European cash equity markets are broadly lower ahead of the midway stage, tracking steep losses on Wall Street after the FOMC struck a slightly more hawkish tone than many had expected (FTSE -0.5%, DAX -0.9%, CAC -1.5%). Basic resource stocks are the clear underperformers as aluminium prices slumped on reports that the US will lift sanctions against Rusal. Oil and technology stocks have also lagged the broader market with the former weighed by further declines in the oil markets – US crude futures touched a fresh multi-year low of $45.82 this morning. In the bond markets, Treasuries are little changed on the day with the 10-year holding just below yesterday’s nine-month peak. Core EU bonds also opened firmly in the green but have pared back towards the flat line, weighed by stronger-than-expected UK retail sales data. Turning to currencies, the Dollar Index has shed -0.8% to 96.2 (lowest since November 20th) as growth concerns and fears of yield curve inversion take hold. Among the G10’s, the Swedish Krona shot to the top of the pile after a surprise twenty-five basis point increase by the Riksbank and has pulled the Norwegian Krone along for the ride. The Euro and Swiss Franc are the next best performers while Sterling jumped on the aforementioned retail sales data. Looking ahead, futures are pointing to a flat open on Wall Street with US jobless claims and Philly Fed due for release. The Bank of England are also expected to leave the Bank Rate on hold at midday.
Key Headlines/Data:
* European Corporate News:
– Norsk Hydro (-4.5%) | Rio Tinto (-2.6%) | BHP Billiton (-2.4%): Weighed by falling aluminium prices after the US said it would lift sanctions against Rusal
– Shire (+1.9%): Receives FDA approval
– Airbus (-7.9%): Facing a DoJ probe (Le Monde)
– Deutsche Bank (-5.5%):
* Swiss Trade Balance (Nov) Chf 4.737 Bln, previous Chf 3.748 Bln revised to 3.522 Bln
* Chinese Commerce Ministry said there are plan to hold further trade talks with the US.
* UK Commons leader Leadsom said the government could seek a managed no-deal where they collaborate with the EU in the event that parliament rejects PM May’s Brexit deal.
* Riksbank raised the repo-rate twenty-five basis points to -0.25%:
– Economic activity entering a more mature phase with rising cost pressures
– Conditions remain good for inflation close to 2 per cent
– Monetary policy needs to proceed cautiously
– The forecast for the repo rate therefore indicates that the next rate rise will probably occur during the second half of 2019. After this, the forecast indicates approximately two rate rises per year by 0.25 percentage points each time.
– Sees repo rate averaging 0.48% in Q4 2020 versus 0.66% previously | Sees repo rate averaging 0.98% in Q4 2021 versus 1.23% previously
* Euro Zone Current Account (Oct) €23.0 Bln, previous €16.9 Bln revised to €17.6 Bln
* Italian Producer Price Data (Nov):
– PPI M/M -0.7%, previous +1.3%
– PPI Y/Y +4.5%, previous +5.8%
* UK Retail Sales Data (Nov):
– Retail Sales M/M +1.4% versus +0.3% expected, previous -0.5% revised to -0.4%
– Retail Sales Y/Y +3.6% versus +1.9% expected, previous +2.2% revised to +2.4%
– Core Retail Sales M/M +1.2% versus +0.2% expected, previous -0.4%
– Core Retail Sales Y/Y +3.8% versus +2.3% expected, previous +2.7% revised to +2.8%
* In a joint statement, the UK said they have reached an agreement with Norway and Switzerland post-Brexit.
* UK CBI Distributive Trades Survey (Dec) -13 versus 16 expected, previous 19
* US government report has recommended EU car tariffs are delayed until January (WiWo)
* Spokesman for UK PM May said a second Brexit referendum is not plausible. He also said cabinet ministers have been clear in their support for her deal.
