Notes/Observations
USD begins 2018 with fresh broad declines; Dollar Index at 3 1/2 month lows
Both German and Euro Zone Dec Final PMI Manufacturing unrevised and at record highs; France revised lower but still the highest reading since Sept 2000
Asia:
PBoC: To set up temporary liquidity facility for the China Lunar New Year which will allow banks to use official required deposit reserves of up to 200bps
China Dec Manufacturing PMI (Govt official): 51.6vV 51.6e; Non-Manufacturing: 55.0 v 54.7e
China Dec Caixin PMI Manufacturing: 51.5 v 50.7e (highest reading since Aug)
Europe:
PM May said to consider Brexit role for Boris Johnson in cabinet reshuffle
ECB’s Coeure (France): saw "reasonable chance" bond buys will not be extended
ECB’s Mersch (Luxembourg): We should take a position on the future of QE prior to summer 2018. Needed to move step by step toward monetary policy normalization; can’t act too tentatively and too late
Americas:
President Trump tweet: Iran is failing at every level despite the terrible deal made with them by the Obama Administration. The great Iranian people have been repressed for many years. They are hungry for food & for freedom. Along with human rights, the wealth of Iran is being looted. TIME FOR CHANGE!
Energy:
Weekly Baker Hughes US Rig Count: 929 v 931 w/w (-0.2%) (2nd weekly decline in a row)
Economic Data:
(IN) India Dec PMI Manufacturing: 54.7 v 52.6 prior (5th month of expansion)
(IE) Ireland Dec Manufacturing PMI: 59.1 v 58.1 prior (record high)
(TR) Turkey Dec PMI Manufacturing: 54.9 v 52.9 prior (10th month of expansion)
(SE) Sweden Dec PMI Manufacturing: 60.463.0e
(NL) Netherlands Dec Manufacturing PMI: 62.2 v 62.4 prior (52nd month of expansion)
(NO) Norway Dec Manufacturing PMI: 57.8 v 57.0e
(PL) Poland Dec PMI Manufacturing: 55.0 v 54.6 (38th month of expansion and highest since Feb 2015)
(HU) Hungary Dec Manufacturing PMI: 60.0 v 58.8 prior (25th month of expansion)
(ES) Spain Dec Manufacturing PMI: 55.8 v 56.2e (50th month of expansion)
(CZ) Czech Republic Dec PMI Manufacturing: 59.8 v 59.2e (17th month of expansion)
(IT) Italy Dec Manufacturing PMI: 57.4 v 58.5e (16th month of expansion)
(FR) France Dec Final Manufacturing PMI: 58.8 v 59.3e (confirmed 15th month of expansion and highest since Sept 2000)
(DE) Germany Dec Final Manufacturing PMI: 63.3 v 63.3e (confirmed 37th month of growth and a record high)
(EU) Euro Zone Dec Final Manufacturing PMI: # v 60.6e (confirmed 53rd month of growth and a record high)
(GR) Greece Dec Manufacturing PMI: 53.1 v 52.2 prior (7th month of expansion and highest since Jun 2008)
(UK) Dec PMI Manufacturing: 56.3 v 57.9e
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.6% at 386.9, FTSE -0.3% at 7,650, DAX -0.3% at 12,942, CAC-40 %-0.1 at 5, IBEX-35 % at , FTSE MIB % at , SMI % at , S&P 500 Futures +0.2%]
Market Focal Points/Key Themes: European Indices have started 2018 on the weaker foot with notable weakness in the Dax and French CAC, with the strong Euro putting pressure on indices after reaching a 4 month high. On the corporate front IAG trades higher after confirming the acquisition of NIKI from Air Berlin, while M&S trades slightly higher following the divestiture of its retail units in Hong Kong and Macau. BP trades slightly lower after the company expects a one off non cash charge of $1.5B in Q4 due to the US tax changes and Glencore trades lower after selling its Tahmoor Coal Mine in Australia.
Equities
Consumer Discretionary [International Consolidated Airlines [IAG.UK] +1.8% (Confirms acquisition of NIKI for €20M), Steinhoff [SNH.ZA] +12% (Update on restatement of financial statements), Stockmann [STCBV.FI] +4.4% (Completed the divestment of Delicatessen’s business in Finland for €27M; Looks at possible divestment of its book house property)]
Energy [BP [BP.UK] -0.3% (Impact of US tax overhaul)]
Materials [Glencore [GLEN.UK] -0.6% (Divestiture)]
Speakers
Norway Central Bank (Norges) Gov Olsen: Interest rate to normalize
Norway PM Solberg: Domestic economy was doing better; Hoped for a three-party coalition
Currencies
EUR/USD was higher by 0.4% in the session as the pair added to its post-holiday gains. The pair has been rising on expectations that ECB’s QE program would not be extended when the program ends in Sept (expectations heightened following weekend commentary by ECB’s Coeure (France): who noted that saw a "reasonable chance" bond buys would not be extended). ECB begins 2018 by cutting its monthly purchases by half to €30B
GBP/USD was again approaching the post-Brexit 1.36 key resistance area. GBP aided by speculation that PM May would consider a Cabinet reshuffle to quell the storm within her own Tory party and provide a Brexit role for Boris Johnson.
Fixed Income
Bund Futures trade down 22 ticks at 161.46 bouncing off a low of 161.22 following the decline in Equities as the Euro continues to strengthen. A continued move below today’s 161.22 low targets 161.00 then 160.71, with a continued rebound targeting 161.86.
Mondays liquidity report showed Friday’s excess liquidity fell to €1.758T from €1.779T prior. Use of the marginal lending facility rose to €299M from €266M prior.
European corporate issuance rose 12.6% in 2017 to €1.27T with SSAs accounting for ~36% of the primary issuance. In total 1,776 tranches were issued via 828 issuers.
Looking Ahead
(IT) Italy Dec Budget Balance: No est v -€5.5B prior
05:25 (BR) Brazil Central Bank Weekly Economists Survey
05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 6-month Bills
05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
06:45 (US) Daily Libor Fixing
07:00 (CA) Canada Nov Leading Indicator M/M: No est v 0.4% prior
07:00 (BR) Brazil Dec PMI Manufacturing: No est v 53.5 prior
(ZA) South Africa Dec Naamsa Vehicle Sales Y/Y: No est v 7.2% prior
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming issuance
08:05 (UK) Baltic Dry Bulk Index
08:50 (FR) France Debt Agency (AFT) to sell combined €4.5-5.7B in 3-month, 6-month and 12-month BTF Bills
09:00 (MX) Mexico Dec IMEF Manufacturing Index: 52.4e v 52.6 prior; Non-Manufacturing Index: 52.0e v 52.5 prior
09:30 (CA) Canada Dec Manufacturing PMI: No est v 54.4 prior
09:30 (EU) ECB paused its Covered-Bond Purchases into year-end (no update)
09:45 (US) Dec Final Markit Manufacturing PMI: 55.0e v 55.0 prelim
10:00 (MX) Mexico Nov Total Remittances: $2.5Be v $2.6B prior
10:30 (MX) Mexico Dec PMI Manufacturing: No est v 52.4 prior
11:30 (US) Treasury to sell 4-Week and 52-Week Bills
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
12:00 (BR) Brazil Dec Trade Balance: $4.2Be v $3.6B prior; Total Exports: $17.1Be v $16.7B prior; Total Imports: $12.9Be v 13.1B prior
12:00 (IT) Italy Dec New Car Registrations Y/Y: No est v 6.8% prior
