Notes/Observations
Euro Zone flash CPI misses expectations and still well below the ECB target
Unemployment remains improving trend for Europe (Italy at 5-year lows, Euro Zone at 8-year lows)
OPEC bi-annual meeting seen keeping current level of production cuts intact for another 9 months
Odds of seeing a US tax cut seem above 60%
Asia:
Bank of Korea (BOK) raised the 7-Day Repo Rate by 25bps to 1.50% for its 1st rate hike since 2011
China Nov Official Govt Manufacturing PMI: 51.8 v 51.5e v 51.6 prior, Non-manufacturing PMI: 54.8t v 54.3 prior
Japan Oct Preliminary Industrial Production M/M: 0.5% v 1.8%e; Y/Y: 5.9% v 7.1%e
BoJ’s Harada: Wages and prices to rise as BOJ continued with its easing policy; Labor shortages had been insufficient. Current policy sufficient for 2% price target; more easing might be needed if external shocks occur. Would start to reduce easing if price momentum strengthened
Europe:
ECB’s Knot (Netherlands): inflation outlook posed no threat to price stability. Despite undershooting its inflation aim in the near term, the ECB was fulfilling its mandate. Full phasing out of net asset purchases from Sept 2018 onwards is warranted
ECB’s Weidmann (Germany): remained skeptical about need for ECB QE. Strong data signaled the ECB growth outlook could be raised
Britain reportedly nearing deal on Northern Ireland border; officials on both sides reportedly predict agreement within weeks. UK officials this week tabled proposals to avoid a hard border in Ireland that could remove the last major obstacle to a deal
Italy said to back Portugal Fin Min Centeno as the next Eurogroup chairman
SNB Vice President Zurbruegg: reiterates the Swiss Franc remains highly valued. Safe haven aspect of Swiss Franc was still out there, but situation remained fragile
Americas:
Tax reform bill passes in procedural hurdle in US Senate (as expected) in a 52-48 vote. Allowed for debate to begin on the Senate floor with a final vote likely by Friday
President Trump sent nomination of Marvin Goodfriend for Fed to Senate
Fed Williams (moderate, non-voter): failing to raise rates to more normal levels could risk recession; should continue to raise rates slowly over coming year. Would like to get rates to new normal level around 2.5% over next two years
Fed’s Kashkari (dove, voter): if inflation keeps falling, there’s no reason to tap the brakes. If we needed more stimulative policy we could cut rates back to zero, use forward guidance and balance sheet policy. Negative rates would likely come after those if ever
Fed’s Beige Book: Price pressures have strengthened since last report. Economy ws growing at modest to moderate pace. Wage growth modest or moderate despite tight labor market
Energy:
Iraq Oil Min: reiterates would prefer 9-month oil agreement extension
Iran To go along with 6 or 9 month extension; expects OPEC meeting to go very well
Economic Data:
(CH) Swiss Q3 GDP Q/Q: 0.6% v 0.6%e; Y/Y: 1.2% v 0.8%e
(DE) Germany Oct Retail Sales M/M: -1.2% v +0.3%e; Y/Y: -1.4% v +2.8%e
(UK) Nov Nationwide House Prices M/M: 01% v 0.1%e; Y/Y: 2.5% v 2.7%e
(DK) Denmark Q3 Preliminary GDP Q/Q: -0.6% v -0.2%e; Y/Y: 1.3% v 1.7%e
(NO) Norway Oct Credit Indicator Growth Y/Y: 5.7% v 5.6%e
(NO) Norway Oct Retail Sales W/Auto Fuel M/M: -0.2% v +0.7%e
(TR) Turkey Oct Trade Balance: -$7.3B v -$7.4Be
(FR) France Nov Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e
(FR) France Nov CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1.3% v 1.2%e
(ES) Spain Q3 Final GDP Q/Q: 0.8% v 0.8%e; Y/Y: 3.1% v 3.1%e
(CH) Swiss Nov KOF Leading Indicator: 110.3 v 109.7e
(AT) Austria Q3 Final GDP Q/Q: 0.8% v 0.6% prelim; Y/Y: 3.2% v 2.6% prelim
(DE) Germany Nov Unemployment Change: -18K v -10Ke; Unemployment Rate: 5/6% v 5.6%e
(IT) Italy Oct Unemployment Rate: 11.1% v 11.1%e (matches low from 2012)
04:00 (PL) Poland Q3 Final GDP Q/Q: 1.2% v 1.1% prelim; Y/Y: 4.9% v 4.7% prelim
(NO) Norway Dec Central Bank Norges Bank Daily FX Purchases (NOK): -900M v -650Me
(EU) Euro Zone Nov Advance CPI Estimate Y/Y: 1.5% v 1.6%e; CPI Core Y/Y: 0.9% v 1.0%e
(EU) Euro Zone Oct Unemployment Rate: 8.8% v 8.9%e. (lowest since 2012)
(IT) Italy Nov Preliminary CPI (NIC incl. tobacco) M/M: % v 0.0%e; Y/Y: % v 1.1%e
(IT) Italy Nov Preliminary CPI EU Harmonized M/M: % v 0.0%e; Y/Y: % v 1.2%e
Fixed Income Issuance:
(IN) India sold total INR150B vs. INR150B indicated in 2024, 2027, 2034 and 2046 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.3% at 389, FTSE -0.3% at 7373, DAX +0.6% at 13134, CAC-40 +0.4% at 5417, IBEX-35 +0.5% at 10314, FTSE MIB +0.8% at 22508, SMI +0.2% at 9324, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
European Indices trade higher with the FTSE once again the under performer trading lower on the back of a stronger Sterling as the GBPUSD pair approaches $1.35.
On the corporate front Credit Suisse provided initial 2019 and 2020 guidance, with shares reacting positively, while Daily Mail General Trust trades over 20% lower after a fall in profits and guiding 2018 margins lower y/y.
Equitie
Consumer discretionary [Daily Mail General [DMGT.UK] -24% (Earnings), GreeneKing [GNK.UK] -3% (Earnings), Marston [MARS.UK] +10.7% (Earnings), Go-Ahead [GOG.UK] – 1.3% (Trading update)]
Financials: [Credit Suisse [CSGN.CH] +2.5% (Outlook), Aviva [AV.UK] +2.4% (Outlook)]
Technology: [Altran [ALT.FR] -4.5% (Acquisition), Rocket Internet [RKET.DE] -3.6% (Earnings)]
Energy: [Norsk Hydro [NHY.NO] -3.5% (Capital market day)]
Speakers
Various oil ministers’ comment as OPEC holds semi-annual meeting in Vienna:
Saudi Arabia Energy Min Al Falih: In perfect alignment with all OPEC countries; preference was for 9 month as not reached comfortable levels on oil inventories. Non-Opec members must do more because overhang remained. Too early to talk of exit strategy; exit to be gradual. Believed that global oil demand would absorb shale
Kuwait Oil Min Almarzooq: Agreement on production caps for both Libya and Nigeria totaling 2.8M bpd. Kuwait was currently exporting around 2M bpd
Iran Oil Min Zanganeh: Longer duration extension would aid market stability. No discussion to raise production cuts beyond the 1.8M bod
UAE Oil Min Mazrouei: Markets were in a better position compared to a year ago. Opec job was not yet done; looking for wider group of countries to join production cuts
Nigeria Oil Min Kachikwu: Expected to reach 1.8M B/D crude output by year-end
Other Speakers in session:
ECB’s Praet (Belgium, chief economist): Width of economic upturn is notable but too early to signal the all-clear signal
Norway Stats Agency (SSB) Quarterly forecasts raised its 2018 Mainland GDP from 2.1% to 2.5% and 2018 Underlying CPI from 1.7% to 1.8%. It saw the Repo Rate at current level well into 2019
Russia PM Medvedev: Economy has entered a growth phase
Turkey Central Bank Financial Stability Report: Banking sector preserves sound asset quality
Turkey President Chief Adviser Ertem: Targeting inflation, not the FX rate. Central bank could act on rates; had instrument independenceto do so. Expected a rapid drop in inflation in Q1. Import price increase to slow down due to FX impact
South Africa Dep President Ramaphosa: Reject possibility of IMF helping the country. South Africa needed an economic plan
India Fin Min Jaitley: 10% GDP growth is a challenging figure; would require a global economic boom
Thailand Central Bank: Have intervened to slow the THB currency (Baht) rise. Reiterated view that THB currency is moving in line with regional peers
Japan LDP Tax Panel Member Miyazawa: have not decided to raise tobacco taxes at the moment; would make sense to make new category for heat/burn tobacco
Currencies
USD unable to must much upside momentum even as US tax bill advances but did muster some strength just ahead of the NY morning.
GBP currency (Sterling) continued to build upon gains as optimism on the Brexit negotiations continued. After the UK govt said to agree on a financial settlement bill reports circulated that a deal on the Irish border could result in EU leaders offering a two-year transition agreement. GBP/USD at 2-month highs after testing the 1.,3480 level. Dealers see the 1.36 area as the key resistance.
EUR/USD was softer after Nov advance CPI came in below expectations. The 1.5% annual pace was a slight improvement from the Oct level but still distance from the ECB target.
EUR/NOK rises to test 9.9017 for its highest level since Dec 2008. the retail sales data brought some uncertainty over the country’s economic recovery. The NOK moved off its worst level after the central bank (Norges) increased its planned daily purchases of FX in Dec
Fixed Income
Bund futures trade 162.74 up 12 ticks, following softer inflation data out of the Euro Zone. Continued downward pressure sees 162.10 followed by 161.50. A reversal targets 163.40 then 163.75.
Gilt futures trade at 124.21 down 17 ticks, following yesterday’s 10-year gilts biggest daily fall since June on Brexit progress. Continued upside eyeing 125.15 then 125.65. Downside targets include 124.01 then 123.75.
Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.858T from €1.863T. Use of the marginal lending facility fell to €286M from €291M prior.
Looking Ahead
05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills
05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds
06:00 (BR) Brazil Oct National Unemployment Rate: 12.2%e v 12.4% prior
06:00 (PT) Portugal Q3 Final GDP Q/Q: 0.5%e v 0.5% prelim; Y/Y: No est v 2.5% prelim
06:00 (PT) Portugal Oct Industrial Production M/M: No est v -6.7% prior; Y/Y: No est v 2.8% prior
06:00 (PT) Portugal Oct Retail Sales M/M: No est v 0.8% prior; Y/Y: No est v 4.1% prior
06:00 (IT) Italy Oct PPI M/M: No est v 0.3% prior; Y/Y: No est v 2.0% prior
06:00 (ZA) South Africa Oct Electricity Production Y/Y: No est v 1.1% prior; Electricity Consumption Y/Y: No est v 0.2% prior
06:00 OPEC holds closed door session)
06:30 (IN) India Oct Eight (Key) Industries: No est v 5.2% prior
06:40 (EU) ECB’s Hakkarainen (SSM member) in London
07:00 (IN) India Q3 GDP Y/Y: 6.5%e v 5.7% prior, GVA Y/Y: 6.3%e v 5.6% prior
07:00 (ZA) South Africa Oct Budget Balance (ZAR): No est v -3.5B prior
07:00 (ZA) South Africa Oct Trade Balance (ZAR): -5.5Be v +4.0B prior
07:00 (CL) Chile Oct Unemployment Rate: 6.6%e v 6.7% prior
08:00 (PL) Poland Nov Preliminary CPI M/M: 0.4%e v 0.5% prior; Y/Y: 2.3%e v 2.1% prior
08:00 (RU) Russia Gold and Forex Reserve w/e Nov 24th: No est v $427.6B prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Oct Personal Income: 0.3%e v 0.4% prior; Personal Spending: 0.3%e v 1.0% prior, Real Personal Spending (PCE): 0.2%e v 0.6% prior
08:30 (US) Oct PCE Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.4%e v 1.3% prior
08:30 (US) Oct PCE Deflator M/M: 0.1%e v 0.4% prior; Y/Y: 1.5%e v 1.6% prior
08:30 (US) Initial Jobless Claims: 240Ke v 239K prior; Continuing Claims: 1.89Me v 1.904M prior
08:30 (CA) Canada Q3 Current Account: -$20.0Be v -$16.3B prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (BE) Belgium Q3 Final GDP Q/Q: No est v 0.3% prior; Y/Y: No est v 1.7% prior
09:00 OPEC and Non-Opec members ministerial meeting
09:00 (BR) Brazil to sell 2023 LFT
09:00 (BR) Brazil to sell 2018, 2019 and 2021 LTN Bills LTN
09:45 (US) Nov Chicago Purchasing Manager: 63.0e v 66.2 prior
10:00 (CO) Colombia Oct National Unemployment Rate: No est v 9.2% prior, Urban Unemployment Rate: 9.8%e v 10.5% prior
10:00 (MX) Mexico Oct Net Outstanding Loans (MXN): No est v 3.895T prior
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (NZ) New Zealand Nov QV House Prices Y/Y: No est v 3.9% prior
12:00 (IR) Iran Foreign Min Zarif in Rome
12:30 (US) Fed’s Quarles (FOMC voter) in Cleveland
13:00 (US) Fed’s Kaplan (moderate, voter) in Dallas
13:10 (UK) BOE FPC member Sharp
14:00 (DE) German Chancellor Merkel and SPD leader Schultz meet with President Steinmeier
14:00 (AR) Argentina Oct Industrial Production Y/Y: 5.0%e v 2.3% prior
15:00 (US) Oct Agriculture Prices Received: No est v 6.3% prior
15:30 (MX) Mexico Oct YTD Budget Balance (MXN): No est v 63.2B prior
16:45 (NZ) New Zealand Q3 Terms of Trade Index Q/Q: 1.3%e v 1.5% prior
17:00 (AU) Australia Nov Manufacturing PMI: No est v 55.5 prior
17:30 (AU) Australia Nov AiG Performance of Manufacturing Index: No est v 51.1 prior
18:00 (AU) Australia Nov CoreLogic House Prices M/M: No est v 0.0% prior
18:00 (KR) South Korea Nov CPI M/M: 0.0%e v -0.2% prior; Y/Y: 1.8%e v 1.8% prior; CPI Core Y/Y: 1.7%e v 1.3% prior
18:00 (KR) South Korea Q3 Final GDP SA Q/Q: 1.4%e v 1.4% prelim; Y/Y: 3.6%e v 3.6% prelim
18:30 (JP) Japan Oct Jobless Rate: 2.8%e v 2.8% prior; Job-To-Applicant Ratio: 1.52e v 1.52 prior
18:30 (JP) Japan Oct Overall Household Spending Y/Y: -0.3%e v -0.3% prior
18:30 (JP) Japan Oct National CPI Y/Y: 0.2%e v 0.7% prior; Ex Fresh Food (Core) Y/Y: 0.8%e v 0.7% prior, CPI Ex Fresh Food and Energy (core core): 0.2%e v 0.2% prior
18:30 (JP) Tokyo Nov CPI Y/Y: -0.1%e v -0.2% prior; Ex-Fresh Food Y/Y: 0.6%e v 0.6% prior, CPI Ex Fresh Food and Energy Y/Y: 0.2%e v 0.1% prior
18:50 (JP) Japan Q3 Capital Spending Y/Y: 3.2%e v 1.5% prior; Capital Spending (Ex-Software) Y/Y: 3.0%e v 0.6% prior
19:00 (KR) South Korea Nov Trade Balance: $8.5Be v $7.3B prior; Exports Y/Y: 10.3%e v 7.1% prior; Imports Y/Y: 13.3%e v 7.4%e
19:30 (JP) Japan Nov Final Manufacturing PMI: No est v 53.8 prelim
19:30 (MY) Malaysia Nov Manufacturing PMI: No est v 48.6 prior
19:30 (PH) Philippines Nov Manufacturing PMI: No est v 53.7 prior
19:30 (KR) South Korea Nov Manufacturing PMI: No est v 50.2 prior
19:30 (TW) Taiwan Nov Manufacturing PMI: No est v 53.6 prior
19:30 (TH) Thailand Nov Manufacturing PMI: No est v 49.8 prior
19:30 (VN) Vietnam Nov Manufacturing PMI: 50.9e v 51.6 prior
20:45 (CN) China Nov Caixin Manufacturing PMI: No est v 51.0 prior
22:30 (TH) Thailand Nov CPI M/M: No est v 0.2% prior; Y/Y: 1.0%e v 0.9% prior; Core Y/Y: 0.6%e v 0.6% prior
