Risk Sentiment Recovers

Notes/Observations

• Risk appetite finding some support.
• EU confidence data showed that the most recent surge in virus cases was hitting sentiment in the region.

Asia

• RBA Dec Minutes reiterated stance that was committed to highly supportive monetary condition. Emergence of omicron virus variant was a new source of uncertainty and the risk to recovery would be more clear in Feb 2022. Reiterated forward guidance that would not increase rates until CPI was sustainably within 2-3% range.
• Japan Govt said to be considering raising FY22 real GDP Forecast from 2.2% to at least 3.0% citing the expected impact of the extra budget.
• Japan Cabinet Office (Govt) Dec Economic Report raised its overall economic assessment for the 1st time in 17 months. It now saw the domestic economy picking up as severe conditions due to the coronavirus were gradually easing.

Coronavirus

• CDC: The omicron variant makes up almost 75% of US C-19 cases. Texas Health officials announced they’ve recorded their first death associated with the omicron variant.
• President Biden to announce Covid measures in a speech on Tuesday (Dec 21st). The speech said not to be about locking the country down but focusing on the unvaccinated and setting up testing sites across the country.
• China Dongxing Port suspends customs Ops due to coronavirus.

Europe

• ECB’s De Guindos (Spain): Inflation in the Euro Zone has been not as temporary as we expected.
• UK PM Johnson not preparing to announce any more Covid restrictions before Christmas. To wait until the data was clearer before taking further action.
• Turkey President Erdogan announced new tools in free market economy rules to ease volatility in FX rate. The new financial alternatives to citizens would not have to convert TRY currency (Lira) savings into FX due to volatility. Withholding tax on Turkey govt bonds to be cancelled (Note: TRY currency moved away from record lows of 18.36 to test below 11.20 level on Erdogan Rescue Plan which would compensate holders of lira in banks in the event of further currency depreciation).

Americas

• Biden-Manchin talks on Sunday reportedly, ‘ended with a sense negotiations on BBB would continue in some form next year. Manchin (D-WV) reportedly made an offer last week to support a $1.8T ‘Build Back Better’ bill that included universal pre-K and climate spending, but excluded expanding child tax credit. Biden did not agree to proposal due to lack of child tax credit.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.67% at 470.48, FTSE +0.72% at 7,250.20, DAX +0.42% at 15,303.89, CAC-40 +0.32% at 6,891.88, IBEX-35 +0.80% at 8,308.06, FTSE MIB +0.50% at 26,308.00, SMI +0.37% at 12,635.90, S&P 500 Futures +0.53%].
• Market Focal Points/Key Themes: European indices open higher across the board but moderated some of their gains through the morning’s trading; all sectors start the day in the green as better risk sentiment is attributed to developents in medication against the new covid variant; sectors among those leading to the upside are materials and energy; while slower to rise sectors include health care and utilities; Irish government to initiate sale of part of their stake in AIB; UK’s CMA looks for deeper probe into Veolia/Suez deal; Zardoaya receives increased offer from Otis; Schroders confirms to take stake in Greencoat Capital; Fiskars sells it’s NA watering unit; earnings expected during the upcoming US session include General Mills, Blackberry and Rite Aid.

Equities

• Consumer discretionary: Tomtom [TOM2.NL] +5% (partnership with Volkswagen).
• Financials: Allied Irish Bank [ALBK.IE] -1% (Irish govt to sell part of its stake).
• Healthcare: Zur Rose Group [ROSE.CH] -7% (German digital prescriptions rule).
• Industrials: Zardoya Otis [ZOT.ES] +2% (increased offer), Manz AG [M5Z.DE] +10% (order).
• Technology: Infineon [IFX.DE] +1.5% (Micron earnings).

Speakers

• ECB’s Kazimir (Slovakia) stated that there was a risk that elevated inflation could stay for longer time. Reiterated Council stance that ECB is not preparing to raise rates in the near future but would have to act if the inflation outlook changed in the 2023/24 period. Reiterated view that not seeing signs of wage-price spiral at this time but could increase if high inflation persisted.
• UK Govt official Barclay noted that Chancellor Sunak to say more on covid economic package for the hospitality industry in the near future.
• Greece Debt Agency (PDMA) debt 2022 issuance said to be looking to raise €12B and tap the bond market at least 4 times during year. To issue at least one note per quarter with financing program to be front-loaded.
• Israel Fin Min Liberman stated that there was no need for additional pandemic measures at this time.
• Thailand Finance Ministry saw 2022 GDP growth at 4.0% as economy reopens from pandemic.
• President Biden to outline steps to combat the Omicron virus variant in an upcoming speech. US planning to mail-out 500M testing kits free-at-home COVID-19 tests from Jan 2022 and prepared to deploy Federal medical personnel to hospitals.

Currencies/Fixed Income

• Risk appetite was trying to find fresh legs and this is providing some retracement in the USD and JPY related pairs. Session rebuffing some of the EU confidence data that showed that the most recent surge in virus cases was hitting sentiment in the region.
• EUR/USD hovering around the 1.13 area and well contained within its recent range.
• GBP/USD inching higher at 1.3255 by mid-session.
• TRY currency (Lira) moved away from recent record lows of 18.36 to test 11.15 level on Erdogan Rescue Plan for its biggest gain since 1983. Erdogan announced measures to compensate holders of lira in banks in the event of further currency depreciation.

Economic data

• (NL) Netherlands Dec Consumer Confidence Index: -25 v -19 prior.
• (NL) Netherlands Oct Consumer Spending Y/Y: 8.5% v 4.6% prior.
• (FI) Finland Nov Unemployment Rate: 6.0% v 6.0% prior.
• (DE) Germany Jan GfK Consumer Confidence Index: # v -2.7e.
• (UK) Nov Public Finances (PSNCR): £37.0B v £61.6B prior; PSNB (ex-banking groups): £17.4B v £16.0Be; Net Borrowing: £16.6B v £15.3Be; Central Government NCR: £13.1B v £2.6B prior.
• (CH) Swiss Nov Trade Balance (CHF): 6.2B v 5.5B prior; Real Exports M/M: +1.6% v -2.1% prior; Real Imports M/M: +4.3% v -4.5% prior; Watch Exports Y/Y: 11.9% v 12.5% prior.
• (DK) Denmark Nov Retail Sales M/M: -0.3% v +1.3% prior; Y/Y: +1.5% v -2.5% prior.
• (DK) Denmark Dec Consumer Confidence: -2.1 v -2.0 prior.
• (TR) Turkey Dec Consumer Confidence: 68.9 v 71.1 prior.
• (HU) Hungary Q3 Current Account: -€2.3B v -€1.9Be.
• (SE) Sweden Dec Consumer Confidence: 98.7 v 99.0e; Manufacturing Confidence: 127.3 v 126.3 prior; Economic Tendency Survey: 117.1 v 117.6 prior.
• (CH) Swiss Nov M3 Money Supply Y/Y: 1.9% v 2.5% prior.
• (HK) Hong Kong Nov CPI Composite Y/Y: 1.8% v 1.8%e.
• (IS) Iceland Dec CPI M/M: 0.5% v 0.4% prior; Y/Y: 5.1% v 4.8% prior.
• (IS) Iceland Nov Wage Index M/M: 0.3% v 0.5% prior; Y/Y: 7.5% v 7.6% prior.
• (IT) Italy Oct Industrial Sales M/M: 2.8% v 0.2% prior; Y/Y: 16.9% v 15.1% prior.
• (PL) Poland Nov Real Retail Sales M/M: -1.0% v -3.1%e; Y/Y: 12.1% v 8.6%e; Retail Sales Y/Y: 21.2% v 16.1%e.
• (PL) Poland Nov Construction Output Y/Y: 12.7% v 5.1%e.
• (IT) Italy Nov PPI M/M: 1.3% v 9.4% prior; Y/Y: 27.1% v 25.3% prior.

Fixed income Issuance

• None seen.

Looking ahead

• (IL) Israel Dec 12-month CPI Forecast: No ets v 1.8% prior.
• (MX) Citibanamex Survey of Economists.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 06:00 (UK) Dec CBI Retailing Reported Sales: 25e v 39 prior; Total Distribution Reported Sales: No est v 43 prior.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (TR) Turkey to sell Bonds.
• 07:00 (MX) Mexico Q3 Aggregate Supply and Demand: 9.5%e v 23.3% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 08:30 (US) Q3 Current Account Balance: -$205.0Be v -$190.3B prior.
• 08:30 (CA) Canada Oct Retail Sales M/M: +1.0%e v -0.6% prior; Retail Sales (ex-auto) M/M: +1.5%e v -0.2% prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (EU) ECB weekly QE bond buying update.
• 10:00 (EU) Euro Zone Dec Advance Consumer Confidence: -8.1e v -6.8 prior.
• 10:00 (MX) Mexico Weekly International Reserves.
• 12:30 (BR) Brazil Nov Tax Collections (BRL): 157.3Be v 178.7B prior.
• 14:00 (AR) Argentina Q3 Unemployment Rate: No est v 9.6% prior.
• 14:00 (AR) Argentina Q3 Current Account Balance: No est v $2.8B prior.
• 16:00 (NZ) New Zealand Dec Consumer Confidence Index: No est v 96.6 prior.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (CO) Colombia Central Bank Dec Minutes.
• 18:01 (NL) Netherlands Nov House Price Index M/M: No est v 1.0% prior; Y/Y: No est v 18.3% prior.
• 18:30 (AU) Australia Nov Leading Index M/M: No est v 0.2% prior.