European cash equity markets are broadly higher ahead of the midway stage (FTSE +1.4%, DAX +0.1%, CAC +0.6%, FTSE MIB +0.1%). The so-called defensive sectors have outperformed the broader market as investors look ahead to key risk events this week. Technology stocks have lagged meanwhile, dragged lower by Germany’s SAP after they confirmed restructuring charges would take effect in the first quarter. From a regional perspective, the FTSE 100 is out in front as British American Tobacco and Unilever shares rose sharply. In fixed, UK Gilts opened with a modest bid but have since slipped into the red while German Bunds are closer to the flat line. Data impulses have been limited – French consumer confidence rose to 91 (f/c. 88) from 86 while Spanish Q4 unemployment edged down to 14.45% from 14.55%. Turning to currencies, moves have been muted so far this morning with the New Zealand Dollar at the top of the G10 pile. The Dollar Index has lost -0.1% to 95.7 as Eur/Usd and Gbp/Usd eke out small gains. It could prove a busy afternoon for the pound with UK lawmakers set to vote on a series of amendments to the Brexit bill, including efforts to alter the Irish backstop and extend Article 50. Elsewhere, oil prices are in the green with Brent crude futures up around +1.0% while spot gold has added +0.3%. Looking ahead, futures are pointing to a relatively flat open on Wall Street with earnings due from Verizon, 3M and Pfizer before the opening bell. On the data front, we await the US advance goods trade balance, S&P/CS house price data and consumer confidence.
Key Headlines/Data:
* European Corporate News:
– SAP (-3.4%): To take restructuring charges of €800-950 Mln
– British American Tobacco (+4.7%): Reissued with a ‘buy’ rating at UBS
– Unilever (+1.8%): Acquired The Laundress
– Swedbank (-3.5%): Q4 Net Profit 4.59 Bln versus 4.91 Bln expected
– Royal Mail (-10.5%): Lowered FY operating profit guidance to £500-530 Mln from £500-550 Mln
– Philips (+3.2%): Q4 EBITDA €971 Mln versus €957 Mln expected
* U.S. Charges Huawei With Stealing Trade Secrets, Bank Fraud (Bloomberg):
– U.S. prosecutors filed criminal charges against Huawei Technologies Co., China’s largest technology company, alleging it stole trade secrets from an American rival and committed bank fraud by violating sanctions against doing business with Iran.
* Telegraph – Brexit ‘Plan C’ breakthrough hailed by Boris Johnson as Government urged to back Malthouse Compromise
* @PaulBrandITV (Political Correspondent – ITV): DUP not committing itself to Brady amendment just yet. Wants ‘more assurances’ from PM, particularly around what the alternatives to her backstop would actually be.
* @BBCNormanS (Assistant Political Editor – BBC): Understand PM will tell MPs today that she will seek legally binding changes to the backstop – likely to involve re-opening the Withdrawal Agreement . . . Early indications …@Jacob_Rees_Mogg and other leading Brexiteers set to back down over opposition to Brady ammdt.
* @bbclaura (Political Editor – BBC): DUP says it will back Malthouse compromise plan but won’t confirm whether they’ll back Brady amendment or not – want to hear what PM says later
* Swiss Trade Balance (Dec) 1.897 Bln versus 4.550 Bln expected, previous 4.737 Bln revised to 4.745 Bln
* French Consumer Confidence (Jan) 91 versus 88 expected, previous 87 revised to 86
* Spanish Unemployment Rate (Q4) 14.45% versus 14.47% expected, previous 14.55%
* UK Trade Minister Fox said there is less appetite for a no deal Brexit in the EU with the German economy slowing. He also said he has serious reservation about the Cooper-Bowles amendment, adding that lawmakers will get another opportunity to vote against a no-deal Brexit.
* Riksbank Floden said there is no autopilot towards higher rates. He also noted that Swedish growth is entering a calmer phase.
* Italian PPI Data (Dec):
– PPI M/M -0.6%, previous -0.7% revised to -0.8%
– PPI Y/Y +5.2%, previous +5.8% revised to +5.7%
* Germany sold €3.98 Bln of a 2020 bond versus €5.0 Bln target:
– Bid to Cover: 1.6, previous 1.9
– Yield: -0.58%, previous -0.58%
