Thu, Dec 01, 2022 @ 14:38 GMT
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European Market Update: Month-End Keeps Participation Light

Month-end keeps participation light

Notes/Observations

US-Mexico relationship hits a wall; rising possibility that the US will shift towards protectionism beyond pulling out of the TPP

Overnight:

Asia:

Japan CPI tracking in right direction with Headline annual pace hitting a 10-month high (0.3% v 0.2%e); CPI Ex-Food (Core) improved but saw its 10th straight decline for its longest streak since 2011

BOJ increased the size in its medium-term JGB purchases (Note: signals that it won’t tolerate an increase in interest rate)

Europe:

Eurogroup chief Dijsselbloem stated that could envisage future bailouts in Euro Zone without IMF, but its participation in Greece now was non-negotiable due to IMF’s expertise and financial contribution – EU official: the Greek bailout review is not making progress; creditors have asked Greece for more austerity beyond 2018(Note: Greece has vowed not to comply with such requests)

Economic data

(JP) Japan Dec BOJ National CPI Ex Fresh Food, Energy (core-core) Y/Y: 0.1% v 0.1%e

(DE) Germany Dec Import Price Index (beat) M/M: 1.9% v 1.3%e; Y/Y: 3.5% v 2.7%e

(FI) Finland Jan Consumer Confidence: 21.0 v 19.5 prior; Business Confidence: 2 v 1 prior

(FR) France Jan Consumer Confidence (in-line): 100 v 100e

(SE) Sweden Jan Consumer Confidence (beat): 104.6 v 103.6e; Manufacturing Confidence: 119.1 v 115.0e, Economic Tendency Survey: 112.0 v 111.4e

(IT) Italy Jan Consumer Confidence (miss): 108.8 v 110.0e; Manufacturing Confidence (beat): 104.8 v 103.3e, Economic Sentiment: 102.5 v 100.2 prior

(EU) Euro Zone Dec M3 Money Supply (beat)Y/Y: 5.0% v 4.9%e

Fixed Income Issuance:

(IN) India sold total INR110B vs. INR110B indicated in 2022, 2026, 2034 and 2046 bonds

(ZA) South Africa sold total ZAR815M vs. ZAR650M indicated in I/L 2029, 2033 and 2046 bonds

(IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg yield: –0.286% v -0.317% prior; Bid-to-cover: 1.56x v 1.49x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.6% at 3,295, FTSE -0.1% at 7,154, DAX -0.3% at 11,808, CAC-40 -0.7% at 4,832, IBEX-35 -0.8% at 9,439, FTSE MIB -0.9% at 19,272, SMI -0.4% at 8,373, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are trading lower as market participants look take profits from recent gains ahead of the weekend; Banking stocks trading lower in the morning session, with the heavily financial sector weighted Italian and Spanish indices underperforming; shares of Tesco the notable gainer in the FTSE 100 after announcing a merger with Booker Group valued at £3.7B.

A plethora of upcoming scheduled US earnings (pre-market) include American Airlines, AbbVie, Air Products and Chemicals, Franklin Resources, Colgate-Palmolive, Chevron, General Dynamics, Gentex, Honeywell International, Hill-Rom, Moog, NextEra Energy, and PolyOne.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Booker Group BOK.UK 16.7% (to merge into Tesco for 205.3p/shr valued at £3.7B), Elior ELR.FR +1.4% (Q1 sales), SHW AG SW1.DE -0.5% (Tesla cancels €100M order), Tesco TSCO.UK +10.1% (to merge with Booker Group)]

Financials: [UBS UBSN.CH -3.6% (Q4 results), Vestjysk Bank VJBA.DK +2.5% (raises FY16 outlook)]

Healthcare: [Adocia ADOC.FR -29.2% (Eli Lilly terminates BioChaperone Lispro collaboration), Stallergenes GENP.FR +2.3% (positive phase 3 results)]

Industrials: [Alhstrom AHL1V.FI -1.5% (Q4 results), NCC AB NCCB.SE -1.7% (Q4 results), ThyssenKrupp TKA.DE +0.8% (CEO outlook comments)]

Materials: [Ferrexpo FXPO.UK -1.4% (Wigmore to sell 78M shares at 129p/shr)]

Technology: [Eltel ELTEL.SE -21.1% (Cuts FY16 outlook)]

Telecom: [BT Group BT.UK -0.1% (Q3 results), Telia TLSN.SE -0.9% (Q4 results)]

Speakers

German Finance Ministry reiterated opposition to reports that EU Commission to propose the bundling of some Euro regions bonds into "European safe bonds"

German Finance Ministry Monthly Report noted that the domestic economy was on a solid growth trajectory and expected economic upswing to continue in 2017 with domestic demand the main driver

Turkey President Erdogan reiterated his view that raising interest rates would negative impact inflation. He called the central bank to change its current policy framework

Turkey Central Bank increase size of 1-week FX swap auction from $0.5B to $1.0B (Note: largest amount since it re-initiated the measure on Jan. 18th)

Nigeria Central Bank noted that its economic challenges had worsened with pressure on FX reserves persisting. To maintain reserves to safeguard NGN currency (Naira) and aimed to meet genuine demand for FX

Brazil govt said to see change that CPI could come in below the 4.5% target in 2017 and the Selic Target Rate falling to single digit this year (Note: currently at 13.00%)

Currencies

USD rebounded from recent 7-week lows but overall ranges with tight for the most part as month-end kept participation low.

EUR/USD holding below the 107 handle

USD/JPY stayed above the 115 level in the session after BOJ announced size in upcoming bond buying operation. Dealers noted that BOJ increased the size in the 5-10yr JGB maturity from ¥410B to ¥450B sending the meassage that BOJ did not tolerate an increase in interest rates. There had been some speculation that BOJ might be scaling back its asset-buying program after BOJ forgoed a buying operation on Wednesday

Fixed Income:

Bund futures trade at 161.81 up 38 ticks fading some of the sharp move lower seen this week as European Equities trade down paring some of the week gains. A reversal back past 161.48 lows targets 161.19 followed by 160.80. A continuation higher targets 162.19 then 162.60 to close the gap followed by 163.38 and 163.82.

Gilt futures trade at 123.08 up 25 ticks reclaiming the 123 handle as risk off sentiment put pressure on yields. Support moves to 122.60, 122.23 then Dec low at 122.08. Resistance moves to 123.18 followed by 123.62, then 124.13 to close the gap. Short Sterling futures trade flat with Jun17Jun18 remaining steady at 28/29bp.

Friday’s liquidity report showed Thursday’s excess liquidity remained unchanged at €1.259T. Use of the marginal lending facility fell to €31M from €290M prior.

Corporate issuance saw just the one issuer sell $2B in a 2 part offering bringing Week to date issuance to $23.65B, someway below the $30B consensus, but Jan issuance of $144.6B marks a record for the month.

For the week ending Jan 25th Lipper Fund flows reported IG Net inflows of $1.59B bringing YTD inflows to $9.70B, High Yield funds reported outflows of $532.4M bringing YTD outflows to $121.9M.

Looking Ahead

(BR) Brazil Jan CNI Consumer Confidence: 100.5e v 100.3 prior

06:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v 0.9% prior; Y/Y: No est v 4.3% prior

06:00 (UK) DMO to sell combined £4.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.5B and £2.0B respectively)

06:30 (IN) India Weekly Forex Reserves – 06:45 (US) Daily Libor Fixing

07:30 (BR) Brazil Dec Tax Collections (BRL): 124.8B v 102.2B prior

08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond auctions

08:15 (US) Baltic Dry Bulk Index

08:30 (US) Q4 Advance GDP Annualized Q/Q: 2.2%e v 3.5% prior; Personal Consumption: 2.5%e v 3.0% prior

08:30 (US) Q4 Advance GDP Price Index: 2.1%e v 1.4% prior; Core PCE Q/Q: 1.3%e v 1.7% prior

08:30 (US) Dec Preliminary Durable Goods Orders: +2.5%e v -4.5% prior; Durables Ex Transportation: 0.5%e v 0.6% prior; Capital Goods Orders (Non-defense ex aircraft): 0.2%e v 0.9% prior, Capital Goods Shipments (Non-defense/ex- aircraft): 0.5%e v 0.2% prior; Durables Ex-defense: No est v -6.5% prior

10:00 (US) Jan Final Michigan Confidence: 98.1e v 98.1 prelim

10:00 (CO) Colombia Dec National Unemployment Rate: No est v 7.5% prior; Urban Unemployment Rate: 9.6%e v 8,7% prior

11:00 (EU) Possible sovereign analyst action after European close

(UK) United Kingdom and Finland Sovereign Debt to be rated by Moody’s; Denmark, Spain and Turkey Sovereign Debt to be rated by Fitch; Germany Sovereign Debt to be rated by Canada rating agency DBRS

13:00 (US) Weekly Baker Hughes Rig Count data

15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 25bps to 7.25%

Weekend:

Sun: (DE) German Social Democratic Party candidate Schulz announces platform:

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