Notes/Observations
German State CPI readings near ECB target
Brexit negotiations have renewed optimism of moving into phase 2 with reports the UK will likely meet the financial settlement terms of the EU
Asia:
North Korea: Confirms fired new type of ICBM at HWASONG-15 that puts entire US in range; launch was successful
North Korea Leader Kim Jung Un: Have begun to complete nuclear program and finally realized the cause of completing the State Nuclear Force; Missile program would not threaten any country as long as they did not “infringe of North Korea sovereign gains”
South Korea said to have responded with land, sea and air missiles towards the east just minutes of the NK missile launch
Japan Chief Cabinet Sec Suga: Trump/Abe agreed China needs to play an increase role regarding North Korea; Trump/Abe did not discuss military options but agreed to boost deterrence capability against NK
US President Trump: Briefed while missile was still in flight; it is situation we will handle; launch doesn’t change US approach to NK issue; will take care of NK issue
Europe:
Reportedly UK and EU agree Brexit divorce bill with tab between €45-55B (vs. EU demands of €60B). The final figure deliberately being left open to interpretation, depending on how each side calculates the output from an agreed methodology. (**Note: Govt official: did not recognize UK Telegraph newspaper account of Brexit negotiations)
Americas:
Senate Budget Committee advances the tax bill. All 12 Republicans vote ‘yes’ including Senators Johnson and Corker; the 11 Democrats vote ‘no’. Budget Committee approval moves the bill to the full Senate, which could consider the bill later this week
Energy:
Weekly API Oil Inventories: Crude: +1.8M v -6.4M prior
Economic Data:
(NL) Netherlands Nov Producer Confidence: 9.1 v 8.2 prior
(NO) Norway Q3 Manufacturing Wage Index Q/Q: 0.9% v 0.4% prior
(CH) Swiss Oct UBS Consumption Indicator: 1.54 v 1.51 prior
(FR) France Oct Consumer Spending M/M: -1.9% v -0.1%e; Y/Y: -0.6% v +1.4%e
(FR) France Q3 Preliminary GDP (2nd reading) Q/Q: 0.5% v 0.5%e ; Y/Y: 2.2% v 2.2%e
(DE) Germany Nov CPI Saxony M/M: 0.3% v 0.0% prior; Y/Y: 2.0% v 1.8% prior
(ES) Spain Preliminary Nov CPI M/M: 0.4% v 0.5%e; Y/Y: 1.6% v 1.7%e
(ES) Spain Preliminary Nov CPI EU Harmonized M/M: 0.3% v 0.4%e; Y/Y: 1.7% v 1.9%e
(SE) Sweden Nov Consumer Confidence: 108.0 v 104.0e; Manufacturing Confidence: 121.9 v 120.3e, Economic Tendency Survey: 114.1 v 111.9e
(HU) Hungary Oct Unemployment Rate: 4.0% v 4.0%e
(SE) Sweden Q3 GDP Q/Q: 0.8% v 0.8%e; Y/Y: 2.9% v 3.5%e
(AT) Austria Nov Manufacturing PMI: 61.9 v 59.4 prior
(DE) Germany Nov CPI Bavaria M/M: +0.4% v -0.1% prior; Y/Y: 1.8% v 1.5% prior
(DE) Germany Nov CPI Brandenburg M/M: +0.4% v -0.1% prior; Y/Y: 1.6% v 1.3% prior
(DE) Germany Nov CPI Hesse M/M: +0.4% v -0.2% prior; Y/Y: 2.0% v 1.6% prior
(CH) Swiss Nov Credit Suisse Expectations Survey: 40.7 v 32.0 prior
(DE) Germany Nov CPI Baden Wuerttemberg M/M: +0.4% v -0.2% prior; Y/Y: 1.8% v 1.5% prior
(DE) Germany Nov CPI North Rhine Westphalia M/M: 0.3% v 0.0% prior; Y/Y: 1.8% v 1.6% prior
(UK) Oct Mortgage Approvals: 64.6K v 65.0Ke
(UK) Oct Net Consumer Credit: £1.5B v £1.5Be; Net Lending: £3.4B v £3.7Be
(PT) Portugal Nov Consumer Confidence: 2.3 v 2.1 prior; Economic Climate Indicator: 2.1 v 2.1 prior
(EU) Euro Zone Nov Business Climate Indicator: 1.49 v 1.51e; Consumer Confidence (Final): 0.1 v 0.1e , Economic Confidence: 114.6 v 114.6e, Industrial Confidence: 8.2 v 8.6e, Services Confidence: 16.3 v 16.7e
Fixed Income Issuance:
(IN) India sold total INR110B vs. INR110B indicated in 3-month, 6-month and 12-month bills
(DK) Denmark sold total DKK12.9B in 3-month and 6-month Bills
(SE) Sweden sold total SEK2.0B vs. SEK2.0B indicated in 2022 and 2032 Bonds
(IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated range in 2.05% Aug 2027 BTP bonds; Avg Yield: 1.73% v 1.86% vprior; Bid-to-cover: 1.65x v 1.43x prior
(IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated range in Apr 2025 CCTeu (Floating Rate bond); Avg Yield: 0.46% v 0.60% prior; Bid-to-cover: 1.60x v 1.56x prior
(RU) Russia sold RUB16.2B vs. RUB16.4B indicated in Oct 2024 OFZ bonds; Yield: 7.49%
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.6% at 389.3, FTSE -0.5% at 7422, DAX +0.7% at 13148, CAC-40 +0.5% at 5417, IBEX-35 +1.2% at 10267, FTSE MIB +0.6% at 22417, SMI +0.1% at 9330 S&P 500 Futures flat]
Market Focal Points/Key Themes:
European Indices trades mostly higher across the board with the exception of the FTSE100 which trades lower on talk of a Brexit divorce bill has been preliminary agreed between the UK and Europe. A new record close in the US overnight as well as a generally positive session in Asia has helped underpin the rally.
On the corporate front Daimler trades higher after reports Geely Auto proposed to acquire a 5% stake via share issue which was rejected by Daimler. Cineworld underperforms after confirming it has made an approach to acquire Regal Ent, while on the earnings front, Findel trades 20%+ higher on strong results, with Britvic, Poor AG and Telford Home other notable risers. Elsewhere shares of the LSE trade lower after CEO Xavier Rolet stepped down ahead of the originally scheduled. Looking ahead notable earners include Tiffanys and RBC.
Equities
Consumer discretionary [Britvic [BCI.UK] +7% (Earnings), Cineworld [CINE.UK] -14% (Proposed takeover of Regal Ent for $23/shr)]
Industrials: [RPC [RPC.UK] -7.0% (Earnings), Porr Ag [ABS2.DE] +2.5% (Earnings), Philips Lighting [LIGHT.NL] -3.2% (Philips to place 17.1M shares)]
Financials: [Brewin Dolphin [BRW.UK] +2% (Earnings), LSE [LSE.UK] -2.1% (CEO steps down effective immediately)]
Utilities: [Findel [FDL.UK] +21% (Earnings)]
Real Estate: [ Telford Home [TEF.UK] +2.6% (Earnings)]
Speakers
BOE member Cunliffe: UK consumer credit growing fast, need to watch it. Agree with rest of MPC that UK economy’s potential growth had slowed
ECB’s Constancio (Portugal) noted that the region must more resilient to possible shocks
EU Chief Brexit Negotiator Barnier: Hope to report to EU Council of sufficient progress in the Brexit negotiations. Still working to reach agreement with Britain about its exit from the bloc. Ireland remained a big problem in negotiations. Will try to prevent a hard Brexit.
ECB Financial Stability Report: Higher rates might trigger concerns on debt servicing. Maintained its overall assessment and saw no generalized overvaluation in Euro Area financial markets. Regional recovery and monetary policy made debt more sustainable. Saw progress on sovereign debt as political risks look
German Bundesbank Financial Stability Report: Resilience for banking sector was good overall; strong economic picture might masks financial risks. Risks from residential property financing were still limited
Sweden FSA Financial Stability Report: Resilience of sector was generally satisfactory but did see significant risks in commercial real estate sector
Russia Central Bank official reiterated its stance to gradually cut interest rates. To look at only long-term inflation changes. 2017 GDP growth seen around 1.7-1.8%
BOJ’s Nakaso: Communication was important for an exit strategy; Reversal rate was a useful theory for policy. Financial stability was the basis for sustainable economic growth. BOJ easing was a factor in greater bank competition but exerted downward pressure on profits. Easing had encouraged more active lending by banks
China Commerce Ministry (MOFCOM): US move on aluminum to hurt bilateral interests (**Note: US Commerce Department initiated anti dumping investigation of aluminum imports from China)
UAE Oil Min Mazrouei: OPEC still debating the length of any extension in production cuts; to also look at other options. UAE did not see a threat from US shale oil production
Currencies
EUR/USD was higher by 0.2% as Various German States reported the Nov CPI data. Several of the Nov CPI readings was above the ECB target of around 2.0%
GBP/USD was at 2-month highs above the 1.34 level as some of the concerns of a hard Brexit was diminished after reports circulated that UK will move closer to the EU demands for the financial settlement. Market expectations of next potential BOE rate hike moved forward to Sept 2018 from Nov as a result of progress in the Brexit negotiations
Fixed Income
Bund futures trade 162.80 down 22 ticks, steady as the German state of Saxony inflation pick up points to rebound in German price growth. Continued upside sees 163.40 then 163.63. A reversal targets 162.50 then 162.38.
Gilt futures trade at 124.76 down 12 ticks as UK makes a Brexit breakthrough. Continued upside eyeing 125.15 then 125.65. Downside targets include 124.24 then 123.75.
Wednesday’s liquidity report showed Tuesday’s excess liquidity climbed to €1.863T from €1.850T. Use of the marginal lending facility fell to €291M from €315M prior.
Corporate issuance saw 8 issuers raise $4.5B in the primary market
Looking Ahead
05:30 (EU) ECB allotment in 3-month LTRO (
05:30 (DE) Germany canceled plan sale of €3.0B in 2022 BOBL
06:00 (BR) Brazil Oct PPI Manufacturing M/M: No est v 1.1% prior; Y/Y: No est v 2.1% prior
06:30 (CL) Chile Central Bank (BCCh) Nov Minutes
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia to sell RUB10B in 2028 OFZ bonds
07:00 (US) MBA Mortgage Applications w/e Nov 24th: No est v 0.1% prior
07:00 (CL) Chile Oct Manufacturing Production Y/Y: +4.4%e v -1.4% prior, Industrial Production Y/Y: 5.8%e v 1.0% prior
07:00 (CL) Chile Oct Total Copper Production: No est v 485.9K tons prior
07:00 (UK) Weekly PM May question time in House of Commons
07:30 (BR) Brazil Oct Primary Budget Balance (BRL): +3.0Be v -21.3B prior; Nominal Budget Balance: -25.5Be v -53.3B prior
08:00 (DE) Germany Nov Preliminary CPI M/M: 0.3%e v 0.0% prior; Y/Y: 1.7%e v 1.6% prior
08:00 (DE) Germany Nov Preliminary CPI EU Harmonized M/M: +0.2%e v -0.1% prior; Y/Y: 1.7%e v 1.5% prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Q3 Preliminary GDP Annualized Q/Q: 3.2%e v 3.0% advance; Personal Consumption: 2.5%e v 2.4% advance
08:30 (US) Q3 Preliminary GDP Price Index: 2.2%e v 2.2% advance; Core PCE Q/Q: 1.3%e v 1.3% advance
08:30 (US) Fed’s Dudley (dove, FOMC voter) on US economy
09:00 (UK) BOE Gov Carney at event in London
09:45 (UK) BOE’s Ramsden (Dissentger) at event in London
10:00 (US) Oct Pending Home Sales M/M: 1.0%e v 0.0% prior; Y/Y: +3.0%e v -5.4% prior
10:00 (US) Fed Chair Yellen before joint economic committee
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (DE) ECB’s Weidmann (GermanY) in Essen
12:00 (CA) Canada to sell 30-Year Real Return Bonds
12:45 (US) Fed Williams (moderate, non-voter) in Phoenix
13:30 (NL) ECB’s Knot (Netherlands) in London
14:00 (US) Federal Reserve Beige Book
