Virus Concerns And Upcoming Central Bank Meetings In Focus

Notes/Observations

• According to South African 3-week study based on >211K samples, 2 doses of Pfizer/BioNTech vaccine provide 70% protection against hospitalization, 33% protection against infection during current Omicron wave
• UK labour market continued to weathered the storm after the furlough scheme ended in September
• South Africa study has markets concern of an upward wave of new infections
• Focus remains on upcoming central bank rate decisions (Fed on Wed; SNB, BOE, and ECB on Thurs; BOJ on Fri)

Asia

• BOJ again buys ¥2.0T in bonds via repurchase agreements for its 2nd consecutive operation. (*8Note: move follows rise in Japanese repo rates)

Coronavirus

• South African 3-week study noted that 2-doses Pfizer/BioNTech vaccine provided 70% against hospitalization, 33% protection against infection during current Omicron wave

Europe

• BOE Gov Bailey stated that corporate debt vulnerability had only increased moderately during pandemic. Did not think we are in a situation where there is stress around the corner for markets due to Omicron. Scrapping the affordability requirement for mortgages should not be seen as relaxation of lending standards
• UK House of Commons to vote on new Covid measures on Tuesday, Dec 14th. Recent press articles noted that approx. 70 Tory MPs were expected to vote against, however the measures are likely to pass after the labour Party said they would support them
• Chancellor of the Exchequer Sunak (Fin Min) said to have been asked by the head of the CBI to scrap plans to raise taxes after the BOE warned about risks to the economy from Omicron variant

Americas

• US Senate to vote Tuesday (Dec 14th) on a bill lifting the debt ceiling
• White House said President Biden had a constructive phone call with Senator Manchin (D-WV), and to follow up in next few days. Manchin had cited concerns with the proposal’s reliance on temporary programs and inflation. (earlier Manchin said that he still wanted a package of about $1.7T)

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 -0.08% at 473.12, FTSE +0.26% at 7,250.40, DAX -0.10% at 15,606.72, CAC-40 -0.05% at 6,939.78, IBEX-35 +0.48% at 8,362.50, FTSE MIB 0.00% at 26,550.00, SMI -0.04% at 12,546.26, S&P 500 Futures -0.38%]
• Market Focal Points/Key Themes: European indices open generally higher but started to trend lower as the session wore on; turn in sentiment blamed on report about omicron out of South Africa; sectors among those leading the way higher are materials and financials; while industrials and real estate sectors lag; oil and gas subsector moving higher following OPEC and IEA monthly reports; Vifor confirms to be acquired by CSL; Terminix to be acquired by Rentokil; National Express and Stagecoach confirm their merger; focus on upcoming FOMC meeting later in the day; earnings expected during the upcoming US session include OVS

Equities

• Consumer discretionary: Ocado [OCDO.UK] +8% (trading update)
• Energy: Rosneft [ROSN.RU] +2% (puts out fire at its largest oilfield)
• Healthcare: Vifor Pharma [VIFN.CH] +15% (confirms to be acquired)
• Industrials: Ceconomy [CEC.DE] +8% (earnings), Stagecoach [SGC.UK] +8% (to be acquired), Rentokil Initial [RTO.UK] -4% (acquires US firm Terminix)
• Telecom: BT Group [BT.A.UK] -6% (stake sale)

Speakers

• Germany IFO Institute updated its economic outlook which saw Q4 domestic GDP at -0.5%. It raised the 2022 GDP growth forecast from 5.1% to 3.7% and also raised the 2023 GDP growth forecast from 1.5% to 2.9%.
• Norway govt to reintroduce govt guarantee scheme for corporate loans.
• UK Dep PM Raab Noted that no further restrictions were planned for this Christmas and Plan B rules were likely to be sufficient to stem the spread of Omicron.
• Sweden Central Bank (Riksbank) Dep Gov Breman noted that Nov CPI data showing that electricity prices were having a big effect and supported view that could be reasonable to taper more in 2022.
• Czech Central Bank Gov Rusnuk stated that he saw interest rate closer to 4.0% in 2022 than to 3.0%. Expected a debate on a larger rate hike of over 50bps in Dec.
• German VDMA Engineering association updated it production outlook for 2021 and 2022. Cut its 2021 production from 10.0% to 7.0% while raising the 2022 production outlook from 5.0% to 7.0%. It saw supply bottlenecks remaining until Q2 2022 nut was not seeing any cancellation in orders at this point.
• Bank of Korea (BOK) Nov Minutes noted that one member (Joo) saw it being difficult to expect a strong economic recovery unless the pandemic eased. Did added that recovery in job market and household income meant it was time to discuss adjusting policy rates. One member noted that inflation might last for a considerable time.
• BOJ said to be considering extending the covid measures beyond Mar 2022.
• IEA Monthly Oil Report (OMR) noted that gobal oil supply was poised to overtake demand starting from Dec 2021. IEA cut its 2021 global oil demand growth from 5.5M bpd to 5.4M bpd and cut the 2022 global oil demand growth from 3.4M bpd to 3.3M bpd. New containment measures put in place to halt the spread of the virus were likely to have a more muted impact on the economy versus previous COVID waves.

Currencies/Fixed income

• USD remained supported on expectations of an upbeat Fed announcement which would be complemented with accelerate tapering of its bond-purchase program. Greenback did drift lower towards the mid-part of the session as equity markets gave back their initial gains. Virus concerns continue to percolate as more studies were presented on vaccine efficacy.
• EUR/USD moved back above the 1.13area. Dealers noted that the Omicron virus variant puts some uncertainty whether the ECB’s Pandemic Emergency Purchase Program would end as scheduled in in March 2022.
• GBP/USD moved off the 1.32 level ahead of the UK Parliament debate and vote on new covid measures. Recent press articles noted that approx. 70 Tory MPs were expected to vote against, however the measures are likely to pass after the labour Party said they would support them.

Economic data

• (SE) Sweden Nov PES Unemployment Rate: 3.5 v 3.6% prior.
• (FI) Finland Nov CPI M/M: 0.4% v 0.8% prior; Y/Y: 3.7% v 3.2% prior.
• (IN) India Nov Wholesale Prices (WPI) Y/Y: 14.2% v 12.0%e.
• (UK) Nov Jobless Claims Change: -49.7K v -58.5K prior; Claimant Count Rate: 4.9% v 5.0% prior.
• (UK) Oct Average Weekly Earnings 3M/Y: 4.9% v 4.6%e; Weekly Earnings (ex-bonus) 3M/Y: 4.3% v 4.0%e.
• (UK) Oct ILO Unemployment Rate: 4.2% v 4.2%e; Employment Change 3M/3M: +149K v +225Ke.
• (CH) Swiss Nov Producer & Import Prices M/M: 0.5% v 0.6% prior; Y/Y: 5.8% v 5.1% prior.
• (ZA) South Africa Q3 BER Consumer Confidence: -9 v -10 prior.
• (SE) Sweden Nov CPI M/M: 0.5% v 0.4%e; Y/Y: 3.3% v 3.2%e; CPI Level: 348.03 v 347.86e.
• (SE) Sweden Nov CPIF M/M: 0.5% v 0.4%e; Y/Y: 3.6% v 3.5%e.
• (SE) Sweden Nov CPIF (ex-energy) M/M: 0.1% v 0.1%e; Y/Y: 1.9% v 1.9%e.
• (IS) Iceland Nov International Reserves (ISK): 918B v 925B prior.
• (EU) Euro Zone Oct Industrial Production M/M: 1.1% v 1.2%e; Y/Y: 3.3% v 3.0%e.

Fixed income issuance

• (ZA) South Africa sold total ZAR3.9B vs. ZAR3.9B indicated in 2032, 2037 and 2048 bonds.
• (ES) Spain Debt Agency (Tesoro) sold total €1.66B vs. €1.0-2.0B indicated range in 3-month and 9-month bills.
• (AT) Austria Debt Agency (AFFA) sold €805M vs. €805M indicated in 0% Feb 2031 RAGB Bonds; Avg Yield: -0.156% v -0.031% prior; bid-to-cover: 2.20x v 2.90x prior (Oct 5th 2021).
• (IT) Italy Debt Agency (Tesoro) sold €3.5B vs. €3.0-3.5B indicated range in new 0.00% Dec 2024 BTP Bonds; Avg Yield: -0.10% v -0.27% prior; bid-to-cover: 1.21x v 1.65x prior.

Looking ahead

• UK House of Commons to vote on new Covid measures.
• (PT) Bank of Portugal on ECB financing to Portuguese Banks.
• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 06:00 (US) Nov NFIB Small Business Optimism Index: 98.4e v 98.2 prior.
• 06:00 (PT) Portugal Nov Final CPI M/M: No est v 0.5% prelim; Y/Y: No est v 2.6% prelim.
• 06:00 (PT) Portugal Nov Final CPI EU Harmonized M/M: No est v 0.3% prelim; Y/Y: No est v 2.7% prelim.
• 06:00 (BR) Brazil Central Bank (BCB) Dec Minutes.
• 06:30 (EU) ESM to sell €1.1B in 12-month Bills.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (TR) Turkey to sell Bonds.
• 07:00 (MX) Mexico Oct Gold Production: No est v 7.6K kilograms prior; Silver Production: No est v 353.9K kilograms prior; Copper Production: No est v 41.2K tons prior.
• 07:00 (BR) Brazil Oct IBGE Services Volume Y/Y: No est v 11.4% prior.
• 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to raise Base Rate by 40bps to 2.50%.
• 08:00 (PL) Poland Oct Current Account Balance: -€1.2Be v -€1.3B prior; Trade Balance: +€0.1Bev -€0.1B prior; Exports: €25.6Be v €24.5B prior; Imports: €25.5Be v €24.7B prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (US) Nov PPI Final Demand M/M: 0.5%e v 0.6% prior; Y/Y: 9.2%e v 8.6% prior.
• 08:30 (US) Nov PPI (ex-food/energy) M/M: 0.4%e v 0.4% prior; Y/Y: 7.2%e v 6.8% prior.
• 08:30 (US) Nov PPI (ex-food/energy/trade) M/M: 0.4%e v 0.4% prior; Y/Y: No est v 6.2% prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB QE purchases announcement.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement.
• 09:45 (UK) BOE to buy £1.47B in APF Gilt purchase operation (20+ years).
• 10:00 (MX) Mexico Weekly International Reserves.
• 14:00 (AR) Argentina Nov National CPI M/M: 3.2%e v 3.5% prior; Y/Y: 52.1%e v 52.1% prior.
• 16:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to raise Overnight Rate Target by 125bps to 4.00%.
• 14:00 (NZ) RBNZ Gov Orr in Parliament.
• 16:30 (US) Weekly API Oil Inventories.
• 16:45 (NZ) New Zealand Q3 Current Account Balance (NZD): -7.8Be v -1.4B prior; Current Account to GDP Ratio: -4.5%e v -3.3% prior.
• 18:00 (KR) South Korea Nov Unemployment Rate: 3.3%e v 3.2% prior.
• 18:30 (AU) Australia Dec Consumer Confidence Index: No est v 105.3 prior.
• 20:30 (CN) China Nov New Home Prices M/M: No est v -0.3% prior; Y/Y: No est v 3.4% prior.
• 20:30 (CN) China Nov Retail Sales Y/Y: 4.7%e v 4.9% prior; Retail Sales YTD Y/Y: 13.8%e v 14.9% prior.
• 20:30 (CN) China Nov Industrial Production Y/Y: 3.7%e v 3.5% prior; Industrial Production YTD Y/Y: 10.4%e v 10.9% prior.
• 20:30 (CN) China Nov YTD Fixed Urban Assets Y/Y: 5.4%e v 6.1% prior.
• 20:30 (CN) China Nov YTD Property Investment Y/Y: 6.1%e v 7.2% prior.
• 20:30 (CN) China Nov Surveyed Jobless Rate: 4.9%e v 4.9% prior.
• 22:00 (KR) South Korea Oct M2 Money Supply M/M: No est v 0.5% prior; “L” Money Supply M/M: No est v 0.2% prior.
• 22:00 (CN) China to sell 1-year and 10-year Upsize Bond.
• 23:00 (ID) Indonesia Nov Trade Balance: $4.4Be v $5.7B prior; Exports Y/Y: 45.2%e v 53.4% prior; Imports Y/Y: 38.2%e v 51.1% prior.
• 23:30 (JP) Japan Oct Tertiary Industry Index M/M: 1.2%e v 0.5% prior.