European cash equity markets are mostly lower ahead of the midway stage having eased back from a higher open (FTSE -0.6%, DAX -0.4%, CAC -0.4%, FTSE MIB +0.2%). The ‘Food & Beverage’ sector is the worst performer, dragged lower by Heineken after Goldman Sachs cut the stock to ‘sell’ from ‘buy’. Trade sensitive stocks have outperformed meanwhile with basic resources firmly in the green amid reports both the US and China have expressed a will to settle the ongoing trade dispute. In fixed, both UK and German government bond yields have declined despite some solid macro data from the region – Euro Zone retail sales and Sentix investor confidence both surprised to the upside. Of note, the French/German ten-year yield spread reached its widest since April 2017. Turning to currencies, the Dollar Index has fallen below Friday’s low as dovish remarks from Fed Chair Powell continue to weigh. The Swiss Franc is the strongest of the G10’s while the Euro has also gained on the aforementioned data beats. Oil prices are ahead with US crude futures and Brent adding around three-percent at the recent highs. Spot gold is up +0.4%. Looking ahead, futures are pointing to a relatively flat open on Wall Street. On the data front, we await US ISM non-manufacturing, factory prders and durable goods revisions plus Canadian IVEY PMI. We also expect possible comments from ECB Vice President De Guindos.
Key Headlines/Data:
* European Corporate News:
– Heineken (-2.2%): Cut to ‘sell’ from ‘buy’ at Goldman Sachs
– Centrica (-4.9%): Cut to ‘hold’ from ‘buy’ at Jeffries
– Tullow Oil (+2.2%): Raised to ‘outperform’ from ‘sector-perform’ at RBC
– InterContinental Hotels (-2.5%): Cut to ‘underweight’ from ‘equal-weight’ at Morgan Stanley
– Ryanair (-0.7%): Named the UK’s worst airline for the sixth year running
* UK PM May has warned the UK will be in unchartered territory if parliament rejects her Brexit deal, adding that the vote will be held around January 15th:
– Government sources said the vote will take place on Tuesday 15th January
– More than 200 UK lawmakers have written to May, asking her to rule out the option of a no-deal Brexit
* US destroyer has sailed near the disputed Paracel Islands in the South China Sea:
– Chinese Foreign Ministry said the move has violated international laws and warned the US to top these actions.
* German Retail Sales Data (Nov):
– Retail Sales M/M +1.4% versus +0.3% expected, previous -0.3% revised to +0.1%
– Retail Sales Y/Y +1.1% versus -0.7% expected, previous +5.0% revised to +5.2%
* German Factory Orders Data (Nov):
– Factory Orders M/M -1.0% versus -0.4% expected, previous +0.3% revised to -0.2%
– Factory Orders Y/Y -4.3% versus -3.2% expected, previous -2.7% revised to -3.0%
* Chinese Foreign Ministry denied knowledge of a scheduled meeting between US President Trump and Chinese Vice President Wang. They did say however that both sides have expressed will to work together to implement the consensus of the two presidents.
* German Construction PMI (Dec) 53.3, previous 51.3
* Euro Zone Sentix Investor Confidence (Jan) -1.5 versus -2.8 expected, previous -0.3
* Euro Zone Retail Sales Data (Nov)
– Retail Sales M/M +0.6% versus +0.1% expected, previous +0.3% revised to +0.6%
– Retail Sales Y/Y +1.1% versus +0.4% expected, previous +1.7% revised to +2.3%
* EU Commission reiterated the Brexit deal on the table is the only deal possible and will not be renegotiated.
