European cash equity markets are mostly lower ahead of the midway stage as investors tread cautiously ahead of the G20 summit (FTSE -0.7%, DAX -0.6%, CAC -0.4%). US President Trump and Chinese President Xi are scheduled to meet tomorrow amid the looming possibility of higher US import tariffs which has prompted underperformance in the auto and basic resource sectors. Bank stocks are also firmly in the red, dragged lower by Deutsche Bank as the money laundering raid extended to a second day. In the bond markets, ranges have been tight with both UK and German 10-year benchmarks trading slightly higher for the day having showing little reaction to macro data. For the record, Euro Zone CPI was slightly softer-than-expected at +2.0% YoY (f/c. +2.1%) while the unemployment rate held steady at 8.1% (f/c. 8.0%). Italian Q3 GDP will be of more concern however after it contracted QoQ at -0.1% (f/c. +0.2%). There were reports during the early exchanges suggesting that Italian PM Conte and Economy Minister Tria are working on a plan to lower the 2019 deficit target to 2%. Turning to currencies, the Dollar Index has edged up +0.2% and briefly touched the 97 handle although trades flat versus the Japanese Yen. The Norwegian Krone is the weakest of the G10’s after retail sales fell short of expectations while Sterling continues to be weighed by ongoing Brexit related uncertainty. Elsewhere, oil prices are in the red with US crude futures down around one-percent after the Russian Energy Ministry said OPEC and non-OPEC oil producers are comfortable with current oil prices. Spot gold is down -0.1%. Looking ahead, futures are pointing to a lower open on Wall Street with Canadian GDP and Chicago PMI due for release. We also expect possible comments from the ECB’s Coeure and New York Fed President Williams.
Key Headlines/Data:
* European Corporate News:
– Deutsche Bank (-2.6%): Money laundering raids extend to a second day
– Altice (+8.1%): French unit agreed to sell its 49.99% stake in its fibre optic business
* Guardian: Theresa May has ruled out any plan B involving a Norway-style compromise deal with the Labour party in order to deliver a parliamentary consensus on Brexit, saying the opposition party’s refusal to accept the backstop arrangement put the UK on a course for no deal.
* Il Messaggero: Italian PM Conte and Economy Minister Tria are working on a plan to lower the 2019 deficit target to 2%
* German Retail Sales Data (Oct):
– Retail Sales M/M -0.3% versus +0.4% expected, previous 0.1% revised to -0.3%
– Retail Sales Y/Y +5.0% versus +2.7% expected, previous -2.6% revised to -2.8%
* German Import Price Data (Oct):
– Import Price Index M/M +1.0% versus +0.4% expected, previous +0.4%
– Import Price Index Y/Y +4.8% versus +4.2% expected, previous +4.4%
* UK Nationwide House Price Data (Nov):
– House Price Index M/M +0.3% versus +0.1% expected, previous 0.0%
– House Price Index Y/Y +1.9% versus +1.7% expected, previous +1.6%
* Norwegian Core Retail Sales M/M (Oct) -0.2% versus +0.1% expected, previous -0.7% revised to -0.6%
* French CPI Data (Nov P):
– CPI M/M -0.2% versus -0.2% expected, previous +0.1%
– CPI Y/Y +1.9% versus +1.9% expected, previous +2.2%
– CPI EU Harmonized M/M -0.2% versus -0.2% expected, previous +0.1%
– CPI EU Harmonized Y/Y +2.2% versus +2.3% expected, previous +2.5%
* Swiss KOF Leading Indicator (Nov) 99.1 versus 99.5 expected, previous 100.1 revised to 100.2
* UK Trade Minister Fox reassured that members of the cabinet would vote for PM May’s Brexit deal.
* Ukrainian State Security Official said they are considering mirror actions against Russia in response to the captured Ukrainian ships.
* Italian Unemployment Rate (Oct) 10.6% versus 10.1% expected, previous 10.1% revised to 10.3%
* Norwegian Unemployment Rate (Nov) 2.3% versus 2.2% expected, previous 2.2%
* Spanish Current Account Balance (Sep) €0.90 Bln, previous €1.83 Bln
* Riksbank Deputy Governor Floden said they believe the Krona is undervalued and should strengthen 5-10% over the long-term. He also noted data since the October meeting has been disappointing but it is too early to tell how it will effect plans to begin raising rates.
* Euro Zone CPI Data (Nov P):
– CPI Y/Y +2.0% versus +2.1% expected, previous +2.2%
– Core CPI Y/Y +1.0% versus +1.1% expected, previous +1.1%
* Euro Zone Unemployment Rate (Oct) 8.1% versus 8.0% expected, previous 8.1%
* Italian CPI Data (Nov P):
– CPI M/M -0.1% versus -0.3% expected, previous 0.0%
– CPI Y/Y +1.7% versus +1.7% expected, previous +1.6%
– CPI EU Harmonized M/M -0.2% versus -0.3% expected, previous +0.2%
– CPI EU Harmonized Y/Y +1.7% versus +1.6% expected, previous +1.7%
* Russian Energy Ministry said OPEC and non-OPEC oil producers are comfortable with current oil prices.
* Italian GDP Data (Q3 P):
– GDP Q/Q -0.1% versus +0.2% expected, previous +0.2%
– GDP Y/Y +0.7% versus +0.8% expected, previous +0.8%
