European cash equity markets are broadly higher ahead of the midway stage with the Euro Stoxx 600 touching its best level since last Monday (FTSE +0.7%, DAX +0.2%, CAC +0.6%, FTSE MIB +0.1%). Technology stocks are among the best performers, closely followed by basic resources after some back-and-forth in the US-China trade dispute overnight. Banks have lagged meanwhile, weighed by a sharp drop in Deutsche Bank after their headquarters were raided by prosecutors in relation to a money laundering operation. We also steep fall in auto related shares in recent trade after EU Commissioner Oettinger said he expects US auto tariffs before Christmas. From a broader perspective, risk sentiment has been underpinned by dovish remarks made by Fed Chair Powell yesterday who said rates are just below the range of neutral. US government bond yields have continued their move to the downside with ten-year borrowing costs hitting their lowest since September 18th at 2.99% this morning. Core European yields have followed suit and were further pressured by soft German state CPI data with the year-on-year rate slowing in four of the six states. Data elsewhere saw Euro Zone confidence indicators mostly improve versus last month while UK consumer credit and mortgage lending were higher-than-expected. Turning to currencies, the Dollar Index has reversed an earlier drop to trade 0.2% higher at just below the 97 handle. The Japanese Yen remains the G10 outperformer on safe-haven flows while Sterling and the Swedish Krona are at the foot of the G10 table, weighed by Brexit related uncertainty and weak data respectively. Elsewhere, oil prices are in the red with Brent crude futures down just over one-percent and US crude futures falling below $50 for the first time in over a year. Spot gold is up +0.3%. Looking ahead, futures are pointing to a lower open on Wall Street. Data wise, we await US personal income/spending, PCE deflator, jobless claims and pending home sales.
Key Headlines/Data:
* European Corporate News:
– Deutsche Bank (-3.4%): Frankfurt headquarters raided by prosecutors in relation to a money laundering operation
– Rio Tinto (+1.5%): To build a new $2.6 Bln iron-ore mine
– Iliad (+1.4%): Upgraded to ‘equalweight’ from ‘underweight’ at Morgan Stanley
– Intu Properties (-35.6%): Deputy Chairman confirmed £2.9 Bln takeover had been cancelled
* La Republica: Italy could be given more time by the EU before they trigger the Excessive Deficit Procedure.
* La Stampa: Italian PM Conte sees the deficit target being cut to 2.2%:
– Italian Deputy PM Salvini, when asked about a lower deficit target of 2.2%, said this is not the case
* Swiss GDP Data (Q3):
– GDP Q/Q -0.2% versus +0.4% expected, previous +0.7%
– GDP Y/Y +2.4% versus +2.9% expected, previous +3.4% revised to +3.5%
* Norwegian Credit Indicator Y/Y (Oct) +5.7% versus +5.7% expected, previous +5.6% revised to +5.5%
* French GDP Data (Q3 P):
– GDP Q/Q +0.4% versus +0.4% expected, previous +0.4%
– GDP Y/Y +1.4% versus +1.4% expected, previous +1.4%
* German State CPI (Nov):
– Saxony: M/M -0.1%, previous +0.2% | Y/Y +2.1%, previous +2.5%
– Brandenburg: M/M -0.1%, previous +0.1% | Y/Y +1.8%, previous +2.3%
– Bavaria: M/M +0.3%, previous +0.2% | Y/Y +2.7%, previous +2.8%
– Hesse: M/M +0.3%, previous +0.1% | Y/Y +2.1%, previous +2.2%
– North Rhine Westphalia: M/M +0.3%, previous +0.1% | Y/Y +2.4%, previous +2.4%
– Baden Wuertemberg: M/M +0.3%, previous +0.1% | Y/Y +2.7%, previous +2.8%
* UK PM May said there are some MP’s that do not want the UK to leave the EU but as far as she is concerned, they will be leaving in March 2019.
* Spanish CPI Data (Nov P):
– CPI M/M -0.1%, previous +0.9%
– CPI Y/Y +1.7% versus +2.0% expected, previous +2.3%
– CPI EU Harmonized M/M -0.2%, previous +0.7%
– CPI EU Harmonized Y/Y +1.7% versus +2.0% expected, previous +2.3%
* Spanish Retail Sales Y/Y (Oct) +1.8%, previous -0.9% revised to -0.4%
* EU Brexit Minister Barnier said the Brexit deal on offer is the only possible deal.
* Swedish GDP Data (Q3):
– GDP Q/Q -0.2% versus +0.3% expected, previous +0.8% revised to +0.5%
– GDP Y/Y +1.6% versus +2.3% expected, previous +2.5% revised to +2.7%
* German Unemployment Rate (Nov) 5.0% versus 5.1% expected, previous 5.1%:
– Unemployment Change -16K versus -10K expected, previous -11K revised to -12K
* UK Net Consumer Credit (Oct) £0.89 Bln versus £1.00 Bln expected, previous £0.79 Bln revised to £0.85 Bln:
– Net Lending Secured On Dwellings £4.12 Bln versus £3.50 Bln expected, previous £3.89 Bln revised to £4.02 Bln
– Mortgage Approvals 67.09K versus 64.55K expected, previous 65.27K revised to 65.73K
* Euro Zone Consumer Confidence (Nov F) -3.9 versus -3.9 flash/expected:
– Business Climate Indicator 1.09 versus 0.96 expected, previous 1.01
– Economic Confidence 109.5 versus 109.0 expected, previous 109.8 revised to 109.7
– Services Confidence 13.3 versus 13.1 expected, previous 13.6 revised to 13.3
– Industrial Confidence 3.4 versus 2.5 expected, previous 3.0
* Italy sold €4.25 Bln of 2023 & 2028 BTP’s versus €3.25-4.25 Bln target.
* WiWo: EU Commissioner Oettinger said he expects US auto tariffs before Christmas.
