European cash equity markets are mixed at the closing bell after staging a notable recovery from this morning’s lows led by the utility and financial sectors (FTSE +0.3%, DAX +0.1%, CAC -0.4%). Trade sensitive stocks continue to lag the broader market meanwhile as optimism surrounding the US-China trade talks fades. Analysts have highlighted the lack of a joint communique from the world’s two largest economies and limited detail in their respective statements.We also saw a rebound on Wall Street from a lower open where retail stocks have underperformed following disappointing trading updates from Kohl’s and Macy’s. In the bond markets, the US 10-year yield is little changed around 2.72% with little reaction shown to a slowdown in US initial jobless claims to 216K (f/c. 225K) from 233K. We also heard from Richmond Fed President Barkin who said he expects growth to continue this year, though at a somewhat slower pace. He later added that he does not believe rates are at neutral yet but they are near. Turning to currencies, the Dollar Index has advanced to a new daily high of 95.4 in recent trade. The Australian Dollar is the strongest of the G10’s while the Swiss Franc is the weakest by some distance. The Canadian Dollar was unresponsive to stronger-than-expected building permits. Elsewhere, oil prices have pared earlier gains and rallied to new highs in recent trade with US crude futures up around one-percent while spot gold is down -0.4%. Still to come today, a plethora of Fed speakers including Chair Powell (17:00 GMT), St Louis President Bullard (17:30 GMT), Chicago President Evans (18:00 GMT) and Governor Clarida (22:30 GMT). The US Treasury also looks to raise $16.0 Bln via a 30-Year bond auction.
Key Headlines/Data:
* US Corporate News:
– Twitter (+1.4%): Upgraded to ‘buy’ from ‘neutral at Bank of America
– Boeing (+1.2%): Upgraded to ‘overweight’ from ‘equal-weight’ at Morgan Stanley
– Ford (-0.4%): Announced turnaround plans including thousands of job cuts across Europe
– Target (-3.4%): Same-store holiday sales rose +5.7% versus +3.4% in 2017 | Reaffirmed FY guidance
– Kohl (-6.8%): Same-store holiday sales rose +1.2% versus +7.0% in 2017
– Macy’s (-17.6%): Comparable sales -0.7% | Cuts FY guidance
– American Airlines (-8.0%): Cut 2018 guidance
* UK opposition leader Corbyn said a general election should be a priority before a second referendum on EU membership. He also said Labour would table a motion of no-confidence in the government when they judge it will have the best chance of success.
* U.S. Blocks Some Exports From Huawei’s Silicon Valley Unit (WSJ):
– Huawei Technologies Co. is contending with a new obstacle: getting technology it developed at a U.S. subsidiary back to China.
* Spokesman for UK PM May said she is working to get further Brexit assurances from the EU before the end of debate in parliament.
* Moody’s: Stable outlook for CEE sovereigns balances strong but slowing growth and structural challenges:
– The stable outlook for sovereign creditworthiness in 2019 in the Central and Eastern Europe (CEE) region reflects its still strong but slowing growth and generally supportive debt profiles, set against structural and institutional challenges and tighter global funding conditions
* ECB Minutes:
– It was underlined that the situation remained fragile and fluid, as risks could quickly regain prominence or new uncertainties could emerge
– As regards the balance of risks, on the one hand, the view was expressed that a case could be made for assessing risks to activity as tilted to the downside
– It was also remarked that the assessment of still balanced risks to growth was supported by the emergence of new upside risks, namely a further decline in oil prices
– Looking ahead, the suggestion was made to revisit the contribution of targeted longer-term refinancing operations to the monetary policy stance.
* Richmond Fed President Barkin:
– I forecast growth to continue this year, though at a somewhat slower pace
* Barkin later said he does not believe we are at neutral yet but we are near. He added that he was in favour of normalising rate at the right pace and right time.
* US Initial Jobless Claims 216K versus 225K expected, previous 231K revised to 233K:
– Continuing Claims 1.722 Mln versus 1.714 Mln expected, previous 1.740 Mln revised to 1.750 Mln
* Canadian Building Permits M/M (Nov) +2.6% versus -0.5% expected, previous -0.2% revised to -0.4%
* @realDonaldTrump – “Great support for Border Security and the Wall.” @foxandfriends Even greater than anyone would know! “Presidents supporters do not want him to cave.” @SteveDoocy I won’t!
* US President Trump said they have had tremendous success with China on trade. He also said he has the absolute right to declared a national emergency on the border but is not prepared to do so yet.
