Notes/Observations
Various European central banks raise their growth outlook (France, Germany, Austria) in the aftermath followed ECB staff projections (Spain cut citing Catalonia crisis)
Asia:
Japan Q4 Tankan All Industry Manufacturing Index 25 v 24e (11-year high); Large Manufacturing Index: 23e v 24e; Large Manufacturers Outlook: 19 v 22e
BoJ said to ‘tweak’ message as dissenter calls for more easing. BoJ to adjust its communication to flag risks of additional easing after some investors wrong interpreted BOJ Kuroda’s recent remarks on reversal rate theory as a hint about an early policy exit
Europe:
Minority of ECB officials sought to signal guidance may change if inflation keeps accelerating
ECB’s Weidmann (Germany): Loose EU monetary policy contributed to deceptive calm; it’s a fallacy to believe the euro area was prepared for all cases
UK PM May said expected to ‘back down’ on Brexit date plan to avoid a 2nd Commons defeat next week
Germany Chancellor Merkel: EU leaders could move to Brexit Phase 2. EU leaders have made clear that UK PM May has made good offers which might make it possible for the EU27 to see sufficient progress and agree to move on to phase 2 discussions. There still remain many questions to be solved; time was running out
Bank of France raised GDP growth forecasts for 2017 thru 2019 (in-line with ECB staff projections). Raised 2017 GDP growth forecast from 1.3% to 1.8% and 2018 GDP from 1.5% to 1.7%
Americas:
Senator Rubio said to vote no on tax bill unless working poor tax credit is expanded
Speaker of House Ryan (R-WI) said ti be considering retiring from Congress after 2018
Bank of Canada (BOC) Gov Poloz: To continue to be cautious on rates; growing increasingly confident that the economy would need less monetary stimulus over time
Mexico Central Bank (Banxico) raised Overnight Rate by 25bps to 7.25% (as expected)
Economic Data:
(NL) Netherlands Oct Retail Sales Y/Y: 0.2% v 6.5% prior
(DK) Denmark Nov PPI M/M: 0.9 v 0.5% prior; Y/Y: 1.2% v 1.9% prior
(NO) Norway Nov Trade Balance (NOK): -4.2B v 15.1B prior
(TR) Turkey Sept Unemployment Rate: 10.6% v 10.7%e
(CN) Weekly Shanghai copper inventories (SHFE): 142.1K v 158.1K tons prior
(FR) France Q3 Final Wages Q/Q: 0.3% v 0.3%e
(IT) Italy Oct General Government Debt: €2.290T v €2.284T prior
(EU) Euro Zone Oct Trade Balance (Seasonally Adj): €19.0B v €24.3Be; Trade Balance NSA (unadj): €B v €26.4B prior
Fixed Income Issuance:
(ZA) South Africa sold total ZAR900M vs. ZAR900M indicated in I/L 2029, 2033 and 2050 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.3% at at 387.9, FTSE -0.1% at 7444, DAX -0.4% at 13020, CAC-40 -0.2% at 5345, IBEX-35 +0.1% at 10189, FTSE MIB -0.4% at 22110, SMI flat at 9382 , S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
European Indices trade largely lower across the board following the lead from Asia and US markets overnight. Markets have drifted slightly lower digesting the plethroa of rate dcesions yesterday with the BoE and ECB keeping rates unchanged.
On the corporate front Swedish retail giant trades sharply lower after big miss on Q4 Rev, citing lower footfall at their physical stores. Elsewhere SDL trades sharply lower in the UK after warning on profits, while SQS Quality software trades over 50% higher on a potential takeover; Tele2 trades higher after merging its Dutch operation with Deutsche Telekom.
Equities
Consumer Discretionary [H&M [HMB.SE] -15.5% (Q4 Rev), Steinhoff [SNH.ZA] -7% (Chairman steps down)]
Telecoms [Telit Comms [TCM.UK] +3.0% (Trading update), Tele2 [TELE2A.SE] +1.8% (Merges dutch ops with Deutsche Telekom)]
Technology [SQS Quality Software [SQS] +54% (Potential takeover), SDL [SDL.UK] -26% (Profit warning)]
Speakers
ECB’s Vasiliauskas (Lithuania) stated that did not see need for additional QE in 2018; measures implemented were showing results
ECB’s Nowotny (Austria) stated that ECB should look through oil-price impact on inflation
EU’s Juncker: stated ahead of the EU Leader Summit that UK PM May had made a big effort and this should be recognized
Italy PM Gentiloni stated that 2nd phase of Brexit would not be easier than the 1st
German Bundesbank raised its GDP growth forecasts for 2017 thru 2019 citing export-driven boom. Raised 2017 GDP from 1.9% to 2.6%; 2018 GDP from 1.7% to 2.5% and 2019 GDP from 1.6% to 1.7%. It did noted that the domestic economy was reaching an increasingly mature state. Export growth to weaken further out, particularly due to capacity constraints and labor shortages
Bank of Italy (BOI) Quarterly Economic Bulletin: Raised GDP growth forecasts for 2017 thru 2019. It raised 2017 GDP growth from 1.4% to 1.6%; 2018 GDP growth from 1.3% to 1.4% and 2019 GDP growth from 1.2% to 1.3%
Bank of Spain (BOS) updated its economic forecasts: Reduces growth outlook citing Catalonia crisis but see economy maintaining growth in the coming 2-3 years
Austria Central Bank updated its economic forecasts which raised the GDP growth forecast for the 2017 thru 2019 period. It also bumped up its inflation view for both 2017 and 2018
Japan government expected to cut JGB sales to market in FY18/19 by about ¥7T from this FY to around ¥134T
Currencies
EUR/USD stayed below the 1.18 level as dealers assessed the implication of still subdued inflation in the euro zone in 2020. The session saw various national central banks follow the ECB lead in upgrading its growth forecast. However, despite the activity exceeding expectations it suspected not to generate further price pressures.
Fixed Income
Bund futures trade 163.53 up 1 tick, following a record high in German manufacturing PMI. Continued upside sees 163.63 then 164.25. A reversal targets 162.50 then 162.38.
Gilt futures trade at 126.29 down 1 tick near the highs for the week. Continued upside eyeing 126.15 then 126.65. Downside targets include 125.24 then 124.75.
Friday’s liquidity report showed Thursday’s use of the marginal lending facility fell to €203M from €633M prior.
Corporate issuance saw four issuers raise $2.2B in primary market. Primary expected to close for the year after this week.
Looking Ahead
(BR) Brazil Dec CNI Industrial Confidence: No est v 56.5 prior
05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 1-Week Auction Rate by 25bps to 8.00%
06:00 (IE) Ireland Q3 GDP Q/Q: 1.6%e v 1.4% prior; Y/Y: No est v 5.8% prior
06:00 (IE) Ireland Q3 Current Account Balance: No est v -€0.9B prior
06:00 (IE) Ireland Oct Trade Balance: No est v €3.6B prior
06:00 (BR) Brazil Oct IBGE Services Sector Volume Y/Y: -0.8%e v -3.2% prior
06:00 (UK) DMO to sell combined £5.0B in 1-month, 3-month and 6-month Bills (£2.0B, £1.0B and £2.0B respectively)
06:30 (IN) India Weekly Forex Reserves
06:45 (US) Daily Libor Fixing
07:00 (IS) Iceland Nov Unemployment Rate: No est v 1.9% prior
07:00 (IL) Israel Nov CPI M/M: -0.2%e v +0.3% prior; Y/Y: 0.4%e v 0.2% prior
07:00 (UK) BOE Quarterly Bulletin:
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Dec Empire Manufacturing: 18.8e v 19.4 prior
08:30 (CA) Canada Oct Manufacturing Sales M/M: 0.9%e v 0.5% prior
09:00 (BE) Belgium Oct Trade Balance: No est v €1.4B prior
09:15 (US) Nov Industrial Production M/M: 0.3%e v 0.9% prior; Capacity Utilization: 77.2%e v 77.0% prior, Manufacturing Production: 0.3%e v 1.3% prior
10:00 (CO) Colombia Oct Industrial Production Y/Y: +0.8%e v -1.9% prior, Retail Sales Y/Y: 1.2%e v 1.4% prior
10:00 (MX) Mexico Central Bank (Banxico) Economist Survey
11:00 (EU) Potential sovereign ratings after EU close
(PT) Portugal Sovereign Debt to be rated by Fitch
(IE) Ireland Sovereign Debt to be rated by Fitch
(UK) United Kingdom Sovereign Debt to be rated by DBRS
13:00 (US) Weekly Baker Hughes Rig Count data
16:00 (US) Oct Total Net TIC Flows: No est v $51.3B prior; Net Long-Term Tic Flows: No est v $80.9B prior
Weekend events:
(DE) Bavaria’s Ruling CSU Party Holds Convention
(ZA) South Africa ruling African National Congress (ANC) leadership election
(BR) Brazil Oct Economic Activity Index (monthly GDP) M/M: No est v 0.4% prior; Y/Y: No est v 1.3% prior
