European cash equity markets are broadly higher ahead of the midway stage (FTSE +1.1%, DAX +1.5%, CAC +1.5%). Basic resource and technology stocks are leading gains, boosted by renewed optimism surrounding US-China trade talks after a phone call took place between US Treasury Secretary Mnuchin, Trade Representative Lighthizer and Chinese Vice Premier Liu He. According to the WSJ, the three officials discussed Chinese purchases of agricultural products and changes to fundamental Chinese economic policies. Investors will also have welcomed some respite for the pound which has rebounded from yesterday’s twenty-month low although the situation regarding the withdrawal agreement remains uncertain. EU officials remain steadfast that the text cannot be renegotiated although EU Commission President Juncker did add further clarifications are possible. UK PM May is set to meet with both EU Council President Tusk and Juncker later today. Elsewhere in FX, the Dollar Index has inched down -0.3% to trade just below the 97.0 level while the Swedish Krona and Norwegian Krone occupy the G10 top spots this morning. The Euro has inched higher versus the Greenback despite a pretty dismal German ZEW survey. Turning to commodities, oil prices are ahead with Brent crude futures up around +0.4%. Spot gold is up +0.2%. Looking ahead, futures are pointing to a higher open on Wall Street with US producer price data due for release.
Key Headlines/Data:
* European Corporate News:
– WPP (+7.1%): Announced £300 Mln restructuring plan, including 2,500 job cuts over three years.
– Ashtead Group (+2.8%): Expects FY results ahead of expectations
– Covestro (+3.0%): Raised to overweight from equal weight at Morgan Stanley
– Standard Life Aberdeen (-2.8%): Cut to sector perform at RBC
– Sanofi (+2.2%): Raised to buy from hold at Jeffries
* Italian press (Republica) reported that PM Conte is pushing for a deficit target of 2.1% next year, however Deputy PM’s Salvini and Di Maio are said to be refusing to go below 2.2%.
* Separate reports (Messaggero) said the EU are demanding a deficit target of 1.95%
* U.S., China Kick Off a New Round of Trade Talks (WSJ):
– The U.S. and China started the latest round of trade talks with a phone call involving Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He.
– The three senior officials discussed Chinese purchases of agricultural products and changes to fundamental Chinese economic policies during the phone call, said people familiar with the conversation. They didn’t provide further details.
* French Non-Farm Payrolls Q/Q (Q3) +0.1%, previous +0.2% revised to +0.1%
* Irish Foreign Minister Coveney stated that the backstop will not change, however the government has no issue providing reassurances around the backstop.
* EU Commission President Juncker said reopening the withdrawal agreement will not happen but further clarifications are possible.
* @MehreenKhn (FT Brussels Correspondent) – EU sources insisting this morning that May won’t get a clarification on the backstop that will carry any legal weight – replicating the contortions Brussels made to help out Rutte in 2016.
* UK Employment Change (3M/3M) (Oct) +79K versus +25K expected, previous +23K:
– Unemployment Rate 4.1% versus 4.1% expected, previous 4.1%
– Average Earnings Y/Y +3.3% versus +3.0% expected, previous +3.0% revised to +3.1%
– Average Earnings Ex. Bonus Y/Y +3.3% versus +3.2% expected, previous +3.2%
* UK Jobless Claims Change (Nov) +21.9K versus +13.2K expected, previous +20.2K revised to +23.2K:
– Claimant Count Rate 2.8%, previous 2.7%
* German ZEW Survey – Current Conditions (Dec) 45.3 versus 55.8 expected, previous 58.2
– Expectations -17.5 versus -25.0 expected, previous -24.1
* Germany sold €2.41 Bln of a 2020 bond versus €3.0 Bln target:
– Bid to Cover: 1.9, previous 1.9
– Yield: -0.58%, previous -0.58%
* US NFIB Small Business Optimism (Oct) 104.8 versus 107.3 expected, previous 107.3
* According to a government sources, there is an excellent chance that Italy will not face disciplinary action if they agree to a deficit target of 2.0%. However, they also say neither coalition partner wants to go below 2.2%.
* UK government spokesman said the government will bring the Brexit deal back to parliament for a vote before January 21st.
