Notes/Observations
Senate to vote on later today to try to reopen govt and fund it through Feb 8th
BOJ and ECB rate decisions this week with focus on potential forward-looking discussions about the prospects for policy normalization
Asia:
Australia PM Turnbull affirms next election won’t be held until 2019
PBOC Adviser Sheng Songcheng:reiterated of no need for PBoC to raise benchmark interest rates as it would raise the cost of financing in the real economy and would not be conducive to financial deleveraging
China State Planner: Confident Chinese economy will maintain steady, good momentum in2018 ; will further guide Chinese firms in their overseas investment
Japan Cabinet Office confirmed speculation that it would push back its forecast for achieving primary budget surplus by two years to FY27
Europe:
Germany Social Democrats (SPD) voted to support the opening of formal coalition talks with Chancellor Merkel’s conservative bloc with vote by 362 to 279
Renewed speculation that EU officials could pick a new ECB vice president with the Eurogroup ministers to kick off the process today
PM May: Reiterates Britain wants to have a comprehensive trade deal with the EU as well as a defense pact in place once its leaves the bloc
France President Macron: UK could get a special trade deal with the EU after Brexit, UK will not have full access to the single market without accepting its rules
Former UKIP leader Nigel Farage said to be considering forming a new pro Brexit party after becoming dismayed with internal politics and scandal within UKIP since his resignation as leader 18 months ago
President Trumps anger with UK PM May puts US-UK trade deal after Brexit is at risk; relationship said to have "soured”. Trump is still furious with the way he has been treated by the British government and warned his deteriorating relationship with May is likely to kill any prospect of a swift post-Brexit trade deal. May will attempt to clear the air with Trump when she meets him at Davos (if he attends)
Fitch raised Spain sovereign rating one notch to A- from BBB+; revised outlook to Stable from Positive
S&P raised Greece sovereign rating one notch to B from B-; maintained outlook Positive
Americas:
US Senator Majority Leader Mcconnell (R-KY): Set next Senate procedural vote on 3-week stopgap spending bill for noon EST Monday
Senate minority leader Schumer (D-NY): Yet to reach agreement on path forward
Senator Flake (R-AZ):; Bipartisan meeting to be held on Monday at 10 am EST to discuss continuing resolution (CR)
President Trump if Govt shutdown stalemate continued, Republicans should use procedural “nuclear option” to change Senate rules and pass long-term spending bill
Energy:
Russia and OPEC reaffirmed that they will continue with oil-production cuts until year-end to clear a global glut, indicate willingness to cooperate beyond
Economic Data:
(NL) Netherlands Jan Consumer Confidence: 24 v 25 prior
(NL) Netherlands Nov Consumer Spending Y/Y: 2.6% v 1.7% prior
(JP) Japan Dec Convenience Store Sales Y/Y: -0.3% v -0.3% prior
(NL) Netherlands Dec House Price Index M/M: 0.4% v 0.5% prior; Y/Y: 8,2% v 8.2% prior
(NO) Norway Q4 Industrial Confidence: 6.4 v 5.0e
(TW) Taiwan Dec Export Orders Y/Y: 17.5% v 12.2%e
(TW) Taiwan Dec Unemployment Rate: 3.7% v 3.7%e
(CH) Swiss Dec M3 Money Supply Y/Y: 3.2 v 4.3% prior
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 400.7 , FTSE +0.1% at 7735, DAX -0.1% at 13423, CAC-40 -0.1% at 5520 , IBEX-35 +0.4% at 10519, FTSE MIB +0.1% at 237773 , SMI -0.2% at 9494, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes:
European Indices trade mixed this morning, with outperformance in the Spanish Ibex, as Indices trade off the sesssion highs in rangebound trade ahead of a busy earnings week.
Swiss financial giant UBS trades under pressure after reporting inline results, with electrical retailer Dixons Carphone trading higher with LFL growth of 6%. In the M&A space Sanofi confirmed the acquisition of Biovertativ in an $11.6B deal, while Richemont announced a voluntary tender for Yoox Net-A-Porter. Elsewhere in the UK Ocado trades over 10% higher after a partnership with Sobeys; Bookmaker Ladbrokes and William Hill trade sharply lower after reports of a new £2M maximum in gaming machines.
Looking ahead notable earners include Haliburton and Wynn Resorts.
Movers
Consumer Discretionary [Dixons Carphone [DC.UK] +2% (Chirstmas update), Ocado [OCDO.UK] +13% (Partnership with Sobeys), William Hill [WMH.UK] -12.5%, Ladbrokes [LCL.UK] -10% (UK said to be set to announce a new £2 maximum stake on lucrative high stakes gaming machines)]
Financials [UBS [UBSG.CH] -1.6% (Earnings)]
Technology [Aveva [AVV.UK] +5.0% (Trading update), Lending Tech [LTG.UK] +6.8% (Trading update)]
Healthcare [Sanofi [SAN.FR] -3.8% (To acquire Bioverativ for $11.6B) Swedish Orphan Biovitrum [SOBI.SE] +11% (up in sympathy)]
Speakers
ECB bond purchases are deviating from capital-key requirements with purchases of Italian, French, Austrian, Belgian Govt bonds last year was about 10% above the level justified by the capital key
EU draft document: Greece needs additional debt-mitigating measures (**note comments aheda of today’s Eurogroup meeting)
Czech Central Bank Gov Rusnok: Saw a very good probability of a rate hike in Feb while no enormous inflation pressure on domestic economy
Spain prosecutor said to have asked Supreme Court judge Llarena to activate an European arrest warrant for former Catalan President Puigdemont (**Note: Request comes after Puigdemont left Brussels for Copenhagen)
Iraq Oil Min Luaibi: Oil prices are heading in the right direction
Currencies
The USD was only modestly softer despite the continued shutdown of the US govt
The EUR/USD remained about a big figure away from its recent 3-month highs of 1.2323 as the pair seemed to have failed to benefit from bullish news. Focus turning to ECB rate decision on Thursday.
USD/JPY seemed to break its historical correlation with US bond yields. Dealers noted that US bond yields are not supporting USD/JPY pair. BOJ meets on Tuesday with no change expected in policy but to focus on its forward communication especially on the inflation front. Japan will release its Dec COPI data on Friday with analysts noting that an overshoot in the core CPI would raise the possibility of the BOJ moving to normalize policy
Monday’s Eurogroup meeting of eurozone finance ministers should sign off the latest bailout tranche and allow the closing of the third review. The fourth review is expected to be completed in June. The current Greek bailout runs until August
Fixed Income
Bund Futures trades down 11 ticks at 160.47 after initially rallying as strong support lies sub 160 level. Continued upside targets 162.00, while a move lower targets the159.56 low.
Gilt futures trade at 123.50 down 12 ticks, hanging near Friday’s low. Support continues to stand at 123.55 then 122.83, with upside resistance at 124.25 then 124.96.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.863T from €1.860T prior. Use of the marginal lending facility fell to €237M from €434M prior.
Corporate issuance saw banks dominate with $47B issuance in high-grade raised last week
Looking Ahead
05:25 (BR) Brazil Central Bank Weekly Economists Survey
06:00 (DE) German Bundesbank monthly report
06:00 (IE) Ireland Dec PPI M/M: No est v -0.4% prior; Y/Y: No est v -3.6% prior
06:00 (TR) Turkey to sell 2024 Floating Rate bonds
06:00 (IL) Israel to sell Bonds
06:45 (US) Daily Libor Fixing
07:00 (RO) Romania to sell 3.25% 2024 Bonds
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week (to sell 3-month and 9-month Bills on Tues)
08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Dec Chicago Fed National Activity Index: 0.22e v 0.15 prior
08:30 (CA) Canada Nov Wholesale Trade Sales M/M: 1.2%e v 1.5% prior
08:55 (FR) France Debt Agency (AFT) to sell combined €4.8-6.0B in 3-month, 6-month and 12-month BTF Bills
09:00 (MX) Mexico Dec Unemployment Rate (Seasonally Adj): 3.5%e v 3.5% prior; Unemployment Rate (Unadj):3.3%e v 3.4% prior
09:00 IMF updates its World Economic Outlook (WEO)
09:00 (EU) Eurogroup Finance Ministers meet
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:00 (CO) Colombia Nov Trade Balance: -$0.8Be v -$0.6B prior; Total Imports: $4.0Be v $3.9B prior
11:00 (US) Senate Republicans will have a conference meeting
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
12:00 (US) Senate expected to vote to fund the government through Feb. 8th (expected not to pass)
14:00 (CO) Colombia Nov Economic Activity Index (Monthly GDP) Y/Y: 1.6%e V 1.4% prior
15:00 (MX) Mexico Citibanamex Survey of Economists
21:00 (PH) Philippines Q4 GDP Q/Q: 1.6%e v 1.3% prior; Y/Y: 6.7%e v 6.9% prior, GDP Annual Y/Y: 6.5%e v 6.8% prior
(JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to leave Interest Rate unchanged at -0.10%
