European cash equity markets are mixed ahead of the midway stage; the Euro Stoxx 600 did edge up to a fresh four-week high at one stage this morning but has since slipped back towards the flat line (FTSE +0.3%, DAX -0.1%, CAC -0.1%). The ‘Food & Beverage’ sector is the best performer as ABInbev shares spiked on reports they are considering an IPO of their Asian operation; real estate stocks jumped after Bank of America upgraded UK house builders. In fixed, core EU bonds rose during the early exchanges but eased off their best levels after UK monthly GDP surprised to upside at +0.2% MoM (f/c. +0.1%). Gilts briefly turned negative in recent trade amid reports that Brexit could be delayed although this was swiftly played down by a UK government spokesman. Italian government bonds rose to new highs after a solid BTP auction rose the maximum target amount. Data elsewhere was less encouraging with weaker industrial production data from both the UK and Italy, following similar outruns in France and Germany earlier this week. Turning to currencies, Sterling popped and dropped on the aforementioned Brexit report/denial. The Greenback is lower versus all the G10’s with the Dollar Index down -0.3% while the Antipodeans are the best performers. Elsewhere, oil prices are ahead with US crude futures up around +0.8% while spot gold gas added +0.5%. Looking ahead, futures are pointing to a relatively flat open on Wall Street with bourses looking to extend the winning streak to six-sessions. On the data front, we await US CPI and real earnings.
Key Headlines/Data:
* European Corporate News:
– ABInbev (+5.6%): Said to be considering an IPO of its Asian operation
– Daimler (-1.4%): Geely denied earlier reports they had cut their Daimler stake by more than half
– Lafargeholcim (+2.7%): Upgraded to ‘buy from ‘underperform’ at Bank of America
– Renault (-2.7%): Former Chairman Ghosn indicted on two new charges of financial misconduct
– Iliad (+1.1%) | Altice (+0.6%): French magazine Challenges noted speculation of a possible merger
– Suez (-3.2%) | Veolia (+2.1%): Downgrade at Societe Generale
– Taylor Wimpey (+5.6%) | Persimmon (+5.1%): UK house building sector upgraded to neutral
* German Economy Minister Altmaier noted that the weak pound was hurting German exports.
* Bank of France Industrial Confidence (Dec) 103 versus 100 expected, previous 102
* Spanish Industrial Production Y/Y (Nov) -2.%, previous +0.8% revised to +0.7%
* UK Foreign Minister Hunt said no-Brexit is another possibility coming into sight, adding that alternative forms of Brexit are not as plentiful as people think. He did also say however that a Brexit deal is still possible with assurances on the backstop.
* Swedish Social Democrats are said to have reached an agreement with other political parties as they try to form a government. Septerate reports later suggested the Centre and Liberal parties will back Social Democrat Lofven as PM.
* Italian Industrial Production Data (Nov):
– Industrial Production M/M -1.6% versus -0.3% expected, previous +0.1% revised to -0.1%
– Industrial Production Y/Y -2.6% versus +0.2% expected, previous +1.0%
* EU Commission President Juncker said he hopes a Brexit deal can be reached as ‘no-deal’ would be a disaster.
* UK GDP Data (Nov):
– GDP M/M +0.2% versus +0.1% expected, previous +0.1%
– GDP Y/Y +1.4% versus +1.3% expected, previous +1.5%
* UK Industrial Production Data (Nov):
– Industrial Production M/M -0.4% versus +0.2% expected, previous -0.6% revised to -0.5%
– Industrial Production Y/Y -1.5% versus -0.7% expected, previous -0.8% revised to -0.9%
* UK Trade Balance (Nov) -£12.02 Bln versus -£11.40 Bln expected , previous -£11.87 Bln revised to -£11.95 Bln
* @BBCkatyaadler (BBC Europe Editor) – There’s talk of a Juncker/Tusk letter by Monday setting out EU reassurances on the backstop. This is not 100% confirmed.
* Italy sold €6.5 Bln of 2021, 2025 & 2048 BTP’s versus €5.0-6.5 Bln target
* Delay to Brexit on way, Cabinet ministers reveal (Evening Standard):
– Brexit looks increasingly likely to be delayed beyond the scheduled exit of March 29, Cabinet ministers today revealed to the Standard.
– A backlog of at least six essential Bills that must be passed before Britain leaves the European Union has left ministers convinced the timetable will be extended.
* Spokesman for UK PM May said she has ruled out extending Article 50.
