Optimism Continues To Peculate On Brexit As Talks Continue

Notes/Observations

• Brexit talks continue with optimism that a trade agreement is imminent
• Focus on US jobs data; pace of gains likely have decelerated amid rising Covid-19 cases across the country; potential for negative reading????
• USD weakness intensifies

Asia:

• India Central Bank (RBI) left Repurchase Rate unchanged at 4.00% (as expected)
• Australia Oct Final Retail Sales M/M: 1.4% v 1.6%e

Coronaviurs:

• Total global cases 65.2M (+1.1% d/d); Total deaths: 1.51M (+1.0% d/d)

Europe:

• EU official noted that the prospect of a breakthrough in Brexit talks in the next few days was possible but receding. Unsure if the France President Macron will veto the Brexit deal over access to UK fisheries
• :EU Commission chief von der Leyen and UK PM Johnson likely to hold a call on Fri or Sat, either to sign off on a deal or to give negotiators political instructions to try and finalize any agreement

Americas:

• US Senate Leader McConnell stated that he had a good conversation with House Speaker Pelosi
• US Senate leader McConnell said to be favoring smaller stimulus package
• President-elect Biden stated that US spending bill should be passed as it’s a good start; would ask for more once he’s sworn in

Energy:

• OPEC+ confirmed agreement to raise oil output by 500K bpd beginning in Jan and would review monthly

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.28% at 392.80, FTSE +0.60% at 6,529.05, DAX +0.11% at 13,267.95, CAC-40 +0.36% at 5,594.29, IBEX-35 +0.36% at 8,230.00, FTSE MIB +0.60% at 22,138.50, SMI +0.20% at 10,363.42, S&P 500 Futures +0.30%]
• Market Focal Points/Key Themes: European indices open modestly higher and then advanced further into the green as the session porgressed; better performing sectors include energy and consumer discretionary; materials and financials sectors among underperformers; SSE, Eni and Equinor transact shares in Dogger Bank assets; WB to make all 2021 titles available for streaming simultaneously with theatrical release; focus on upcoming NFP figures; quarterly review of DAX concludes with no changes; events expected in the upcoming US session include Glencore investor update and Big Lots earnings

Equities

• Consumer discretionary: AB Foods [ABF.UK] +2% (trading update), Kinepolis [KIN.BE] -9%, Cineworld [CINE.UK] -9% (AT&T in US to make all of its 2021 Warner Bros films available in theaters and on the HBO Max streaming service starting on the same day)
• Healthcare: AstraZeneca [AZN.UK] +1.5% (Pfizer news on scaling back vaccine production), Nicox [COX.FR] -10% (placement)

Speakers

• BOE’s Saunders sppech on policy options noted that rate cuts combined with stimulus might be the best policy approach. QE by itself might be less effective as stimulus and did see modest scope to cut rates further . Vaccine reduced some downside risks but there remained some headwinds that could leave the economy stuck with high unemployment and below target inflation
• EU Council President Michel stated that Brexit negotiation were continuing; upcoming EU Leader Summit to take position on latest developments regarding Brexit. Reiterated trust in EU chief negotiator Barnier. He also remained optimistic on resolution regarding EU 7-year budget and Recovery Fund
• France EU Affairs Min Beaune stated that the risk of a no-deal Brexit outcome still existed. Reiterated full confidences in EU chief negotiator Barnier
• Italy EU Affairs official Amendola stated that was working on sustainability of public debt
• EU Official: UK trade dea wasl imminent, expected to have one by the end of the weekend barring last minute breakdown in talks. EU leaders could hold another summit on Brexit after the Dec 10-11th event.
• EU Economic Commissioner Gentiloni (Italy): Confident that differences with Hungary and Poland will be overcome (**Note: refers to EU 7-year budget)
• Thailand Central Bank Gov Sethaput: 2021 GDP forecast could be below outlook slowdown in tourism
• Japan PM Suga stated that would decide on economic measures early during the week of Dec 7th. Cabinet to decide on size of package. To secure budget to extend employment measures and give handouts to single parent households. He added that low-income single parents would receive ¥50K. To remain on alerts to the virus situation
• India Central Bank (RBI) Gov Das post rate decision press conference: stated that had a window to check inflation at this time and would continue to watch inflation. Domestic economic had recovered faster than anticipated. Aimed to prevent volatility in INR currency (Rupee) exchange rate; reiterated stance that RBI did not have FX target

Currencies/Fixed Income

• USD weakness intensified during the week and remain on soft footing in the session
• EUR/USD trading at 1.2170 level by mid-session with sights on the 1.24/25 neighborhood. Again dealers noted that ECB chief economist Lane did not mention FX in his remarks on Wed, thus providing the green light for further USD weakness
• GBP/USD was higher as Brexit talks continued. Again dealers noted that as long as negotiations continued there was always hops of a breakthrough. The 1.36 level viewed as pivotal resistance and possible catalyst for any move back toward pre-Brexit range above 1.50 area
• ECB decision next Thursday. Dealers noted that its support ECB and markets’ perpetual search for yield would remain the key drivers of euro zone peripheral government bonds

Economic Data

• (DE) Germany Oct Factory Orders M/M: 2.9% v 1.5%e; Y/Y: 1.8% v 0.2%e
• (CN) Weekly Shanghai copper inventories (SHFE): 97.8K v 92.9K tons prior
• (FR) France Oct YTD Budget Balance: -€159.9B v -€161.6B prior
• (RU) Russia Narrow Money Supply w/e Nov 27th (RUB): 13.35T v 13.46T prior
• (CZ) Czech Q3 Average Real Monthly Wage Y/Y: 1.7% v 0.2%e
• (HU) Hungary Oct Industrial Production M/M: 2.8% v 2.3% prior; Y/Y: 2.7% v 0.5%e
• (TW) Taiwan Nov Foreign Reserves: $513.4B v $501.2B prior
• (DE) Germany Nov Construction PMI: 45.6 v 45.2 prior
• (CZ) Czech Nov Unemployment Rate: 3.8%v 3.7% prior
• (IS) Iceland Nov Preliminary Trade Balance (ISK): -5.5B v -7.1B prior
• (IT) Italy Oct Retail Sales M/M: 0.6% v 0.3%e; Y/Y: 2.9% v 0.7%e
• (UK) Nov New Car Registrations Y/Y: -27.4% v -1.6% prior
• (UK) Nov Construction PMI: 54.7 v 52.0e
• (GR) Greece Q3 GDP Q/Q: 2.3% v 8.3%e; Y/Y: -11.7% v -14.2% prior

Fixed income Issuance

• (IN) India sold total INR220B vs. INR220B indicated in 2023, 2033, 2035 and 2050 bonds
• (ZA) South Africa sold total ZAR2.0B vs. ZAR2.0B indicated in I/L 2029, 2033 and 2046 Bonds

Looking Ahead

• 06:00 (IE) Ireland Q3 GDP Q/Q: No est v -6.1% prior; Y/Y: No est v -3.0% prior
• 06:00 (IE) Ireland Q3 Current Account Balance: No est v €11.7B prior
• 06:00 (IE) Ireland Nov Live Register Monthly Change: No est v -4.4K prior; Live Register Level: No est v 211.6K prior
• 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.5B respectively)
• 06:30 (TR) Turkey Nov Real Effective Exchange Rate (REER): No est v 60.66 prior
• 06:30 (IN) India Weekly Forex Reserve w/e Nov 27th: No est v $575.3B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces upcoming bill issuance (held on Wed)
• 07:00 (CL) Chile Oct Nominal Wage M/M: No est v 1.0% prior; Y/Y: No est v 3.6% prior
• 07:00 (MX) Mexico Nov Vehicle Production: No est v 347.8K prior; Vehicle Exports: No est v 280.5K prior – 07:00 (MX) Mexico Nov Consumer Confidence: 38.5e v 37.6 prior
• 07:30 (IS) Iceland to sell 2023, 2025 and 2033 Bonds
• 08:00 (PL) Poland Central Bank (NBP) Nov Minutes
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
• 08:30 (US) Nov Change in Nonfarm Payrolls: +475Ke v +638K prior; Change in Private Payrolls: Payrolls: +540Ke v +906K prior; Change in Manufacturing Payrolls: Payrolls: +45Ke v +38K prior
• 08:30 (US) Nov Unemployment Rate: 6.8%e v 6.9% prior; Underemployment Rate: : No est v 12.1% prior; Labor Force Participation Rate: : 61.8%e v 61.7% prior
• 08:30 (US) Nov Average Hourly Earnings M/M: 0.1%e v 0.1% prior; Y/Y: 4.2%e v 4.5% prior; Average Weekly Hours: 34.8e v 34.8 prior
• 08:30 (US) Oct Trade Balance: -$64.8Be v -$63.9B prior
• 08:30 (CA) Canada Oct Int’l Merchandise Trade (CAD): -3.1Be v -3.3B prior
• 08:30 (CA) Canada Nov Net Change in Employment: +20.0Ke v +83.6K prior; Unemployment Rate: 8.9%e v 8.9% prior; Full Time Employment Change: No est v +69.1K prior; Part Time Employment Change: No est v +14.5K prior; Participation Rate: 65.2%e v 65.2% prior; Hourly Wage Rate Y/Y: 5.2%e v 5.2% prior
• 08:45 (UK) BOE’s Tenreyro
• 10:00 (US) Oct Factory Orders: 0.8%e v 1.1% prior; Factory Orders (ex-transportation): No est v 0.5% prior
• 10:00 (US) Oct Preliminary Durable Goods Orders: 1.3%e v 1.3% prelim; Durables (ex-transportation): 1.3%e v 1.3% prelim; Capital Goods Orders (non-defense/ex-aircraft): 0.7%e v 0.7% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v 2.3% prelim
• 10:00 (US) Fed’s Bowman
• 11:00 (RU) Russia Nov CPI M/M: 0.7%e v 0.4% prior; Y/Y: 4.4%e v 4.0% prior
• 11:00 (RU) Russia Nov CPI Core M/M: 0.6%e v 0.5% prior; Y/Y: 3.9%e v 3.6% prior
• 11:00 (EU) Potential sovereign ratings after European close (Fitch on Italy and Sweden; Canadian Rating Agency DBRS on Germany and Denmark)
• 13:00 (US) Weekly Baker Hughes Rig Count