European cash equity markets are mostly lower ahead of the midway stage although declines are relatively modest (FTSE -0.4%, DAX -0.3%, CAC -0.4%, FTSE MIB -0.1%). Bank stocks are among the worst performers after Societe Generale warned that fourth-quarter results would be impacted by tough market conditions. Brexit related uncertainty has also played its part in dampening risk sentiment – having survived a no confidence vote, UK PM May now faces the arduous task of tweaking her withdrawal agreement to get it through parliament without irking EU leaders and crossing their red lines. Sterling has been relatively steady however with Gbp/Usd sitting just below the $1.29 handle having been in a relatively tight range since parliament voted against her deal on Tuesday evening. Elsewhere in FX, the Dollar Index is flat for the day around 96.1 while the Japanese Yen moved to the top of the G10 pile on safe-haven demand. Trade sensitive currencies (Aussie/Kiwi Dollar) have underperformed meanwhile US-China trade relations look to have soured on reports that US prosecutors are targeting Huawei in a criminal probe. On the data front, Euro Zone CPI data provided no real surprises as the headline and core rate were unrevised from the flash readings of +1.6% YoY and +1.0% YoY respectively. Euro Zne construction output rose +0.9% YoY. Elsewhere, oil prices are firmly in the red with US crude futures and Brent both down around one-percent. Spot gold is flat. Looking ahead, futures are pointing to a slightly lower open on Wall Street with earnings due from Morgan Stanley, PPG Industries and M&T Bank before the bell. US data releases include housing starts, building permits and jobless claims although may have been impacted by the ongoing government shutdown.
Key Headlines/Data:
* European Corporate News:
– Societe Generale (-3.7%): Warned Q4 results will be impacted by tough market conditions
– Associated British Foods (+6.0%): Primark sees stronger-than-expected holiday sales
– Sage (+5.9%): Maintained FY guidance and said it had been encouraged by a strong start to 2019
– ITV (-6.2%): Cut to ‘underperform’ from ‘buy’ at Bank of America
– Easyjet (-3.2%): Downgraded at Barclays
– Taylor Wimpey (-1.7%) | Barratt Development (-0.4%): RICS – Expected house sales hits record low
* Huawei Targeted in U.S. Criminal Probe for Alleged Theft of Trade Secrets (WSJ):
– Federal prosecutors are pursuing a criminal investigation of China’s Huawei Technologies Co. for allegedly stealing trade secrets from U.S. business partners, including technology used by T-Mobile US Inc. to test smartphones, according to people familiar with the matter.
* May’s government survives no-confidence vote (BBC):
– UK Prime Minister Theresa May has seen off a bid to remove her government from power, winning a no-confidence vote by 325 to 306.
* Opposition leader Corbyn: no talks with May until no-deal Brexit is off table (Guardian):
– Jeremy Corbyn has said he will not hold talks with Theresa May until the prime minister agrees to remove the threat of a no-deal Brexit, ruling out any meeting with the prime minister in the immediate aftermath of the no-confidence vote.
* ECB Lautenschlaeger said she will wait for the March projections before making any changes to her view, adding that she is data driven.
* China confirmed Vice Premier Lui will attend trade talks in the US.
* @Peston (ITV – Political Editor) – Reaching out by May and team to Labour MPs, not going to plan according to senior Tory: “Big pushback from Labour MPs against meeting Gove – zero trust”. I guess the way he excoriated @jeremycorbyn yesterday not a traditional olive branch
* El Pais – The EU will condition any delay to Brexit on an agreement being reached between May and Corbyn.
* EU Brexit Minister Barnier said they would move immediately if the UK moved their red lines.
* Italian Trade Balance (Nov) €3.84 Bln, previous €3.78 Bln
* Spain sold €4.61 Bln in 2021, 2023, 2024 and 2027 government bonds versus €4.0-5.0 Bln target
* Euro Zone CPI Data (Dec):
– CPI M/M 0.0% versus -0.2% expected, previous -0.2%
– CPI F Y/Y +1.6% versus +1.6% flash/expected
– Core CPI F Y/Y +1.0% versus +1.0% flash/expected
* Euro Zone Construction Output Data (Nov):
– Construction Output M/M -0.1%, previous -1.6%
– Construction Output Y/Y +0.9%, previous +1.8% revised to +0.6%
* UK sold £2.5 Bln of a 2024 Gilt:
– Bid to Cover: 2.22
– Yield Tail: 0.4 basis points
* @SkyNewsBreak – House of Commons leader Andrea Leadsom says a statement and motion on the Government’s next Brexit steps will be put forward on Monday and a full day of debate will be held in Parliament on 29 January.
