Brexit Negotiations Enter The Endgame With Talks Appearing To Be At An Impasse

Notes/Observations

• Another full day of Brexit negotiations with the 3 main hurdles remaining; some speculation that talks could end today if no progress seen; Internal Market Bill back in House of Coomons
• Germany Oct Industrial Production handily beats expectations, aided by auto sales
• China registered a record trade surplus with US as exports surge

Asia:

• (CN) China Nov Trade Balance (USD–denominated): $75.4B v $53.8Be; Exports Y/Y: 21.1% v 12.0%e; Imports Y/Y: 4.5% v 7.0%
• S&P cuts State of Victoria and New South Wales rating (top two States in Australia)

Coronaviurs:

• Total global cases 67.1M (+2.8% vs. Fri); total deaths: 1.54M (+2.0% vs. Fri)

Europe:

• BOE’s Haldane (chief economist): A nationwide spending spree could help the economy recover more quickly than current seen
• German Chancellor Merkel and France President Macron to soften level playing field demands in Brexit talks (Note: Reports did circulated afterward that talks were closing in on a political agreement but there has been no progress made on issue of level playing field (LPF))
• UK PM Johnson and EU’s Von der Leyen noted that there remained significant difference on 3 issues (level playing field, governance, and fisheries). UK PM Johnson and EU Commission chief von der Leyen did agreed for talks to continue on Sunday and they would assess the situation again during the evening on Monday, Dec 7th
• UK Cabinet ministers said to back the PM over a no deal if necessa
• UK Internal Market Bill back before the House of Commons on Monday
• Fitch affirmed Italy sovereign rating at BBB-; outlook Stable
• Canadian ratings agency DBRS affirmed Germany sovereign rating at AAA, Stable trend

Americas:

• US Congress said to be likely to pass a 1 week stop gap spending Bill
• Reports circulating that bipartisan group of senators were optimistic that a Covid-19 stimulus package could be presented as early as Monday (Dec 7th
• Trump Administration said to be preparing new sanctions on at least 12 China officials, related to China’s move to disqualify elected lawmakers in Hong Kong
• Attorney General (AG) Barr said to be considering leaving position before end of Trump term

Energy:

• Iran said to be prepared to increase oil production once President-electBiden lifts sanctions if Tehran returned to “strict compliance with the nuclear deal”

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.42% at 392.40, FTSE +0.34% at 6,572.35, DAX -0.39% at 13,247.75, CAC-40 -0.80% at 5,564.19, IBEX-35 -0.60% at 8,273.00, FTSE MIB -0.48% at 22,071.50, SMI +0.45% at 10,410.99, S&P 500 Futures -0.45%]
• Market Focal Points/Key Themes: European indices open mixed but took on a noted negative bias as the session wore on; sectors among better performers include health care and materials; sectors among underperformers financials and consumer discretionary; Elementis confirms rejection of offer from Minerals Technologies; Connells raises offer for Countrywide; Cisco Systems to acquire IMImobile; Countrywide and Frasers reportedly looking at rescue deal for Debenhams; focus on potential release of second US covid relief bill announcement; earnings expected during the upcoming US session include Casey’s General Stores and Progressive Corp

Equities

• Consumer discretionary: Countrywide [CWD.UK] +20% (offer raised), Pandora [PNDORA.DK] +6% (Nov update)
• Healthcare: Celyad [CYAD.BE] -7% (update on programs)
• Industrials: Elementis [ELM.UK] -2% (rejects proposal), Kingfisher [KFG.UK] -1% (trading update)
• Technology: IMImobile [IMO.UK] +47% (to be acquired by Cisco), Micro Focus [MCRO.UK] +14% (analyst upgrade)

Speaker

• EU chief negotiator Barnier in briefing to EU envoys reportedly said no UK trade deal yet; reiterated stance that 3 key issues remained. Barnier’s briefing said to be downbeat on prospects for a deal with the ball being in UK’s court to move talks forward. Barnier denied that EU-UK were close to an agreement on the key issue of fisheries
• UK PM Johnson said to be prepared to pull out of Brexit talks within hours over EU demands and could address the country on this as soon as Tuesday evening
• Ireland Foreign Min Coveney: Brexit deal certainly looked very difficult at moment
• UK Junior Foreign Min official stated that would press ahead on Monday (Dec 7th) with the Internal Market Bill noting that it contained important clauses that protected the integrity of the United kingdom
• EU’s Sefcovic to meet UK official Gove on Monday, Dec 7th to discuss implementing of Withdrawal Agreement including the Protocol on Ireland
• Sweden Central Bank (Riksbank) Nov Minutes: Clear that domestic economy was slowing and would need expansionary policy for long time. Inflation prospects have been revised lower
• Sweden Central Bank (Riksbank) Gov Ingves noted in the Nov Minuted that growth prospects looked less favorable with risks to the downside. Monetary support to remain for as long as needed; no reason to remove them too quickly
• Sweden Central Bank (Riksbank) Floden (dissenter on QE): Better to signal lower rates rather than expand QE. Preferred QE remaining at SEK500B until mid-2021
• Poland Dep PM stated that he saw an EU compromise within reach
• China Foreign Ministry spokesperson Hua Chunying reiterated stance for US to stop interfering in its internal affairs; would take strong countermeasures at any new US sanctions
• China SAFE (FX regulator) reiterated stance that FX market was expected to be basically stable
• Taiwan Central Bank (CBC) announced property measures which put restrictions on companies buying properties and set new limits on individuals buying properties
• France, Germany and Germany joint statement: Iran’s recent announcement of installing additional cascades of advance centrifuges was deeply worrying. Installation at Natanz was contrary to the nuclear deal

Currencies/Fixed Income

• Risk aversion crept back into the market as Brexit negotiations were not making any progress on the 3 remaining hurdles. The rhetoric in the session gave the appearance of no clear signs that a deal would be made. Situation also clouded by threats of a French veto of any unfavorable deal seemed to also limits chances
• EUR/USD was softer from risk aversion flows. Focus remains on ECB’s upcoming meeting on Thursday with stimulus expected to be announced. anticipate boosted asset purchases, extended TLTROs. EUR/USD at 1.2090 at mid-session
• GBP/USD slumped in the session by 200 pips for its largest decline in almost three months after EU chief negotiator Barnier was said to be pessimistic about prospects for deal ahead of the day’s talks. Focus turning to UK PM Johnson talk with EU Commission chief von der Leyen later this evening which was being viewed as a pivotal moment in the process. Reports circulated that some progress must occur by the end of the day if the talks were to continue. PM Johnson was said to be ready to walk away from the negotiations within hours unless the EU backs down from its outrageous demand. To complicate matters the UK House of Commons brings back the Internal markets Bill regarding changes to the Withdrawal Agreement. GBP/USD at 1.3245 at mid-session

Economic Data

• Sweden Dec SEB House-Price Indicator: 50 v 55 prior
• (ZA) South Africa Nov Gross Reserves: $53.8B v $53.7B prior; Net Reserves: $51.3B v $52.2Be
• (DE) Germany Oct Industrial Production M/M: 3.2% v 1.6%e; Y/Y: -3.0% v -4.6%e
• (FI) Finland Oct Preliminary Trade Balance: -€0.1B v -€0.4B prior
• (DK) Denmark Oct Industrial Production M/M: -5.6% v +1.9% prior
• (NO) Norway Oct Industrial Production M/M: -3.5% v -1.6% prior; Y/Y: 0.0% v 6.3% prior
• (NO) Norway Oct Manufacturing Production M/M: +0.6% v -0.5% prior; Y/Y: -2.7% v -3.4% prior
• (MY) Malaysia end-Nov Foreign Reserves: $105.3B v $104.9B prior
• (CH) Swiss Nov Foreign Currency Reserves (CHF): 875.9B v 871.5B prior
• (AT) Austria Nov Wholesale Price Index M/M: 0.3% v 0.6% prior; Y/Y: -3.8% v -4.1% prior
• (CZ) Czech Oct Retail Sales Y/Y: % v -5.3%e; Retail Sales (ex-auto) Y/Y: % v -3.3%e
• (TW) Taiwan Nov Trade Balance: $5.3B v $6.6Be; Exports Y/Y: 12.0% v 8.8%e; Imports Y/Y: 10.0% v 0.3%e
• (SE) Sweden Oct Private Sector Production M/M: 1.3% v 0.3% prior; Y/Y: +1.3% v -1.5% prior
• (SE) Sweden Oct Industrial Orders M/M: +1.3% v -1.1% prior; Y/Y: +1.3% v -1.5% prior
• (SE) Sweden Oct Industry Production Value Y/Y: -2.6% v -2.1% prior; Service Production Value Y/Y: % v -4.3% prior
• (SE) Sweden Q3 Current Account Balance (SEK): 67.4B v 62.3B prior
• (SE) Sweden Nov Budget Balance (SEK): +40.3B v -36.0B prior
• (CH) Swiss weekly Total Sight Deposits (CHF): 705.3B v 706.5B prior; Domestic Sight Deposits: 639.3B v 644.4B prior
• (SG) Singapore Nov Foreign Reserves: $352.6B v $338.1B prior
• (CN) China Nov Foreign Reserves: $3.179T$3.150Te (1st rise in 3 months; highest level since Apr 2016)
• (EU) Euro Zone Dec Sentix Investor Confidence: -2.7 v -7.8e (10th month of negative readings)

Fixed income Issuance

• None seen

Looking Ahead

• (IL) Israel Nov Foreign Currency Balance: No est v $160.7B prior
• 05:30 (DE) Germany to sell €1.5B in 6-month Bubill
• 05:30 (NL) Netherlands Debt Agency (DSTA) cancelled planned Bills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IE) Ireland Oct Industrial Production M/M: No est v -4.8% prior; Y/Y: No est v -13.2% prior
• 06:00 (CL) Chile Nov CPI M/M: 0.2%e v 0.7% prior; Y/Y: 3.0%e v 3.0% prior
• 06:00 (BR) Brazil Nov FGV Inflation IGP-DI M/M: 3.2%e v 3.7% prior; Y/Y: 25.0%e v 22.1% prior
• 06:00 (IL) Israel to sell bonds
• 06:25 (BR) Brazil Central Bank Weekly Economists Survey
• 06:30 (CL) Chile Nov Trade Balance: No est v $1.2B prior; Total Exports: No est v $6.0B prior; Total Imports: No est v $4.8B prior; Copper Exports: No est v $3.2B prior
• 06:30 (CL) Chile Nov International Reserves: No est v $38.3B
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Sept Gross Fixed Investment: No est v -17.4% prior
• 08:00 (PL) Poland Nov Official Reserves: No est v $143.1B prior
• 08:00 (RU) Russia Nov Official Reserve Assets: $583.1Be v $582.8B prior
• 08:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance (bills and bonds)
• 09:00 (FR) France Debt Agency (AFT) to sell €5.2-6.4B in 3-month, 6-month and 12-month bills
• 09:30 (TR) Turkey Nov Cash Budget Balance (TRY): No est v -6.7B prior
• 09:45 (EU) ECB weekly QE bond buying update
• 10:00 (CA) Canada Nov Ivey Purchasing Managers Index (seasonally adj): No est v 54.5prior; PMI (unadj): No est v 55.9 prior
• 15:00 (US) Oct Consumer Credit: $16.1Be v $16.2B prior
• 16:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 0.50%
• (CO) Colombia Nov Consumer Confidence Index: No est v -18.6 prior
• (MX) Citibanamex Survey of Economists
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 107.5 prior
• 18:30 (JP) Japan Oct Household Spending Y/Y: +2.4%e v -10.2% prior
• 18:30 (JP) Japan Oct Labor Cash Earnings Y/Y: -0.7%e v -0.9% prior; Real Cash Earnings Y/Y: -0.4%e v -1.1% prior
• 18:50 (JP) Japan Q3 Final GDP Q/Q: 5.0%e v 5.0% prelim; GDP Annualized Q/Q: 21.6%e v 21.4% prelim; GDP Nominal Q/Q: 5.2%e v 5.2% prelim
• 18:50 (JP) Japan Oct Current Account Balance: ¥2.117Te v ¥1.66T prior; Adjusted Current Account Balance: ¥1.829Te v ¥1.35T prior; Trade Balance (BoP Basis): 1.083Te v ¥918.4B prior
• 18:50 (JP) Japan Nov Bank Lending Y/Y: No est v 6.4% prior; Bank Lending (ex-trusts) Y/Y: No est v 6.2% prior
• 19:00 (NZ) New Zealand Dec Preliminary Business Confidence: No est v -6.9 prior; Activity Outlook: No est v 9.1 prior
• 19:01 (UK) Nov BRC Sales Like-For-Like Y/Y: No est v 5.2% prior
• 19:30 (AU) Australia Nov Business Confidence: No est v 5 prior; Business Conditions: No est v 1 prior;
• 19:30 (AU) Australia Q3 House Price Index Q/Q: -0.4%e v -1.8% prior; Y/Y: 3.3%e v 6.2% prior
• 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills
• 22:35 (JP) Japan to sell 5-Year JGB Bonds