European cash equity markets are broadly lower ahead of the midway stage as optimism surrounding the US-China trade talks fades (FTSE -0.2%, DAX -0.3%, CAC -0.7%). Analysts have highlighted the lack of a joint communique from the world’s two largest economies and limited detail in their respective statements. As such, trade sensitive sectors including basic resources, technology and autos have seen minor underperformance compared to the broader market. In fixed, core European bonds gapped higher at the open and while Gilts have pared back to flat, Bunds are still in the green supported by weaker-than-expected French industrial production data. Treasuries meanwhile are also holding small gains following a plethora of dovish Fed speak yesterday and a similar tone in the FOMC minutes. Turning to currencies, the Dollar Index has seen a modest bounce off yesterday’s three-month low having added +0.2% to 95.3. The Australian Dollar is the strongest of the G10’s supported by an overnight rise in copper prices while the Norwegian Krone was boosted by stronger-than-expected CPI data. Sterling and the Swiss Franc are at the bottom of the pile. Elsewhere, oil prices have seen a modest pullback with US crude futures down -0.4% while spot gold is flat. Looking ahead, futures are pointing to a lower open on Wall Street with the major bourses expected to snap a four-day winning streak. On the data front, we await US advance goods trade balance and jobless claims plus possible comments from Richmond Fed President Barkin and the ECB minutes.
Key Headlines/Data:
* European Corporate News:
– Fiat Chrysler (-0.4%): To pay more than $700 Mln to resolve US lawsuit – sources
– Danske Bank (-3.1%): Has been accused of defrauding investors by a US shareholder
– Tesco (+1.3%): Christmas sales were stronger-than-expected
– Ericsson (-4.2%): Takes a SEK 6.1 Bln charge related to losses in BSS business
– Burberry (-2.2%): Cut to ‘hold’ from ‘buy’ at Berenberg
– Safran (-3.7%): Downgraded at JP Morgan
* Chinese Commerce Ministry said talks with the US lasted so long because both sides were serious and honest, adding that the two sides will push forward consultations as originally planned.
* Norwegian CPI Data (Dec):
– CPI M/M 0.0% versus -0.1% expected, previous +0.5%
– CPI Y/Y +3.5% versus +3.4% expected, previous +3.5%
* French Industrial Production Data (Nov):
– Industrial Production M/M -1.3% versus 0.0% expected, previous +1.2% revised to +1.3%
– Industrial Production Y/Y -2.1% versus -0.2% expected, previous -0.6% revised to -0.7%
* Swedish Industrial Production Data (Nov):
– Industrial Production M/M -0.4%, previous +2.8% revised to +2.7%
– Industrial Production Y/Y -2.4%, previous +4.6% revised to +4.9%
* Italian Retail Sales Data (Nov):
– Retail Sales M/M +0.7% versus +0.2% expected, previous +0.1% revised to +0.2%
– Retail Sales Y/Y +1.6%, previous +1.5% revised to +1.6%
* Leader of the Swedish Social Democrats Lofven said government formation talks are constructive.
* France sold €8.2 Bln of 10, 15 and 30 year OAT’s versus €8.0-9.0 Bln target
* UK opposition leader Corbyn said if the government cannot pass its Brexit deal, there must be a general election.
