Euro Zone Core Inflation Continues To Disappoint, Focus On G20 In Argentina

Notes/Observations

Asia:

• G20 set to begin in Argentina with high hopes on the ‘dinner of the decade’ between Trump and Xi
• FOMC minutes served to confirm the Fed’s data-dependency
• Euro Zone Core inflation continues to be stubborn (YoY missed expectations (1.0% v 1.1%e)

Asia:

• Japan Oct Jobless Rate: 2.4% v 2.3%e – Japan Oct Preliminary Industrial Production M/M: 2.9% v 1.2%e; Y/Y: 4.2% v 2.5%e (fastest growth since Jan 2015)
• Bank of Korea (BoK) raises 7-Day Repo Rate by 25bps to 1.75% (as expected) for its 2nd hike in the current tightening cycle
• China Nov Manufacturing PMI: 50.0 v 50.2e; Non-manufacturing PMI: 53.4 v 53.8e

Europe:

• EU Governments reportedly approve taking next steps toward disciplinary actions over Italy’s debt
• Italy Dep PM Salvini: it’s not written in the Bible that the 2019 deficit to GDP ratio should be 2.4%. Certain Italy could reach an agreement with Brussels over the budget
• UK PM May stated that she was focused on Dec 11th Parliament vote; would prepare for no deal if Parliament rejected the deal

Americas:

• FOMC Nov Minutes had almost all members seeing another rate increase being warranted ‘fairly soon’; Future policy statement to emphasize importance of incoming data

Macro

• (CN) China: The official manufacturing PMI fell to 50.0 in November, the lowest since it last contracted back July 2016. New export orders edged up to 47.0 from 46.9, but has been below 50 since May. The data add to increasing evidence of a slowdown in activity, despite various stimulus measures, as trade concerns impact. The data won’t be helpful for China ahead of the Trump-Xi dinner summit this weekend.
• (CN) China: The official China Daily newspaper said a trade agreement is possible, and while Trump has said they are “close” toan agreement, he also said that he is happy with the current arrangement because of the tariff income.
• (DE) Germany: Retail sales fell -0.3% m/m in October, with September also revised down to -0.3% m/m from 0.1%. The three month trend rate improved slightly, but remained weak at -0.8%, which doesn’t show the hoped for strengthening of economic activity after the contraction in Q3 GDP.
• (EU) Eurozone: The headline CPI rate remains partly impacted by base effects from food prices as as well services prices, while energy price inflation continues to contribute significantly. Underlying inflation indicators, especially wage growth are starting to look more robust though and the ECB is still expected to confirm the phasing out of net asset purchases at next week’s meeting.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.4% at 356.5, FTSE -0.8% at 6985, DAX -0.7% at 11222, CAC-40 -0.5% at 4981, IBEX-35 -0.4% at 9065, FTSE MIB -0.2% at 19121, SMI -0.3% at 8989, S&P 500 Futures -0.4%]
• Market Focal Points/Key Themes: European Indices trade slightly lower across the board following mixed Asian Indices and weaker US futures. On the corporate front Allianz trades lower after providing mid term guidance and tweaking their FY18 outlook; Daimler falls after a downgrade at HSBC. In the M&A space Altice trades sharply higher after its French subsidiary sell ~50% stake in SFR FTTH for €1.8B; Bioquell trades over 35% higher after agreeing to be acquired by Ecolabs. In other news Orexo trades higher after a US cout rules against Actavis appeal on Zusolv patent. Looking ahead notable earners include BRP, Destination XL and Fang Holdings.

Equities

• Consumer discretionary: Icelandair Group [ICEAIR.IS] -13% (share increase proposition; next year guidance), BillerudKorsnas AB [BILL.SE] -2% (acquisition)
• Energy: Uniper [UN01.DE] -0.5%, Fortum [FUM1V.FI] -0.5% (reportedly Fortum may sell stake in Uniper to private party)
• Financials: Allianz [ALV.DE] -1.5% (investor day; presents medium-term targets), Deutsche Bank [DBK.DE] -2% (Raids by German prosecutors said to continue for the second day in a row), Generali [G.IT] +0.5% (reportedly Luxottica’s Del Vecchio to raise Generali stake to 5%)
• Healthcare: Bioquell [BQE.UK] +37% (to be acquired by Ecolab for 590p/shr), Orexo AB [ORX.SE] +6% (US Court of Appeals denies Actavis petition for rehearing regarding validity of the Zubsolv patent)
• Industrials: PSA [UG.FR] -1% (extend long-term partnership with Toyota in the European market), Daimler [DAI.DE] -3% (analyst action), Aston Martin Lagonda [AML.UK] -1.5% (analyst action)
• Technology: Parrot [PARRO.FR] +0.5% (confirms proposed takeover bid at €3.20/shr), Rocket Internet [RKET.DE] +0.5% (earnings), Sage Group [SGE,UK] -4% (analyst action)
• Telecom: Altice [ATC.NL] +10% (divestment)

Speakers

• ECB’s Villeroy (France): Euro was part of solutions for Italy’s economic problems. Respecting EU rules were in Italy and France’s interest
• Italy Fin Min Tria: Still possible to avoid disciplinary procedures over 2019 budget
• Italy PM Conte and Fin Min Tria said to be studying cutting the 2019 budget deficit to 2.0% to reach deal with EU
• UK Trade Sec Fox: No deal Brexit wouldn’t be a disaster
• Sweden Central Bank (Riksbank) Floden stated that he saw increased uncertainly in global markets stemming from trade conflict, Italian budget situation and Brexit. Reiterated that SEK currency should gradually appreciate over time, sees it a bit undervalued at this time
• Russia Energy Min Novak: OPEC and non-Opec members to reach an agreement on oil for 2019. To have an agreed position in Dec. All OPEC, Non-OPEC deal members should comply to deal with no exceptions

Currencies/Fixed Income

• FX market maintained tight ranges into month end and awaited developments out of the weekend G20 meeting being held in Argentina. There appeared to be high hopes on the ‘dinner of the decade’ between Trump and Xi
• Inflation figures in the euro zone risk undermining ECB’s Draghi’s rhetoric about vigorous upward core inflationary pressures. EUR/USD unable to muster strength above the 1.14 level.
• FOMC minutes served to confirm the Fed’s data-dependency but the greenback held its ground against the major pairs.

Economic Data

• (DE) Germany Oct Retail Sales M/M: -0.3% v +0.4%e; Y/Y: 5.0% v 1.4%e
• (DE) Germany Oct Import Price Index M/M: 1.0% v 0.4%e; Y/Y:4.8% v 4.2%e
• (UK) Nov Nationwide House Price Index M/M: 0.3% v 0.1%e; Y/Y: 1.9% v 1.7%e
• (FI) Finland Q3 GDP Q/Q: 0.4% v 0.3% prior; Y/Y: 2.4% v 2.3% prior
• (FI) Finland Sept Final Trade Balance: -€0.2B v -€0.2B prelim
• (DK) Denmark Q3 Preliminary GDP Q/Q: 0.7% v 0.6%e; Y/Y: 2.0% v 2.1%e
• (DK) Denmark Oct Unemployment Rate: 3.2% v 3.1%e; Gross Unemployment Rate: 3.9% v 3.9% prior
• (NO) Norway Oct Retail Sales (with auto fuel) M/M: -0.2% v 0.0%e
• (TR) Turkey Oct Trade Balance: -$0.5B v -$0.5Be (smallest deficit in 17 years)
• (TH) Thailand Oct Current Account Balance: $1.9B v $2.0Be; Overall Balance of payments (BOP): $-0.9B v +$1.0B prior; Trade Account Balance: $1.3B v $2.0B prior; Exports Y/Y: +8.4% v -5.5% prior; Imports Y/Y: 13.3% v 14.3% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 131.0K v 133.2K tons prior
• (FR) France Nov Preliminary CPI M/M: -0.2% v -0.2%e; Y/Y: 1.9% v 2.0%e
• (FR) France Nov Preliminary CPI EU Harmonized M/M: -0.2% v -0.2%e; Y/Y: 2.2% v 2.3%e
• (FR) France Oct PPI M/M: 0.4% v 0.4% prior; Y/Y: 3.9% v 3.7% prior
• (CH) Swiss Nov KOF Leading Indicator: 99.1 v 99.5e
• (ES) Spain Sept Total Mortgage Lending Y/Y: 15.4% v 10.3% prior; Mortgage Approvals Y/Y: 9.5% v 6.8% prior
• (AT) Austria Oct PPI M/M: 0.4% v 0.3% prior; Y/Y: 3.4% v 3.3% prior
• (AT) Austria Q3 Final GDP Q/Q: 0.3% v 0.4% prelim, Y/Y: 2.2% v 2.4% prelim
• (CZ) Czech Q3 Preliminary GDP (2nd reading) Q/Q: 0.6% v 0.4%e; Y/Y: 2.4% v 2.3%e
• (HU) Hungary Oct PPI M/M: 0.6% v 0.1% prior; Y/Y: 6.4% v 6.7% prior
• (HU) Hungary Sept Final Trade Balance: €B v €0.3B prelim
• (RU) Russia Narrow Money Supply w/e Nov 23rd (RUB): 10.23T v 10.33T prior
• (TW) Taiwan Q3 Final GDP Y/Y: 2.3% v 2.3%e
• (HK) Hong Kong Oct Retail Sales Value Y/Y: 5.9% v 3.6%e; Retail Sales Volume Y/Y: 5.2% v 2.8%e
• (SE) Sweden Sept Non-Manual Workers Wages Y/Y: 2.6% v 2.6% prior
• (ES) Spain Sept Current Account Balance: €0.9B v €1.8B prior
• (IT) Italy Oct Preliminary Unemployment Rate : 10.6% v 10.1%e
• (PL) Poland Q3 Final GDP Q/Q: 1.7% v 1.7% prelim; Y/Y: 5.1% v 5.1% prelim
• (PL) Poland Nov Preliminary CPI M/M: 0.0% v 0.3%e; Y/Y: 1.2% v 1.6%e
• (NO) Norway Central Bank (Norges) Dec Daily FX Purchases: -350M v -350M prior
• (NO) Norway Nov Unemployment Rate: 2.2% v 2.2%e
• (IS) Iceland Oct Final Trade Balance (ISK): -12.1B v -11.7B prelim
• (CZ) Czech Oct M2 Money Supply Y/Y: 5.4% v 4.2% prior
• (HK) Hong Kong Oct Budget Balance (HKD): +29.3B v -9.3B prior
• (HK) Hong Kong Oct M3 Money Supply Y/Y: -2.1% v +4.3% prior; M2 Money Supply Y/Y: -2.2% v +4.2% prior; M1 Money Supply Y/Y: -25.7% v -0.3% prior
• (PT) Portugal Nov Preliminary CPI M/M: -0.4% v -0.1% prior; Y/Y: 0.9% v 1.0% prior
• (PT) Portugal Nov Preliminary CPI EU Harmonized M/M: -0.9% v -0.5% prior; Y/Y: 1.0% v 0.8% prior – (SL) Sri Lanka CPI Y/Y: 3.3% v 3.3%e
• (EU) Euro Zone Nov Advance CPI Estimate Y/Y: 2.0% v 2.0%e; CPI Core Y/Y: 1.0% v 1.1%e
• (EU) Euro Zone Oct Unemployment Rate: 8.1% v 8.0%e
• (GR) Greece Sept Retail Sales Value Y/Y: 3.3% v 3.6% prior; Retail Sales Volume Y/Y: 4.9% v 5.2% prior
• (IT) Italy Nov Preliminary CPI (includes tobacco) M/M: -0.1% v -0.2%e; Y/Y: 1.7% v 1.6%e
• (IT) Italy Nov Preliminary CPI EU Harmonized M/M: -0.2% v -0.2%e; Y/Y: 1.7% v 1.6%e
• (BE) Belgium Oct Unemployment Rate: 6.2% v 6.3% prior

Fixed Income Issuance

• (IN) India sold total INR120B vs. INR120B indicated in 2020, 2023, 2031, 2035 and 2046 bonds
• (SE) Sweden sold SEK5.0B in nominal 0.75% 2029 bonds; Avg Yield: 0.6773% v 0.6922 prior; bid-to-cover: 3.49x
• (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in 2025, 2038 and 2050 I/L bonds

Looking Ahead

• (MX) Mexico Oct YTD Budget Balance (MXN): No est v -311.0B prior
• (CO) Colombia Central Bank Board Meeting
• 05:30 (ZA) South Africa to sellZAR650M in 2025, 2038 and 2050 I/L bonds
• 06:00 (IT) Italy Q3 Final GDP Q/Q: 0.0%e v 0.0% prelim; Y/Y: 0.8%e v 0.8% prelim
• 06:00 (PT) Portugal Oct Industrial Production M/M: No est v -2.8% prior; Y/Y: No est v -0.1% prior
• 06:00 (BR) Brazil Q3 GDP Q/Q: 0.8%e v 0.2% prior; Y/Y: 1.6%e v 1.0% prior; GDP 4Qtrs Accumulated: 1.5%e v 1.4% prior
• 06:00 (IL) Iceland Oct Unemployment Rate: No est v 4.0% prior
• 06:00 (IN) India Oct Fiscal Deficit (INR): No est v 34.4B prior
• 06:00 (UK) DMO to sell €3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively)
• 06:30 (IN) India Oct Eight Infrastructure (Key) Industries Y/Y: No est v 4.3% prior
• 06:30 (IN) India Weekly Forex Reserves
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces upcoming bill issuance (held on Wed)
• 07:00 (IN) India Q3 GDP Y/Y: 7.5%e v 8.2% prior; GVA Y/Y: 7.3%e v 8.0% prior
• 07:00 (ZA) South Africa Oct Trade Balance (ZAR): -5.0Be v -3.0B prior
• 07:00 (ZA) South Africa Oct Budget Balance (ZAR): -33.5Be v +3.4B prior
• 07:00 (CL) Chile Oct Manufacturing Production Y/Y: +4.9%e v -5.4% prior; Industrial Production Y/Y: -0.7%e v -3.2% prior; Total Copper Production: No est v 484.1K prior
• 07:00 (CL) Chile Oct Unemployment Rate: 7.0%e v 7.1% prior
• 07:30 (BR) Brazil Oct Primary Budget Balance (BRL): +6.3Be v -24.6B prior; Nominal Budget Balance: -19.3Be v -39.2B prior; Net Debt to GDP ratio: 52.7%e v 52.2% prior
• 07:45 (FR) ECB’s Coeure (France) on panel in Frankfurt
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance (held on Thursdays)
• 08:10 (UK) Baltic Dry Bulk Index
• 08:30 (CA) Canada Q3 GDP M/M: 0.1%e v 0.1% prior; Y/Y: 2.3%e v 2.5% prior; Quarterly GDP Annualized: 2.0%e v 2.9% prior
• 08:30 (CA) Canada Oct Industrial Product Price M/M: -0.5%e v +0.1% prior; Raw Materials Price Index M/M: -5.3%e v -0.9% prior
• 09:00 (BE) Belgium Q3 Final GDP Q/Q: No est v 0.4% prelim; Y/Y: No est v 1.7% prelim
• 09:00 (MX) Mexico Sept Gold Production: No est v 6.6K kilograms z; Silver Production: No est v 329.7K kilograms; Copper Production: No est v 39.5K kilograms
• 09:00 (US) Fed’s Williams (moderate, voter) in NY
• 09:45 (US) Nov Chicago Purchasing Manager: 58.5e v 58.4 prior
• 10:00 (MX) Mexico Oct Net Outstanding Loans (MXP): No est v 4.330T prior
• 11:00 (EU) Potential sovereign ratings after European close
• 13:00 (US) Weekly Baker Hughes Rig count data
• 19:00 (KR) South Korea Nov Trade Balance: $6.3Be v $6.6B prior; Exports Y/Y: 6.6%e v 22.7% prior; Imports Y/Y: 12.1%e v 27.9% prior
• (CO) Colombia Central Bank Board Meeting