Fundamental Analysis

Market Update - European Session: Bitcoin Makes Another New All Time High Crossing $15K

Typography

Notes/Observations

Germany Industrial Production misses expectations - Irish border issue highlights that the Brexit process would not be solved overnight; More reports of a potential revolt within PM's party over her strategy

German SPD party will formally decide later today whether it resume talks with the Union on a Grand coalition

China Nov FX Reaserves rise for the 10th straight month

Asia:

BoJ Gov Kuroda reiterated long way to go to reach 2% price target, would 'persistently' continue 'powerful' easing with the current yield curve policy appropriate for now. BoJ had necessary tools to engineer a smooth exit from QQE but too early to speak about details of future exit

Europe:

Allies of Brexit Min Davis reportedly have launched attempt to replace PM May (**Reminder: On Nov 12th reports circulated that 40 MPs had agreed to sign a letter of no confidence in PM May, short of number required to force leadership vote (48 required)

EU Juncker said to be concerned that UK PM May's Govt could collapse next week if Brexit talks remained deadlocked; Juncker would extend deadline for PM May to settle a dispute over the Irish border to the eve of an EU leaders' summit next Thursday (Dec 14th) to maximize her chances of success

Ireland PM Varadkar and UK PM May joint statement agreed on the 'paramount importance' of no hard border in Ireland

Ireland PM Varadkar: had a good phone call with UK PM May, and willing to look at any proposals from the UK side. PM May did not suggest any new wording on the Irish border today. Any new wording on the Irish border must be consistent with the substance of the text that was agreed upon on Monday. There was very little room to maneuver

Americas:

President Trump: recognized Jerusalem as Israel's capital (as expected); believed it's in the best interests of the US and the pursuit of peace between Israelis and Palestinians

White House: President Trump looking forward to productive discussion with Republican, Democrat leadership on Thursday (Dec 7th); administration hopes to find fiscally responsible ways to avoid a government shutdown

Sen Cornyn (R-TX): Congress might wrap up tax negotiations before Dec 22nd to send bill to President Trump

US House Republicans said to seek to link debt ceiling increase to spending bill

Economic Data:

(NL) Netherlands Nov CPI M/M: -0.2% v +0.1% prior; Y/Y: 1.5% v 1.3% prior

(NL) Netherlands Nov CPI EU Harmonized M/M: -0.4% v +0.2% prior; Y/Y: 1.5% v 1.4%e

(CH) Swiss Nov Unemployment Rate: 3.1% v 3.1%e, Unemployment Rate (Seasonally adj): 3.0% v 3.1%e

(DE) Germany Oct Industrial Production M/M: -1.4% v +0.9%e; Y/Y: 2.7% v 4.3%e

(NO) Norway Oct Industrial Production M/M: -1.4% v -1.7% prior; Y/Y: -2.0% v +12.3% prior

(NO) Norway Oct Manufacturing Production M/M: 0.7% v 0.7%e; Y/Y: 1.9% v 1.2% prior

(DK) Denmark Oct Industrial Production M/M: +2.5 v -5.1% prior

(FR) France Oct Trade Balance: -€5.0B v -€4.7Be

(CH) Swiss Nov Foreign Currency Reserves (CHF): 738.2B v 745.0Be (1st decline since Jun)

(CN) China Nov Foreign Reserves: $3.119T v $3.124Te (10th straight month of increases)

(UK) Nov Halifax House Prices M/M: 0.5% v 0.2%e; 3M/3M: 3.9% v 3.9%e

(SE) Sweden Nov Average House Prices (SEK): 2.944 v 2.972M prior - (SE) Sweden Nov Budget Balance: No est v 6.7B prior

(IT) Italy Q3 Unemployment Rate: 11.2% v 11.2%e (matched lowest quarterly reading since 2012)

(EU) Euro Zone Q3 Final GDP (3rd reading) Q/Q: 0.6% v 0.6%e v 0.6% prelim; Y/Y: 2.6% v 2.5%e

(EU) Euro Zone Q3 Household Consumption Q/Q: 0.3% v 0.4%e, Govt Expenditure Q/Q: 0.2% v 0.3%e, Gross Fixed Capital Q/Q: 1.1% v 0.7%e

(BR) Brazil Nov FGV Inflation IGP-DI M/M: 0.8% v 0.6%e; Y/Y: -0.3% v -0.5%e

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €3.66B vs. €3.0-4.0B indicated range in 2022, 2027 and 2041 Bonds

Sold €1.24B in 0.45% Oct 2022 SPGB; Avg yield: 0.290% v 0.363% prior, Bid-to-cover: 1.9x v 2.34x prior\

Sold €1.63B in 1.45% Oct 2027 SPGB; Avg yield: 1.410% v 1.536% prior; Bid-to-cover: 1.5x v 1.52x prior

Sold €790M9Bn 4.70% July 2041 SPGB; Avg Yield: 2.427% v 2.545% prior; Bid-to-cover: 1.6x v 1.40x prior

Spain Debt Agency (Tesoro) sold €490M vs. €250-750M indicated range in 0.30% Nov I/L 2021 bonds (SPGBei;Bonoei) bond; Real Yield: -1.183% v -0.927% prior; Bid-to-cover: 2.67x v 3.28x prior

(FR) France Debt Agency (AFT) sold total €3.997B vs. €3.0-4.0B indicated in 2026, 2029 and 2039 Oats

Sold €1.99B in 0.25% Nov 2026 Oat; Avg Yield: 0.36% v 0.91% prior; Bid-to-cover: 1.86x v 2.75x prior

Sold €942M in 5.5% Apr 2029 Oat; Avg Yield 0.60% v 0.93% prior; Bid-to-cover: 1.79x v 1.90x prior

Sold €1.065B in 1.75% 2039 green Oat; Avg Yield: 1.27% v 1.51% prior; Bid-to-cover: 1.69x v 1.87x prior

(- SE) Sweden sold SEK 500M in 0.125% I/L 2026 bond; Avg Yield: -1.4879% v -1.277% prior; Bid-to-cover: 2.57x v 1.95x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.3% at 387.5, FTSE +0.3% at 7371, DAX +0.5% at 13064, CAC-40 +0.3% at 5392, IBEX-35 +0.3% at 10214, FTSE MIB +0.3% at 22371, SMI +0.3% at 9336, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European Indices trade higher across the board following a mixed session in Asia, and tracking gains in US futures overnight. In the UK Bookmakers Ladbrokes Coral and GVC have has discussion over a potential merger, with shares up sharply as a result. Else where Uniper shares trade lower after 2018 guidance, while Orange trades higher after providing mid and long term guidance ahead of its investor day. On the earnings front DS Smith trades higher, while Schaffner trades lower, while Steinhoff Intl continues to decline sharply after the company's update after the close failed to provide assurance. Looking ahead notable earners include Dollar General, Ciena and Jinksolar.

Equities

Consumer discretionary [Ladbrokes Coral [LCL.UK] +23%, GVC [GVC.UK] +4.1% (Discussions with GVC over possible combination), William Hill [WMH.UK] +2.1% (Reach agreement on NYX), Steinhoff [SNH.ZA] -30% [Updates market on concerns) ]

Industrials: [Skanska [SKAB.SE] +1.2% (New CEO) ]

Financials: [ Xafinity [XAF.UK] +6% (Earnings, Acquisition)]

Telecom: [Orange [ORA.FR] +1.5% (Investor day)]

Energy: [Uniper [UN01.DE] -1.0% (Initial FY18 outlook)]

Speakers

ECB approved new Eurosystem-wide collateral management system

ECB's Nouy (SSM chief): Bank NPL measures will not happen automatically; proposals to be presented in Q1

Sweden Central Bank (Riksbank) Floden: No reason to be alarmed over housing market macro effects at this time. Development on housing market importance needed to be analyzed. Could stop the QE bond buying program and resume it if necessary (**Note current program runs through December)

Poland Parliament said to have rejected a motion of no confidence in govt (**Note: awaiting the announcement of a new PM)

Turkey Econ Min Zeybekci: Q3 GDP growth to exceed 10%

China FX Regulator SAFE: Forex reserves size to remain stable overall. More balanced international payments, steady cross-border capital flows to help maintain stable forex reserves overall

Currencies

GBP currency remained vulnerable as talks between the UK and the EU remain at an impasse over the question what will happen with the Irish border after the UK leaves the bloc. Renewed circulation that allies of Brexit Min Davis have launched an attempt to replace PM May before the end of the year

EUR/USD was steady in quiet trading. German SPD party will formally decide later today whether it resume talks with the Union on a Grand coalition (party went into the opposition following the Sept elections)

USD/JPY was higher to move back above the 112.60 area as the Nikkei stock index bounced back after suffering its worst decline in 2017 during Wed's session

Fixed Income

Bund futures trade 163.50 up 5 ticks, as investors focus on technical levels. Continued downward pressure sees 162.10 followed by 161.50. A reversal targets 163.75 then 164.33.

Gilt futures trade at 125.58, little changed and near the highs of December. Continued upside eyeing 125.75 then 126.35. Downside targets include 124.50 then 123.75.

Thursday's liquidity report showed Wednesday's excess liquidity rose to €1.914T from €1.910T. Use of the marginal lending facility rose to €123M from €704M prior.

Corporate issuance saw 3 issuers raise $5.7B in the primary market

Looking Ahead

05:30 (UK DMO to sell £2.25B in 1.5% July 2047 Gilts

05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)

05:30 (PL) Poland to sell Bonds - 06:00 (IE) Ireland Oct Live Register Monthly Change: No est v -2.4K prior

06:00 (CL) Chile Nov CPI M/M: 0.1%e v 0.6% prior; Y/Y: 1.9%e v 1.9% prior

06:00 (ZA) South Africa Oct Manufacturing Production M/M: +1.0%e v -0.8% prior; Y/Y: +1.1%e v -1.6% prior

06:30 (CL) Chile Nov International Reserves: No est v $39.3B prior

06:30 (CL) Chile Nov Trade Balance: $0.7Be v $0.6B prior; Total Exports: $6.3Be v $6.0B prior; Total Imports: $5.6Be v $5.4B prior

06:45 (US) Daily Libor Fixing - 07:30 (US) Nov Challenger Job Cuts: No est v 29.8K prior; Y/Y: No est v -3.0% prior

08:00 (PL) Poland Nov Official Reserves: No est v $110.6B prior

08:00 (RU) Russia Gold and Forex Reserve w/e Dec 1st: No est v $430.2B prior

08:00 (RU) Russia Nov Official Reserve Assets: $428.5Be v $424.9B prior

08:05 (UK) Baltic Dry Bulk Index

08:30 (US) Initial Jobless Claims: 240Ke v 238K prior; Continuing Claims: 1.92Me v 1.957M prior

08:30 (CA) Canada Oct Building Permits M/M: No est v 3.8% prior

08:30 (US) Weekly USDA Net Export Sales

09:00 (MX) Mexico Nov CPI M/M: 1.0%e v 0.6% prior; Y/Y: 6.6%e v 6.4% prior, CPI Core M/M: 0.3%e v 0.3% prior

09:00 (FI) Finland Parliament no-confidence motion

09:00 (BR) Brazil to sell 2018, 2019 and 2021 LTN Bills

09:30 (TR) Turkey Nov Cash Budget Balance (TRY): No est v -4.5B prior

10:00 (CA) Canada Nov Ivey Purchasing Managers Index (seasonally Adj): 62.5e v 63.8 prior

10:30 (US) Weekly EIA Natural Gas Inventories

11:00 (US) Treasury announcement for upcoming 3-year, 10-year and 30-year issuance during week of Dec 11th

12:00 (US) Q3 Financial Accounts: Household Change in Net Worth: No est v $1.698T prior

14:00 (CO) Colombia Central Bank Nov Minutes

15:00 (US) Oct Consumer Credit: $17.0Be v $20.8B prior

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