European cash equity markets are broadly higher ahead of the midway stage (FTSE +1.0%, DAX +0.6%, CAC +0.6%. FTSE MIB +1.6%). The Euro Stoxx 600 did touch its lowest level since last Monday at the open but moved higher as Italian banks rallied on reports that the government had reached a deal with the EU on the 2019 budget. EU Vice Commission President Dombrovskis confirmed in recent trade they had reached a deal that avoids the excessive deficit procedure but warned the budget still raises concerns. Italian government bonds have also jumped higher with the ten-year yield touching its lowest since mid-September. Elsewhere in the bond markets, US Treasuries are little changed on the day as investors look ahead to the FOMC later today. Gilts rose to new highs in recent trade after showing little reaction to inline UK inflation data – headline CPI slowed to +2.3% from +2.4% YoY as expected, while the core rate slowed to +1.8% from +1.9%. Turning to currencies, the Dollar Index has shed -0.3% to around 96.8 while the Euro has taken the G10 top spot, boosted by the rally in Italian assets. Sterling had traded higher earlier in the session but has since pared back to flat. Elsewhere, oil prices are ahead with US crude futures up just over one-percent while spot gold is flat. Looking ahead, futures are pointing to a higher open on Wall Street while the US current account and existing home sales plus Canadian CPI are due for release.
Key Headlines/Data:
* European Corporate News:
– GlaxoSmithKline (+7.5%): To split the company after forming a new joint venture with Pfizer
– Natixis (-6.6%): Booked a €260 Mln of losses and provisions on poorly-performing Asian derivatives.
– Deutsche Post (-4.5%) | Royal Mail (-1.5%): FedEx slashed their FY19 forecasts
– Erste Bank (-7.1%) | Rafaissen Bank (-3.5%): Expected to take a hit from new Romanian bank tax
* UK: Lib Dems and SNP table vote of no confidence in May’s government: Minor parties upstage Corbyn as they hatch Commons motion – but PM can still ignore the calls (Daily Mail):
– SNP, Lib Dems, Plaid Cymru and Greens table formal No Confidence vote
– Party leaders call Corbyn’s demand yesterday for non-binding vote ‘a gimmick’
– They insist that if the vote fails they will ‘build a majority’ for second referendum
– But the vote may not be tabled – it is understood the Government only has to give time to motions tabled in the name of the Leader of the Opposition
* Italy strikes deal with EU over budget (Deutsche Welle):
– Italy’s Economy Ministry announced on Tuesday that an informal agreement had been reached with the European Commission over its budget plan. The move would mark the end of a standoff between Italy and the EU over its debt.
– “Great satisfaction for the result achieved,” Deputy Prime Minister Matteo Salvini said in a brief statement. Salvini did not provide any details of the deal.
* German PPI Data (Nov):
– PPI M/M +0.1% versus -0.1% expected, previous +0.3%
– PPI Y/Y +3.3% versus +3.2% expected, previous +3.3%
* French Finance Minister Le Maire said the French deficit next year will be 3.2% of GDP.
* Swedish Consumer Confidence (Dec) 96.4 versus 99.0 expected, previous 97.5 revised to 96.8
– Manufacturing Confidence 116.2, previous 116.2 revised to 115.2
* UK Inflation Data – CPI, RPI & PPI Output (Nov):
– CPI M/M +0.2% versus +0.2% expected, previous +0.1%
– CPI Y/Y +2.3% versus +2.3% expected, previous +2.4%
– Core CPI Y/Y +1.8% versus +1.8% expected, previous +1.9%
– RPI M/M 0.0% versus +0.1% expected, previous +0.1%
– RPI Y/Y +3.2% versus +3.2% expected, previous +3.3%
– PPI Output M/M +0.2% versus -0.1% expected, previous +0.3%
– PPI Output Y/Y +3.1% versus +2.9% expected, previous +3.3%
* ECB’s Nowotny said he would have preferred to let the purchase of corporate bonds expire and buy more government bonds instead.
* UK CBI Trends – Total Order (Dec) 8.0 versus 6.0 expected, previous 10.0
* EU Commission Vice President Dombrovskis confirmed they had reached a deal with Italy that allows them to avoid the excessive deficit procedure. He did add that the Italian budget still raises concerns.
