European cash equity markets are broadly higher ahead of the midway stage with the Euro Stoxx 600 on course to snap a five-session losing streak (FTSE +0.5%, DAX +0.5%, CAC %+0.2%, FTSE MIB +0.5%). Bank stocks are among the best performers, led higher by Italian institutions after La Stampa suggested this morning that Deputy PM Salvini may be open to budget revisions. However this was later denied by an Italian League Official while more recent reports via ANSA suggested the EU Commission have rejected the draft 2019 budget and will open the excessive debt procedure. Italian ten-year yields are currently down around nine basis points while the Italian bank index is trading at the lows but still up +1.2%. Elsewhere in the bond markets, both US and core European yields have advanced as broad risk sentiment improved from yesterday’s slump. Data releases were fairly mundane meanwhile and prompted minimal reaction – UK government borrowing was higher than expected at £7.96 Bln (f/c. £5.35 Bln) while Norwegian unemployment held steady at +4.0%. The OECD economic forecasts were also largely ignored with 2018 growth unchanged at +3.7% although 2019 was cut to +3.5% from +3.7%. Turning to currencies, the New Zealand Dollar and Norwegian Krone are leading the G10 currencies higher while the Japanese Yen is the weakest. The Dollar Index is flat. Elsewhere, oil prices have rebounded this morning with US crude futures up over two-percent at the highs while spot gold has edged up +0.1%. Looking ahead, futures are pointing to a slightly higher open on Wall Street in what will be the last full trading day of the week. Data wise, we await US durable goods, jobless claims, existing home sales and Michigan Sentiment.
Key Headlines/Data:
* European Corporate News:
– Thyssenkrupp (-0.7%): FY17/18 Adj. EBIT €1.55 Bln versus €1.64 Bln expected | FY17/18 Revenue €42.7 Bln versus €42.3 Bln
– Sage (-3.8%): FY17/18 pretax profit rose to £398 Mln | Organic revenue growth +6.8% versus +7.0% expected
– Renault (+1.5%): Carlos Ghosn to remain CEO; Thierry Bolloré to take interim charge as Deputy CEO.
– Volkswagen (+2.1%): Trump to invite the CEO’s of Volkswagen, Daimler and BMW to the White House
– Kingfisher (-2.5%): Q3 sales sales rose +1.2% to £3.04 Bln | To exit Russian, Spanish and Portuguese markets
– Novartis (-0.5%): Negative FDA warning on multiple sclerosis drug
* Norwegian Unemployment Rate (Sep) 4.0% versus 4.0% expected, previous 4.0%
* Swiss Money Supply – M3 Y/Y (Oct) +2.5%, previous +2.3%
* UK Work & Pensions Secretary Rudd said she does not think any of the Cabinet will vote against PM May’s Brexit deal.
* Italian League party denied earlier reports that Deputy PM Salvini was open to revising budget reform plans.
* German Chancellor Merkel said they still don’t know how to solve Spanish objections to the Brexit deal but expects a solution will be found Sunday.
* Saudi oil production is said to have surged in early November to 10.8-10.9 Mln BPD and passed 11.0 Mln for some days.
* Italian Statistics Office (ISTAT) lowered their 2018 domestic growth forecast to +1.1% from +1.4% seen in May; 2019 seen at +1.3%
* UK Public Sector New Borrowing (Oct) £7.96 Bln versus £5.35 Bln expected, previous £3.26 Bln revised to £1.98 Bln:
– Ex. Banks £8.82 Bln versus £6.15 Bln expected, previous £4.12 Bln revised to £2.85 Bln
* Italian Deputy PM Salvini said the 2.4% deficit target cannot be discussed. He added that he is open to dialogue on investment but not the budget deficit or pension reform.
* OECD Economic Forecasts:
– Global growth unchanged at +3.7% for 2018, 2019 cut to +3.5% from +3.7%
– US growth unchanged at +2.9% this year and +2.1% in 2019
* Germany sold €2.45 Bln of a 2023 bond versus €3.0 Bln target:
– Bid to Cover: 1.5
– Yield: -0.2%
* ANSA: The European Commission have rejected the Italian budget
* ANSA: European Commission says disciplinary action should be taken against Italy for excessive debt.
