Notes/Observations
Euro Zone Dec CPI slows into year-end (as anticipated by ECB); Flash YoY reading at 1.4% v 1.5% prior
Focus on US Dec jobs report particularly on wage components
Asia:
China PBoC: Skips OMO for 10th straight session
Renewed press speculation that China may maintain GDP growth target at around 6.5% for 2018
Japan Dec Nikkei PMI Services 51.1 v 51.2 prior with New orders increase at slowest pace in 15 months
Japan Fin Min Aso reiterated needs to raise sales tax for fiscal consolidation, but if economy was not good tax hike could not proceed (**Note: sales tax increase to 10% is planned for Oct 2019)
Japan Econ Min Moteg reiterated domestic economy doing ‘very well’, but still needed to monitor risks to outlook
Europe:
France PM Macron said to have warned against ‘prisoner’s dilemma’ splits in EU over Brexit negotiations
Americas:
Fed’s Bullard (non-voter, Dove): inflation targeting has been major achievement for the Fed; price level targeting is worth consideration. During Q&A he noted that the Fed needed to debate wisdom of proceeding with rate rises if the 10-year yields did not increase and the curve flattened
Economic Data:
(DE) Germany Nov Retail Sales M/M: 2.3% v 1.0%e; Y/Y: 4.4% v 2.3%e
(DK) Denmark Nov Gross Unemployment Rate: 4.3% v 4.3%e; Unemployment Rate (Seasonally adj): 3.4% v 3.4% prior
(NO) Norway Nov Credit Indicator Growth Y/Y: 5.8% v 5.7% prior
(FR) France Dec Preliminary CPI M/M: 0.3% v 0.3%e; Y/Y: 1.2% v 1.2%e
(FR) France Dec Preliminary CPI EU Harmonized M/M: 0.4% v 0.4%e; Y/Y: 1.3% v 1.3%e
(FR) France Dec Consumer Confidence: 105 v 103e
(TW) Taiwan Dec CPI Y/Y: 1.2% v 0.9%e; CPI Core Y/Y: 1.6% v 1.3% prior; WPI Y/Y: 0.2% v 1.6% prior
(DE) Germany Dec Construction PMI: 53.7 v 53.1 prior
(UK) Q3 Unit Labor Costs Y/Y: 1.3% v 1.7% prior
(EU) Euro Zone Dec Advance CPI Estimate Y/Y: 1.4% v 1.4%e; CPI Core Y/Y: 0,9% v 1.0%e
(EU) Euro Zone Nov PPI M/M: 0.6% v 0.3%e; Y/Y: 2.8% v 2.5%e
(IT) Italy Dec Preliminary CPI M/M: 0.4% v 0.2%e; Y/Y: 0.9% v 0.8%e
(IT) Italy Dec Preliminary CPI EU Harmonized M/M: +0.3%e v -0.2% prior; Y/.Y: 1.1%e v 1.1% prior
Fixed Income Issuance:
(ZA) South Africa sold total ZAR900M vs. ZAR900M indicated in I/L 2029, 2033 and 2046 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at at 390.1, FTSE -0.2% at 7482, DAX -0.3% at 13088, CAC-40 -0.2% at 5388, IBEX-35 +0.1% at 10270, FTSE MIB +0.2% at 22442, SMI -0.1% at 9384 , S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:
Equities
Indices [Stoxx600 +0.6% at 395.9 , FTSE +0.3% at 7717 , DAX +1.0% at 13300, CAC-40 +0.7% at 5453 , IBEX-35 +0.5% at 10369, FTSE MIB 0.8% at 22681 , SMI +0.4% at 9551, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes:
European indices continue to trader higher following strong gains yesterday with the FTSE100 making new all time highs. The Dax leads the gainers rising 1% on the back of record closes in Wallstreet overnight, where the Dow crossed 25K.
Shares of Ion Beam in Belgium is a notable decliner this morning after cutting its 2017 outlook and withdraws all other guidance, while Norwegian Airlines trades higher after lifting its outlook. UK Car retailers are under pressure with Vertu and Pendragon trading lower after UK Car registration data. In the M&A space Takeda announced intention to acquire Tigenix for €1.78, and Emmi divested its minority stake in Icelandic Milk and Skyr.
In the US shares of Intel remain in focus following the security flaws in their computer chips, with press reports noting the company has been dealing with the issue since June.
Looking ahead to the US morning notable earners include Constellation Brands, Greenbrier and Cal-Maine Foods.
Movers
Consumer Discretionary [ Johnson Service Grp [JSG.UK] +2.3% (Trading update), Cairn Homes [CRN.UK] -2.3% (Trading update), Emmi [EMMN.CH] +2.1% (Divestiture), Norweigen Air [NAS.NO] +12% (Lifts outlook), Pendragon [PDG.UK] -3.3%, Vertu Motors [VTU.UK] -2% (UK Car registration data)]
Consumer Staples [Greenyard [GREEN.BE] +1.5% (Ends talks with Dole foods)]
Healthcare [Ion Beam [IBAB.BE] -17.4% (Cuts outlook))]
Speakers
Austria Fin Min Loeger: Govt has agreed to €2.5B in budget cuts in 2018
Thailand Central Bank Dep Gov Supapongse reiterated view that ready to step in if THB currency (Baht) price movements are too fast
Currencies
USD remained on soft footing ahead of the US Dec jobs report. Dealers noted that the greenback would likely stay under selling pressure if wages did not show any pick-up. The current global recovery has everything apart from wage growth/inflation which in turn is keeping the Fed rate hikes gradual and volatility low
EUR/USD moved off its recent 3-month highs and yet to break above the 1.21 level. Dec CPI data dis slow into year-end 9as expected). Overall the Euro had benefited in recent weeks from market reassessment on the ECB policy rate outlook. Markets currently pricing the first full 25bp move in eonia by mid-October 2019, compared to Q1 2020 seen in early December
Fixed Income
Bund Futures trade up 2 ticks at 161.72 after Euro Zone headline inflation declines as expected. A continued move below 161.00 low targets 160.71 then 160.45, with a continued rebound targeting 161.86.
Gilt futures trade at 124.77 down 5 ticks off the session highs and close to the highs for the week. Continued upside eyeing 125.25 then 125.82. Downside targets include 123.25 then 122.75.
Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.841T from €1.823T prior. Use of the marginal lending facility fell to €12M from €53M prior.
Corporate issuance saw at least three deals have hit the US high-grade primary, as not even the bomb cyclone can stop eager borrowers from seizing the moment; Lipper reports equity fund inflows of $964M in week ending Jan 3rd. High yield funds saw inflows of $186.4M in the week.
Looking Ahead
06:00 (BR) Brazil Nov Industrial Production M/M: -0.1%e v +0.2% prior; Y/Y: 3.8%e v 5.3% prior
06:00 (IE) Ireland Nov Retail Sales M/M: No est v 0.0% prior; Y/Y: No est v 4.5% prior
06:00 (IE) Ireland Dec Live Register Monthly Change: No est v -2.6K prior; Live Register Level: No est v 244.3 prior
06:00 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-month Bills (£0.5B, £0.5B and £2.0B respectively)
06:30 (IN) Weekly India Forex Reserves
06:45 (US) Daily Libor Fixing
07:00 (IN) India GDP Annual Estimate for 2018 Y/Y: 6.6%e v 7.1% prior
07:00 (CL) Chile Nov Economic Activity Index (Monthly GDP) M/M: +0.2%e v -0.3% prior; Y/Y: 2.5%e v 2.9% prior; Ex-Mining: No est v 2.2% prior
07:00 (CL) Chile Nov Nominal Wage M/M: No est v 0.2% prior; Y/Y: 5.3%e v 5.3% prior
08:00 (PL) Poland Dec Official Reserves: No est v $113.4B prior
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
08:20 (BR) Brazil Dec Vehicle Production: No est v 249.1K prior; Vehicle Sales: No est v 204.2K prior; Vehicle Exports: No est v 73.1K prior
08:30 (US) Dec Change in Nonfarm Payrolls: +190Ke v +228K prior; Change in Private Payrolls: +193Ke v + 221K prior; Change in Manufacturing Payrolls: +18Ke v +31K prior
08:30 (US) Dec Unemployment Rate: 4.1%e v 4.1% prior; Underemployment Rate: No est v 8.0% prior
08:30 (US) Dec Average Hourly Earnings M/M: 0.3%e v 0.2% prior; Y/Y: 2.5%e v 2.5% prior; Average Weekly Hours: 34.5e v 34.5 prior
08:30 (US) Nov Trade Balance: -$49.9Be v -$48.7B prior
08:30 (CA) Dec Net Change in Employment: -2.0Ke v +79.5K prior; Unemployment Rate: 6.0%e v 5.9% prior; Full Time Employment Change: No est v +29.6K prior; Part Time Employment Change: No est v +49.9K prior; Participation Rate: No est v 65.7% prior
08:30 (CA) Canada Nov Int’l Merchandise Trade: -C$1.1Be v –C$1.47B prior
08:30 (US) Weekly USDA Net Export Sales data
10:00 (US) Nov Factory Orders: +1.1%e v -0.1% prior; Factory Orders (ex-transportation): No est v 0.8% prior
10:00 (US) Dec ISM Non-Manufacturing. Composite: 57.6e v 57.4 prior
10:00 (US) Nov Final Durable Goods Orders: No est v 1.3% prelim; Durables Ex-Transportation: No est v -0.1% prelim; Capital Goods Orders (Non-defense/ex-aircraft): No est v -0.1% prelim; Capital Goods Shipment (Non-defense/ex-aircraft): No est v 0.3% prelim; Durables Ex-Defense: Mo est v 1.0% prelim
10:00 (CA) Canada Dec Ivey Purchasing Manager Index (Seasonally adj): No est v 63.0 prior; PMI (unadj): No est v 62.4 pror
10:15 (US) Fed’s Harker on economic outlook
12:30 (US) Fed’s Mester speaks on Panel on Monetary Policy Coordination
13:00 (US) Weekly Baker Hughes Rig count data
19:00 (CO) Colombia Dec CPI M/M: 0.3%e v 0.2% prior; Y/Y: 4.0%e v 4.1% prior
Fed’s Bullard speaks at Economics Convention in Philadelphia
Weekend:
(DE) Germany political parties begin grand coalition talks
