Notes/Observations
Democrats gain seat in US Senate follow Jones victory in Alabama special election; not expected to impact the GOP’s plan to pass tax reform, as Republican leaders are racing to approve the tax legislation by early next week
Plethora of central bank rate decisions over the next 24 hours including the FOMC today and BOE and ECB on Thursday.
Focus on FOMC rate decision later today with 3rd rate hike for 2017 expected; markets eye dots for 2018 rate outlook
Asia:
US/EU/Japan Joint Statement at WTO: vowed to work together to fight market-distorting trade practices and policies that have fueled excess production capacity (in-line with speculation)
Japan Govt said to keep the assumed interest rate at record low of 1.1% in FY18/19 budget draft
Asian Development Bank (ADB) raised 2017 Developing Asia GDP growth forecast to from 5.9% to 6.0%; maintains 2018 forecast at 5.8
Europe:
PM May is facing another painful Brexit dilemma as Tory lawmakers are lining up vote for an amendment to her flagship law that paves the way for the UK’s exit from the EU. Faces the issue whether to cave in to rebels in her Conservative Party who want the power to veto the final Brexit deal or face a potentially damaging defeat.
Italy President Mattarella to dissolve Parliament on Dec 28th or 29th to clear the way for elections(in-line with recent speculation)
Americas:
Alabama special election has Democrat Jones defeating Republican candidate Moore
Energy:
Weekly API Oil Inventories: Crude: -7.4M v -5.5M prior
OPEC Sec Gen Barkindo: Affirms re-balancing of oil market ‘on its way’; strong economic growth, especially in China, is positive. Reiterated saw 2018 global oil demand up 1.5M B/D, in line with 2017
Economic Data:
(DE) Germany Nov Final CPI M/M: 0.3% v 0.3%e; Y/Y: 1.8% v 1.8%e
(DE) Germany Nov Final CPI EU Harmonized M/M: 0.3% v 0.3%e; Y/Y: 1.8% v 1.8%e
(DE) Germany Nov Wholesale Price Index M/M: 0.5% v 0.0% prior; Y/Y: 3.0% v 3.0% prior
(ZA) South Africa Nov CPI M/M: 0.1% v 0.1%e; Y/Y: 4.6% v 4.7%e
(ZA) South Africa Nov CPI Core M/M: 0.0% v 0.2%e; Y/Y: 4.4% v 4.5%e
Iceland Central Bank (Sedabanki) left its 7-day Deposit Rate unchanged at 4.25%
(IT) Italy Oct Industrial Production M/M: 0.5% v 0.7%e; Y/Y: 0.7% v 0.8%e, Industrial Production WDA Y/Y: 3.1% v 3.4%e
(UK) Nov Jobless Claims Change: +5.9K v +6.5K prior; Claimant Count Rate: 2.3% v 2.3% prior
(UK) Oct Average Weekly Earnings 3M/Y/Y: 2.5% v 2.5%e; Weekly Earnings ex Bonus 3M/Y: 2.2% v 2.2%e
(UK) Oct ILO Unemployment Rate: 4.3% v 4.2%e, Employment Change 3M/3M: -56K v -40Ke
(EU) Euro Zone Q3 Employment Q/Q: 0.4% v 0.4% prior; Y/Y: 1.7% v 1.6% prior
(EU) Euro Zone Oct Industrial Production M/M: 0.2% v 0.0%e; Y/Y: 3.7% v 3.2%e
Fixed Income Issuance:
(IS) Iceland to sell EUR-denominated 5-year notes; guidance seen +45bps to mid-swaps
(IN) India sold total INR110B vs. INR110B indicated in 3-month, 6-month and 12-month bills
(DK) Denmark sold total DK4.64B in 3-month and 6-month bills
(SE) Sweden sold SEK2.0B vs. SEK2.0B indicated in % 2028 bonds; Avg Yield: 0.7161% v 0.7373% prior; bid-to-cover: 1.86x v 2.31x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at at 391.4, FTSE +0.1% at 7504, DAX -0.1% at 13165, CAC-40 -0.1% at 5421, IBEX-35 +0.3% at 10318, FTSE MIB -0.4% at 22635, SMI -0.1% at 9351 , S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade mixed this morning following mixed futures in the US after a flat close in Wall Street yesterday. US Futures did see initial weakness after Democrat Doug Jones wins the Alabama Senate race before paring the losses. Retailers were on the front foot this morning with Spanish Clothing giant Inditex lifting the Ibex after 9M results, while Electronics Firm Dixons Carphone trades over 4% higher after encouraging holiday season trading. Elsewhere following their Investor day Serco rises sharply, after lifting guidance, with shares of Nexans in Paris also higher after ther longer term outlook. Looking ahead looking out for guidance from the likes of Honeywell and United Health.
Equities
Consumer Discretionary [Dixons Carphone [CD.UK] +4% (Earnings), Inditex [ITX.ES] +3.0% (Earnings), TUI [TUI.UK] +0.8% (Earnings), Metro [B4B.DE] +1.1% (Earnings)]
Financials [Serco [SRP.UK] +8% (Investor day, lifts outlook)
Industrials [John Wood Group [WG.UK] -1.3% (Outlook), Aurubis [NDA.DE] -3.8% (Earnings)
Technology [Wirecard [WDI.UK] +0.8% (FY18 outlook), Nexans [NEX.FR] +1.4% (Investor day)]
Real Estate [Purple Bricks [URP.UK] -7% (Trading update)]
Speakers
Brexit Min Davis sent a letter to his conservative law makers that reiterated view that UK would not ratify the EU deal without Parliamentary approval (Seen as an attempt to ward off party in-fighting)
EU Chief Brexit Negotiator Barnier reiterated last week’s Brexit agreement was complex; to recommend moving into phase 2 of negotiations
German SPD Dep leader Stegner reiterated party view that would not join Merkel coalition at any price
Iceland Central Bank (Sedabanki) policy statement noted that lower headline inflation would be offset by waning effects of past appreciation of exchange rate. Outlook was for continued strong demand pressures in domestic economy. Called for a tight monetary stance
Czech Central Bank Vice Gov Hampl: More rate hikes might be needed compared to current forecast. Saw risks of stronger domestic inflation pressure
Sweden Employment Service (PES) raised 2017 Unemployment forecast from 6.6% to 6.8% while cutting 2018 Unemployment forecast from 6.7% to 6.6%
German DIW institute raised 2017 and 2018 GDP growth forecasts in its Economic outlook Report. Raised GDP from 1.9% to 2.1% for both years
Brazil Fin Min Meirelles: 2018 GDP growth seen close to 3.0%. Believed that pension reform will be approved
China and UK said to hold bilateral trade talks between Dec 15-16th
UAE Oil Min Mazrouei: To early to speculate on any exit from OPEC/Non-Opec production cuts
Currencies
The softer USD exhibited during Asia saw that trend dissipate as the EU morning progressed. Alabama election results apparently get moved aside ahead of the Fed’s pronouncements
There are a plethora of central bank rate decisions over the next 24 hours including the FOMC today and BOE and ECB on Thursday.
Some dealers were quite perplexed that the GBP failed to gain traction after the recent headline CPI reading of 3.1% and higher than expected wage data in today’s session. While ILO unemployment rate matched a 4 decade low the employment change saw its 2nd straight decline. GBP/USD at 1.3340 area just ahead of the NY morning.
Fixed Income
Bund futures trade 163.36 down 16 ticks, easing back marginally. Continued upside sees 163.63 then 164.25. A reversal targets 162.50 then 162.38.
Gilt futures trade at 125.73 up 7 ticks after UK wages come roughly in line while jobless claims and ILO unemployment rate miss expectations. Continued upside eyeing 126.15 then 126.65. Downside targets include 125.24 then 124.75.
Wednesday’s liquidity report showed Tuesday’s use of the marginal lending facility rose to €M from €283M prior.
Corporate issuance saw 5 issuers raise $1.9B in the primary market
Looking Ahead
OPEC Dec Monthly Oil Report
05:30 (CL) Chile Central Bank’s Traders Survey
05:30 (UK) DMO to sell 0.125% 2036 I/L Gilts
06:00 (BR) Brazil Oct Retail Sales M/M: 0.1%e v 0.5% prior; Y/Y: 5.0%e v 6.4% prior
06:00 (BR) Brazil Oct Board Retail Sales M/M: -0.2%e v +1.0% prior; Y/Y: 9.3%e v 9.3% prior
06:00 (IL) Israel Nov Trade Balance: No est v -$1.7B prior
06:00 (ZA) South Africa Oct Retail Sales M/M: +0.2%e v -0.7% prior; Y/Y: 5.3%e v 5.4% prior
06:30 (IS) Iceland to sell 6-month Bills – 06:45 (US) Daily Libor Fixing
07:00 (RU) Russia to sell combined RUB40B in 2021 and 2028 OFZ bonds
07:00 (US) MBA Mortgage Applications w/e Dec 8th: No est v 4.7% prior
07:00 (UK) PM May Question Time in House of Commons
07:30 (FI) Finland PM Sipila on upcoming EU Leader Summit
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Nov CPI M/M: 0.4%e v 0.1% prior; Y/Y: 2.2%e v 2.0% prior
08:30 (US) Nov CPI Ex Food and Energy M/M: 0.2%e v 0.2% prior; Y/Y: 1.8%e v 1.8% prior
08:30 (US) Nov CPI Index NSA: 246.816e v 246.663 prior; CPI Core Index SA: 253.932e v 253.428 prior
08:30 (US) Nov Real Avg Weekly Earnings Y/Y: No est v 0.4% prior, Real Avg Hourly Earning Y/Y: No est v 0.4% prior
08:30 (CA) Canada Nov Teranet/National Bank HPI M/M: No est v -1.0% prior; Y/Y: No est v 10.0% prior, House Price Index: No est v 218.13 prior
10:30 (US) Weekly DOE Crude Oil Inventories
14:00 (AR) Argentina Q3 Unemployment Rate: No est v 8.7% prior
14:00 (US) FOMC Rate Decision: Expected to raise Funds Target Range 25bps to 1.25%-1.50%
14:30 (US) Fed Chair Yellen post rate decision press conference
