in the arm
• Major European PMI Readings bounce back strongly in December (Beats: France, Germany)
• Continued optimism that a Brexit trade agreement was in reach
• US Congress said to be moving closer towards agreeing another stimulus package to aid the economic recovery.
• Plethora of rate decisions in the coming days

Asia:

• Australia Dec Preliminary PMI Manufacturing: 56.0 v 55.8 prior (7th month of expansion and highest since Dec 2017)
• Japan Dec Preliminary PMI Manufacturing: 49.7 v 49.0 prior (19th straight contraction)
• Japan Nov Trade Balance misses expectations (¥366.8B v ¥522.5Be) as expected fell for the 24th straight month
• BOJ to buy $6.0B from Japan Ministry of Finance (MOF) FX account for special operations (1st time conducting outright purchases of USD from MoF); Could purchase USD any day before end March 2021 (End of Fiscal year). MOF Official stated that the dollar funding announcement was ‘extremely extraordinary’ response under coronavirus
• South Korea Nov Unemployment Rate: 4.1% v 4.2%e

Europe:

• BBC’s Watt: “Big buzz in the last hour among Tory MPs that the UK is heading towards a Brexit deal with the EU. Eurosceptics being reassured they will be happy.”
• UK government said to have watered down their demands regarding the need for fishing vessels operating under the UK flag to be majority British owned
• House of Commons Leader Rees-Mogg said to tell UK MPs they might not vote on any Brexit deal until next year, after it had come into force
• Reports circulated that House of Commons leaders were considering asking UK Parliament members to sit at the beginning of next week. Expectations said to be related to a vote on a potential trade agreement. PM Johnson said to be preparing to push back the Christmas recess if he gets trade deal with the EU by the weekend

Americas:

• Oct Net Long-term TIC Flows: $51.9B v $108.9B prior; Total Net TIC Flows: -$10.4B v -$79.9B prior
• Senate Leader McConnell stated that significant progress was being made on relief Bill
• Senate Min Leader Schumer also noted that was making progress on relief package, hopefully could come to an agreement soon
• Senate Republican leaders said to have asked members not to contest the electoral results at the joint session of Congress on Jan 6th

Energy:

• Weekly API Crude Oil Inventories: +2.0M v +1.1M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.82% at 396.08, FTSE +0.93% at 6,574.15, DAX +1.64% at 13,581.40, CAC-40 +0.82% at 5,575.78, IBEX-35 +0.47% at 8,191.00, FTSE MIB +0.75% at 22,100.50, SMI +0.29% at 10,371.50, S&P 500 Futures +0.25%]
• Market Focal Points/Key Themes: European indices open modestly higher across the board and advanced higher as the session progressed; industrials and energy sectors among better performers; sectors inclined to the downside include financials and health care; Next Private raised offer price for Alice Europe; focus on upcoming FOMC meeting; earnings expected during the upcoming US session include Lennar

Equities

• Consumer discretionary: Bunzl [BNZL.UK] -4% (trading update)
• Energy: Petrofac [PFC.UK] -3% (trading update)
• Healthcare: AB Science [AB.FR] +24% (study result), Valneva [VLA.FR] +4% (vaccine study)
• Industrials: Dixons Carphone [DC.UK] +14% (earnings), Continental [CON.DE] +5% (strategy update), Galapagos [GLPG.BE] -14% (amends existing arrangement with Gilead Sciences)
• Telecom: Nokia NOKIA.FI] -1% (strategy update)

Speakers

• EU Commission Von Der Leyen stated that Brexit talks had a path to a trade agreement but a deal could not be assured. Negotiators were working hard for a deal but key issues of fisheries and Level Playing Field remainedoutstanding
• German DIW Institute chief Fratzscher stated that German economy was seen contracting in Q1 2021
• Germany IFO Institute cut its 2021 GDP growth forecast from 5.1% to 4.2% while raising the 2022 GDP growth forecast from 1.7% to 2.5%
• Sweden Central Bank (Riksbank) Jansson stated that saw the benefits of a higher inflation target. Might be near the ceiling for effectiveness of QE bond buying program. Needed to be vigilant of SEK currency (Krona) development
• Turkey Central Bank (CBRT) Gov Agbal stated that price stability was a prerequisite for sustainable growth. Would tighten policy further if necessary. Domestic demand had recovered in Q3and the rapid recovery had impacted both current account and inflation negatively. Inflation trends showed that FX rate developments was the main element impacting inflation
• Iran Supreme Leader Khamenei said to be planning to make a public appearance to dispel rumors of deteriorating health

Currencies/Fixed Income

• USD remained on the defensive as continued optimism over US fiscal stimulus package being put together coupled with coronavirus vaccines rollout aid the flow away from safe havens
• EUR/USD moved above the 1.22 level as the major European PMI readings bounced back strongly in December with manufacturing in expansion territory.
• GBP/USD was above the 1.35 level as continued optimism percolated that a Brexit trade agreement was within reach. Comments by EU Commission chief Von De Leyen of seeing a path to an agreement was the latest factor to hope…
• FOMC rate decision later on wed and BOE, SNB and BOJ later in the week

Economic Data

• (UK) Nov CPI M/M: -0.1% v +0.1%e; Y/Y: 0.3% v 0.6%e; CPI Core Y/Y: 1.1% v 1.4%e; CPIH Y/Y: 0.6% v 0.8%e
• (UK) Nov RPI M/M: -0.3% v +0.2%e; Y/Y: 0.9% v 1.3%e; RPI (ex-mortgage interest payments) Y/Y: 1.1% v 1.5%e; Retail Price Index: 293.5 v 294.9e
• (UK) Nov PPI Input M/M: 0.2% v 0.3%e Y/Y: -0.5% v -0.7%e
• (UK) Nov PPI Output M/M: 0.2% v 0.2%e; Y/Y: -0.8% v -0.8%e
• (UK) Nov PPI Output Core M/M: 0.0% v 0.2% prior; Y/Y: 0.9% v 0.5% prior
• (CZ) Czech Nov PPI Industrial M/M: -0.5% v +0.1%e; Y/Y: -0.1% v +0.5%e
• (FR) France Dec Preliminary Manufacturing PMI: 51.1 v 50.1e (moved back into expansion); Services PMI: 49.2 v 40.0e; Composite PMI: 49.6 v 42.7e
• (DE Germany Dec Preliminary Manufacturing PMI: 58.6 v 56.5e (6th month of expansion and highest reading since Feb 2018); Services PMI: 47.7 v 44.0e; Composite PMI: 52.5 v 50.6e
• (EU Euro Zone Dec Preliminary Manufacturing PMI: 55.5 v 53.0e (6th month of expansion); Services PMI: 47.3 v 41.9e; Composite PMI: 49.8 v 45.5e
• (IT) Italy Oct Industrial Sales M/M: +2.2% v -2.9% prior; Y/Y: -1.7% v -4.5% prior
• (IT) Italy Oct Industrial Orders M/M: +3.0% v -5.6% prior; Y/Y: 1.2% v 3.3% prior
• (UK) Dec Preliminary PMI Manufacturing: 57.3 v 55.9e (7th straight expansion and highest reading since Nov 2017); Services PMI: 49.9 v 50.5e; Composite PMI: 50.7 v 51.4e
• (UK) Oct ONS House Price Index Y/Y: 5.4% v 4.3% prior
• (EU) Euro Zone Oct Trade Balance (seasonally adj): €25.9B v €23.7B prior; Trade Balance NSA (unaj): €30.0B v €24.8B prior
• (EU) Euro Zone Oct Construction Output M/M: +0.5% v -2.7% prior; Y/Y: % v -2.3% prior
• (EU) Euro Zone Q3 Labour Costs Y/Y: 1.6% v 3.6% prior

Fixed income Issuance

• (IN) India sold total INR160B vs. INR160B indicated in 3-month, 6-month and 12-month bills
• (VN) Vietnam sold total VND12.0T vs. VND8.0T target in 10-year, 15-year, 20-year and 30-year Bonds
• (DK) Denmark sold total DKK3.02B in 3-month, 6-month, 9-month and 12-month Bill
• (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2026 and 2031 bonds

Looking Ahead

• (BR) Brazil Dec CNI Industrial Confidence: No est v 62.9 prior
• (IT) Italy Debt Agency (Tesoro) buyback operation
• 06:00 (IE) Ireland Oct Property Prices M/M: No est v 0.2% prior; Y/Y: No est v -0.8% prior
• 06:00 (IL) Israel Q3 Preliminary GDP Annualized (2nd reading): No est v 37.9% advance
• 06:00 (CZ) Czech Republic to sell combined CZK5.0B in 2027 and 2029 bonds
• 06:00 (RU) Russia to sell 2025 and 2030 OFZ bonds
• 07:00 (US) MBA Mortgage Applications w/e Dec 11th: No est v-1.2 % prior
• 07:00 (UK) Weekly PM Question time in House
• 08:00 (PL) Poland Nov CPI Core M/M: 0.0%e v 0.3% prior; Y/Y: 4.2%e v 4.2% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (EU) Eurogroup videoconference
• 08:30 (US) Nov Advance Retail Sales M/M: -0.3%e v +0.3% prior; Retail Sales (ex-auto) M/M: 0.1%e v 0.2% prior; Retail Sales (ex-auto/gas) 0.2%e v 0.2% prior; Retail Sales (control group): 0.2%e v 0.1% prior
• 08:30 (CA) Canada Nov CPI M/M: 0.0%e v 0.4% prior; Y/Y: 0.8%e v 0.7% prior; Consumer Price Index: 137.5e v 137.5 prior; CPI Core- Median Y/Y: 1.9%e v 1.9% prior; CPI Core- Common Y/Y: 1.6%e v 1.6% prior; CPI Core- Trim Y/Y: 1.8%e v 1.8% prior
• 08:30 (CA) Canada Oct Wholesale Trade Sales M/M: No est v 0.9% prior
• 08:30 (CA) Canada Oct Int’l Securities Transactions (CAD): No est v 4.5B prior
• 09:45 (US) Dec Preliminary Markit Manufacturing PMI: 55.8e v 56.7 prior; Services PMI: 56.0e v 58.4 prior; Composite PMI: No est v 58.6 prior
• 10:00 (US) Dec NAHB Housing Market Index: 88e v 90 prior
• 10:00 (US) Oct Business Inventories: 0.6%e v 0.7% prior
• 10:30 (US) Weekly DOE Oil Inventories
• 10:30 (ES) ECB’s De Guindos (Spain)
• 11:00 (RU) Russia Nov PPI M/M: 0.6%e v 0.3% prior; Y/Y: 1.9%e v 0.7% prior
• 11:00 (ES) ECB’s De Cos (Spain)
• 11:15 (DE) ECB’s Schnabel (Germany)
• 14:00 (AR) Argentina Q3 GDP Q/Q: No est v -16.2% prior; Y/Y: -10.7%e v -19.1% prior
• 14:00 (AR) Argentina Capacity Utilization: No est v 60.8% prior
• 14:00 (US) FOMC Interest Rate Decision: Expected to leave Target Range unchanged between 0.00-0.25%; Expected to leave Interest Rate on Excess Reserves (IOER) unchanged at 0.10%
• 14:30 (US) Fed Chief Powell post rate decision press conference
• 16:45 (NZ) New Zealand Q3 GDP Q/Q: +12.9%e v -12.2% prior; Y/Y: -1.8%e v -12.4% prior
• 19:30 (SG) Singapore Nov Non-oil Domestic Exports M/M: +8.7%e v -5.3% prior; Y/Y: -0.6%e v -3.1% prior; Electronic Exports Y/Y: No est v -0.4% prior
• 19:30 (AU) Australia Nov Employment Change: +40.0Ke v +178.8K prior; Unemployment Rate: 7.0%e v 7.0% prior; Full Time Employment Change: No est v +97.0K prior; Part Time Employment Change: No est v +81.8K prior; Participation Rate: 65.9%e v 65.8% prior
• 22:30 (JP) Japan to sell 3-Month Bills
• 23:00 (JP) Japan Nov Tokyo Condominiums for Sale Y/Y: No est v 67.3% prior