European cash equity markets are firmly in the red ahead of the midway stage with the Euro Stoxx 600 falling to a fresh two-year low (FTSE -0.5%, DAX -0.4%, CAC -0.8%, FTSE MIB -1.3%). Telecommunication stocks are among the worst performer, closely followed by the energy sector as oil prices continued their recent decline – US crude futures extended to a fresh multi-year low at $45.51 in recent trade. Basic resources have outperformed meanwhile, boosted by the prospect of looser monetary policy in China after policymakers dropped a reference to ‘neutral’ in their statement. In the bond markets, US yields are steady with the ten-year little changed around 2.80% while core European yields have advanced in a low volume AM session. Data did not prompt much reaction as UK GDP was unrevised from the flash reading of +1.5% YoY and German GFK consumer confidence was unchanged at 10.4 (f/c. 10.3). However, French Q3 GDP was revised a touch lower to +0.3% QoQ from +0.4%. Turning to currencies, the Dollar Index has edged up +0.2% to 96.6 having gained ground versus all of its G10 rivals except Sterling and the Japanese Yen. The New Zealand Dollar is the weakest. Looking ahead, futures are pointing to a lower open on Wall Street as investors await a raft of US macro data – Q3 GDP, durable goods, personal income/spending, PCE inflation and Michigan sentiment are all due for release plus Canadian GDP and Euro Zone consumer confidence.
Key Headlines/Data:
* European Corporate News:
– Danske Bank (-2.2%): Lowered FY18 net profit guidance to DK 15 Bln from DK 16-17 Bln
– Anglo American (+1.4%): Resumes iron ore operation at Minas-Rio mine in Brazil
* German GFK Consumer Confidence (Jan) 10.4 versus 10.3 expected, previous 10.4
* German Import Price Data (Nov):
– Import Price Index M/M -1.0% versus -0.5% expected, previous +1.0%
– Import Price Index Y/Y +3.1% versus +3.6% expected, previous +4.8%
* French GDP Data Q/Q (Q3) +0.3% versus +0.4% flash/expected
* French Business Confidence (Dec) 104 versus 103 expected, previous 105
* Swedish Retail Sales Data (Nov):
– Retail Sales M/M +0.8% versus +0.6% expected, previous -1.1%
– Retail Sales Y/Y +1.1% versus -0.1% expected, previous -0.1% revised to 0.0%
* Italian Consumer Confidence (Dec) 113.1 versus 114.0 expected, previous 114.8
– Business Confidence 103.6 versus 103.8 expected, previous 104.4
* Norwegian Unemployment Rate (Dec) 2.3% versus 2.3% expected, previous 2.3%
* Chinese policymakers said monetary policy should be prudent and dropped a reference to ‘neutral’ in the statement. They also said fiscal policy will be proactive next year and called on the government to implement tax cuts on a larger scale.
* UK GDP Data (Q3 F):
– GDP Q/Q +0.6% versus +0.6% flash/expected
– GDP Y/Y +1.5% versus +1.5% flash/expected
* UK Current Account (Q3) -£26.52 Bln versus -£21.20 Bln expected, previous -£20.32 Bln revised to -£19.95 Bln
* UK Public Sector Net Borrowing (Nov) £6.35 Bln versus £7.05 Bln expected, previous £7.96 Bln revised to £5.57 Bln:
– Ex Banks £7.21 Bln versus £7.60 Bln expected, previous £8.82 Bln revised to £6.43 Bln
* According to sources, the ECB are becoming increasingly concerned by a slowdown in China and could push back rate guidance to 2020.
