Cable Strengthens On Continuation Of Brexit Talks

Notes/Observations

• Brexit talks continue after weekend assessment from both sides
• Electoral College meets on Monday and seen confirming the US election results

Asia:

• Japan Q4 Tankan Large manufacturers Index registered its 2nd consecutive improvement (-10 v -15e; Outlook Survey -8 v -11e

Coronaviurs:

• Total global cases over 70M with deaths over 1.6M

Europe:

• EU Commission President Von Der Leyen and UK PM Johnson stated that negotiations on a Brexit deal would continue (no specific deadline now set). UK-EU pledged to “go the extra mile”. Reports later circulated that there had been very positive discussions on how to ensure an economic Level Playing Field after Brexit
• PM Johnson reiterated stance that Brexit talks remained still very far apart on key issues and people should be prepared for a no deal Brexit, which was likely to be a WTO Brexit
• Germany to impose new lockdown measures from Dec 16-Jan 10 which will see schools and non-essential shops close
• Fitch affirmed Spain sovereign rating at A-; outlook Stable

Americas:

• Russian hackers said to be behind successfully hack into US Treasury and US Dept of Commerce, incidents confirmed by US Dept of Commerce
• House Speaker Pelosi Aide stated that Pelosi and Treasury Sec Mnuchin hade spoken on Sunday afternoon for 30 mins on omnibus bill and coronavirus and would speak again on Monday
• A group of US lawmakers were expected to unveil an new $908B COVID relief plan on Monday (Dec 14th) but no certainty it would be passed by Congress.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.87% at 393.52, FTSE +0.31% at 6,566.65, DAX +0.98% at 13,242.75, CAC-40 +0.88% at 5,556.04, IBEX-35 +1.55% at 8,188.00, FTSE MIB +1.00% at 21,918.50, SMI +0.01% at 10,392.75, S&P 500 Futures +0.62%]
• Market Focal Points/Key Themes: European indices open higher across the board and remained in the green as the session wore on; sectors leading to the upside include financials and consumer discretionary; real estate and technology sectors among laggards; reportedly Italy looking at new covid restrictions, Germany announces “hard” lockdown through holidays; Codemasters to be acquired by Electronic Arts; AstraZeneca buys Alkexion; reportedly German goverment to take stake in Hensoldt; reportedely State Street and UBS are looking to merge asset management businesses; earnings expected during the US session include Metro AG

Equities

• Consumer discretionary: Delivery Hero [DHER.DE] +1%, Lufthansa [LHA.DE] +1.5% (German lockdown), Codemasters [CDM.UK] +19% (to be acquired by EA), Stockmann [STCBV.FI] +23% (restructuring)
• Healthcare: AstraZeneca [AZN.UK] -6% (purchase of Alexion), Recipharm [RECI.B.SE] +23% (offer), Novartis [NOVN.CH] -1% (study results)

Speakers

• EU chief negotiator Barnier said to have told 27 EU envoys that UK was backtracking on fisheries; two sides remained split on state aid issue
• EU chief negotiator Barnier tweet reiterated belief that coming days were important if deal is in place on Jan 1st, 2021. Reiterated that had responsibility to give the talks every chance of success. Reiterated that key issues of Level Playing Field (LPF) and Fisheries remained
• ECB’s Villeroy (France) stated that any positive economic effect from coronavirus vaccine would not be felt until the end of 2021
• ECB’s Panetta (Italy) reiterated Council view that inflation to remain subdued for a protracted period; prepared to adjust all tools as necessary. Reiterated Council view that an appreciation of the Euro currency could significantly affect the region’s inflation. Says 2021 likely to be a pandemic year
• Bank of France cut its 2021 GDP growth forecasts from 7.4% to 4.8%. It forecasted Nov GDP at -11.0% and Dec GDP at -8.0%
• France Fin Min Le Maire stated that a no deal Brexit outcome could lower the French 2021 GDP outlook by 0.1%. Reiterated stance that Britain would be the big loser in a no-deal outcome
• Ireland PM Martin stated that EU was aware of the severity of a no-deal Brexit; viewed it as a hopeful sign that talks were continuing but challenges did remain
• German Economy Ministry Monthly Report noted that Q4 economic growth would likely severely impacted by newly announced lockdown measures to combat pandemic
• Germany Econ Min Altmaier stated that new restrictions were needed to combat the spread of coronavirus; situation was out of control
• Italy PM Conti stated that the dmestic economic policy to remain expansionary in 2021 while respecting public debt’s sustainability
• UK Business Sec Sharma: To continue discussing on Brexit deal; reiterated that the two side remain apart in several areas
• China Foreign Ministry spokesperson reiterated stance that US should stop politicizing the trade issues
• China Govt Think Tank official Li Xuesong stated that China 2021 GDP growth seen around 7.8%. China should continue its proactive fiscal policies and prudent monetary policies. 021 Fiscal deficit to GDP should be set around 3.0%
• Japan govt said to see FY20/21 (current year) tax revenues around ¥55.1T; lower by ¥8.4T due to impact of pandemic on corporate profits. To suspend the nationwide “Go To Travel” campaign that subsidized tourism between Dec 28th thru Jan 11th. Japan Cabinet is set to endorse 3rd extra budget with spending of around ¥19.2T
• Singapore PM Lee aanounced that to further ease virus restrictions from Dec 28th; Health Monistry approved Pfizer-BioNTech COVID-19 vaccine for use

Currencies/Fixed Income

• USD was on softer footing as the week began with prior sentiments weighing upon the greenback. Dealers cited the improved risk appetite due to the prospect of a Covid-19 vaccine rollout and improved chances of US Congress reaching agreement on fiscal stimulus. Focus on Wed’s FOMC decision with the Fed likely to remain highly accommodative.
• The GBP currency was broadly firmer compared to Friday’s close as Brexit talks continued and providing hope that the end result would not be a no-deal outcome. GBP was higher by over 200 pips from Friday’s close to move back above the 1.34
• EUR/USD at 1.2150 area despite another hard lockdown taking effect in Germany. Pair seemed content to remain in its new technical range of 1.20-1.24

Economic Data

• (SE) Sweden Nov PES Unemployment Rate: 4.7% v 5.0% prior
• (NL) Netherlands Oct Trade Balance: €7.8 v €5.5B prior
• (FI) Finland Oct Final Retail Sales Volume Y/Y: 4.8% v 4.6% prior
• (FI) Finland Nov CPI M/M: -0.1% v +0.1% prior; Y/Y: 0.2% v 0.2% prior
• (IN) India Nov Wholesale Prices (WPI) Y/Y: 1.6% v 1.7%e
• (FR) Bank of France Nov Industrial (Business) Sentiment: 96 v 95e
• (DE) Germany Nov Wholesale Price Index M/M: +0.1% v -0.2% prior; Y/Y: -1.7% v -1.9% prior
• (TR) Turkey Oct Industrial Production M/M: +1.1% v -0.8%e; Y/Y: 10.2% v 8.4%e
• (ZA) South Africa Q4 BER Consumer Confidence: -12 v -23 prior
• (HK) Hong Kong Q3 Industrial Production Y/Y: -7.4% v -5.1% prior
• (HK) Hong Kong Q3 PPI Y/Y: 3.8% v 1.3% prior
• (CH) Swiss weekly Total Sight Deposits (CHF): 704.9B v 705.3B prior; Domestic Sight Deposits: 636.3B v 639.3B prior
• (CZ) Czech Oct Current Account Balance (CZK): 7.8B v 29.6Be
• (EU) Euro Zone Oct Industrial Production M/M: 2.1% v 2.0%e; Y/Y: -3.8% v -4.2%e
• Fixed income Issuance
• (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills; Avg Yield: 0.20% v 0.04% prior; Bid-to-cover: 2.02x v 2.38x prior

Looking Ahead

• (IL) Israel Central Bank (BOI) Nov Minutes
• 06:00 (IL) Israel Q3 Current Account Balance: No est v $B prior
• 06:00 (PT) Portugal Nov Final CPI M/M: No est v -0.3% prelim; Y/Y: No est v -0.2% prelim
• 06:00 (PT) Portugal Nov Final CPI EU Harmonized M/M: No est v -0.5% prelim; Y/Y: No est v -0.4% prelim
• 06:00 (RO) Romania to sell RON400M in 3.65% 2031 Bonds
• 06:00 (IL) Israel to sell bonds
• 06:25 (BR) Brazil Central Bank Weekly Economists Survey
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India Nov CPI Y/Y: 7.2%e v 7.6% prior
• 07:00 (BR) Brazil Oct Economic Activity Index (Monthly GDP) M/M: 1.1%e v 1.3% prior; Y/Y: -2.0%e v -0.8% prior
• 08:00 (PL) Poland Oct Current Account Balance: €1.2Be v €1.1B prior; Trade Balance: €1.1Be v €1.2B prior; Exports: €22.3Be v €21.1B prior; Imports: €21.3Be v €19.9B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 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
• 09:00 (FR) France Debt Agency (AFT) to sell €3.8-5.0B in 3-month, 6-month and 12-month bills
• 09:45 (EU) ECB weekly QE bond buying update
• 10:00 (CO) Colombia Oct Manufacturing Production Y/Y: 1.5%e v -3.0% prior
• 10:00 (CO) Colombia Oct Retail Sales Y/Y: 3.5%e v -0.8% prior
• 11:30 (US) Treasury to sell 13-Week and 26-Week Bills
• 14:00 (CO) Colombia Oct Industrial Production Y/Y: No est v -8.6% prior
• 15:00 (NZ) New Zealand Q4 Consumer Confidence: No est v 95.1 prior
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 109.3 prior
• 19:30 (AU) RBA Dec Minutes
• 19:40 (AU) RBA’s Kearns
• 21:00 (NZ) New Zealand Nov Non-Resident Bond Holdings: No est v 48.8% prior
• 21:00 (CN) China Nov Industrial Production Y/Y: 7.0%e v 6.9% prior; Industrial Production YTD Y/Y: 2.2%e v 1.8% prior
• 21:00 (CN) China Nov Retail Sales Y/Y: 5.0%e v 4.3% prior; Retail Sales YTD Y/Y: -4.9%e v -5.9% prior
• 21:00 (CN) China Nov YTD Fixed Urban Assets Y/Y: 2.6%e v 1.8% prior
• 21:00 (CN) China Nov Surveyed Jobless Rate: 5.2%e v 5.3% prior
• 22:00 (KR) South Korea Oct M2 Money Supply M/M: No est v 0.5% prior; “L” Money Supply M/M: No est v 0.7% prior
• 22:00 (TH) Thailand Central Bank to sell THB60B in 3-month and 6-month bills
• 22:30 (HK) Hong Kong to sell 3-month and 6-month Bills
• 22:30 (JP) Japan to sell 6-Month Bills
• 23:00 (ID) Indonesia Nov Trade Balance: $2.6Be v $3.6B prior; Exports Y/Y: +0.3%e v -3.3% prior; Imports Y/Y: -24.3%e v -26.9% prior
• (US) Electoral College Votes