Asia:
BoJ Gov Kuroda reiterated that would continue current easing framework until 2% inflation was reached, Yield Control (YCC) program had been quite successful
China Ministry of Commerce (MOFCOM) expressed “strong dissatisfaction and firm opposition” to a statement by the US to the WTO that it opposes granting China market
Europe:
ECB’s Villeroy (France) reiterated recovery in euro area was gaining momentum as current favorable economic winds were ‘strong’. Still no room for complacency; needed to be ‘vigilant’ as inflation short of goal
European institutions reach a staff level agreement with Greece authorities on the policy package supporting the ESM program, will presented to EuroGroup on Dec 4th. Greek authorities planned to implement the prior actions necessary to conclude the 3rd review as soon as possible
Bank of International Settlements (BIS) Quarterly Review: Stock prices are above historical averages; Bond-market yields show even more froth than stocks. When and if interest rates begin to rise, corporates may have the incentive to tilt their capital structure back to equity, or at least to reduce stock repurchases, which could raise further questions about stock market valuations
Brexit:
UK Business Sec Clark: Optimistic that Britain and the EU will agree on all major issues before next week’s EU summit. UK fully recognized its payment obligation. Both sides needed to get a clear understanding what these duties are and when they were due. Agreement about rights of EU citizens living in UK an UK citizens living abroad was close
EU official: Britain and EU were 90% of the way to a deal that would open the door for transition and trade talks this month
Diplomatic sources noted that EU was expected to offer a 1st signal this week that enough progress has been made in Brexit talks to start new negotiations with London in Dec on future trade relations. PM May and EU’s Juncker to sign a document after meeting in Brussels that would spell out both sides’ commitment to sorting out the Irish border conundrum
EU’s Tusk: if UK offer was not acceptable to Ireland then its not acceptable to the EU. Supportive of Irish request for no hard border with N. Ireland; To consult with Irish should UK offer on border be sufficient
Americas:
US Senate voted 51-49 to approve sweeping tax overhaul; talks between Senate and House of Representatives will likely begin during week of Dec 4th
President Trump tweets: Sec State Tillerson is not leaving the administration (**Note: Sec of State Tillerson: no truth to reports that he is being replaced)
ABC News suspended reporter Brian Ross for ‘erroneous’ story related to former national security adviser Michael Flynn. Noted that It was shortly after the election, that President-elect Trump directed Flynn to contact Russian officials on topics that included working jointly against ISIS
Economic Data:
(TR) Turkey Nov CPI M/M: 1.5% v 1.1%e; Y/Y: 13.0% v 12.5%e; CPI Core Index Y/Y: 12.1% v 12.3%e
(ES) Spain Nov Unemployment M/M: +7.3K v 56.8K prior
(EU) Euro Zone Dec Sentix Investor Confidence: 31.1 v 33.4e
(UK) Nov Construction PMI: 53.1 v 51.0e
(GR) Greece Q3 GDP Q/Q: 0.3% v 0.8% prior Y/Y: 1.3% v 1.6% prior
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.7% at 386.7, FTSE +0.7% at 7349, DAX +1.1% at 13007, CAC-40 +0.9% at 5362, IBEX-35 +1.0% at 10184, FTSE MIB +1.1% at 22344, SMI +0.8% at 9348, S&P 500 Futures +0.5%]
Market Focal Points/Key Themes:
European Indices trade sharply higher tracking US futures after the US senate voted in favor of tax reform which in tern has also helped lift the dollar. M&A news was the primary theme this morning with Prysmian acquiring General Cable in a $3B deal while Trygvesta acquired Alka Forsinkring for DKK8.2B. Elsewhere Rio tinto provided initial FY18 outlook, whilst Alk Abello trades sharply lower after announces a 3 year investment plan, as well a temporarily suspending its dividend.
Dialog Semi continues to decline after it confirmed it continues to supply Apple, but will know in Q1 whether this relationship will change.
Equities
Materials: [Rio Tinto [RIO.UK] +1.1% (Initial FY18 outlook, Chairman appointment)]
Financials: [Trygvesta [TRYG.DK] +3.5% (Acquires Alka Forsinkring for DKK8.2B)]
Technology: [Soitec [SOI.FR] +2.3% (Capital markets day), Dialog Semi [DLG.DE] -16% (Confirms it continues to supply Apple)]
Telecom: [Prysmian [PRY.IT] -2.1% (Acquires General Cable Corp for $30/shr)]
Healthcare: [Odorsia [IDIA.CH] +3.9% (Collaboration with Janssen Biotech), Circasia [CIR.UK] +12.2% (Tudorza® Successfully Met Both Primary Endpoints in ASCENT Phase IV Study), Alk Abello [ALKB.DK] -11% (3 year investment plan)]
Speakers
Ireland European Affairs Min Mcentee: Not close to a breakthrough on Irish border issue but are making progress
Ireland Dep PM Coveney: Have seen progress on Irish issues. Need clear language that there will be no border. Have a text but no agreement. Could have a breakthrough as early as today
Bavarian Premier Seehofer to step down from position in Q1 (in-line with recent speculation). Soeder to become Bavaria PM with CSU backing
Turkey Dep PM Simsek: Lasting inflation decline to begin in Dec
Japan PM Abe: Infrastructure investment i not keeping up with demand
China reportedly will keep exempting 10% purchase tax on electric vehicles to 2020
China and Japan officials to hold 8th round of discussions regarding maritime affairs during Dec 5-6th period
Russia Nov Oil Production at 10.94M bpd v 10.93M m/m
Saudi Arabia Oil Min Al-Falih: Believed OPEC would not alter course in H2 of 2018. Will not flood the market
Currencies
The USD began the trading week exhibiting a relief rally after the US Senate passed the tax reform bill. Worries about the possibility of the bill being delayed had kept the dollar weak last week
EUR/USD lower by 0.2% at 1.1860 area
GBP/USD was relatively steady as Brexit talks head into the EU deadline for clarity. Pair off 0.2% at 1.3435 area
USD/JPY higher by 0.7% at 112.85
Fixed Income
Bund futures trade 162.99 down 56 ticks, after the U.S. Senate passed the tax cuts bill. Continued dowward pressure sees 162.10 followed by 161.50. A reversal targets 163.40 then 163.75.
Gilt futures trade at 125.11 down 34 ticks, following the move in Treasuries and Bunds. Continued upside eyeing 125.15 then 125.65. Downside targets include 124.01 then 123.75.
Friday’s liquidity report showed Thursday’s excess liquidity rose to a record high of €1.912T from €1.886T. Use of the marginal lending facility fell to €243M from €265M prior.
Looking Ahead
(RO) Romania Nov International Reserves: No est v $37.6B prior
(UK) PM May’s lunch with EU’s Juncker ahead of key Brexit clarification deadline.
(CH) Swiss Parliament holds Winter Session in Bern
05:25 (BR) Brazil Central Bank Weekly Economists Survey
05:30 (NL) Netherlands Debt Agency (DSTA) to sell Bills
06:45 (US) Daily Libor Fixing
08:00 (BR) Brazil Oct CNI Capacity Utilization: No est v 77.5% prior
08:00 (SG) Singapore Nov Purchasing Managers Index (PMI): No est v 52.6 prior
08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
08:05 (UK) Baltic Dry Bulk Index
08:30 (CH) Swiss Government question time in Parliament
08:55 (FR) France Debt Agency (AFT) to sell combined €5.2-6.4B in 2-month, 3-month, 6-month and 12-month BTF Bills
09:00 (MX) Mexico Oct Leading Indicators M/M: No est v 0.12 prior
09:00 (EU) Eurogroup meeting
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:00 (US) Oct Factory Orders: -0.4%e v+ 1.4% prior, Factory Orders (Ex Transportation): No est v 0.7% prior
10:00 (US) Oct Final Durable Goods Orders: -1.0%e v -1.2% prelim; Durables Ex Transportation: No est v 0.4% prelim
10:00 (DK) Denmark Nov Foreign Reserves (DKK): No est v 464.3B prior
11:00 (IS) Iceland Q3 Current Account (ISK): No est v 16B prior
11:30 (US) Treasuries to sell to 3-month and 6-month bills
14:00 (CO) Colombia Nov Total PPI M/M: No est v 0.8% prior
