European cash equity markets are broadly lower ahead of the midway stage; the Euro Stoxx 600 is on course for fifth straight day of declines having touched its lowest level since October 26th this morning (FTSE -0.5%, DAX -0.8%, CAC -0.8%, FTSE MIB -0.7%). Technology stocks have underperformed by a fairly wide margin, following on from a similar performance on Wall Street yesterday as Apple shares fell over four-percent amid reports they have cut production levels for the new iPhone models. The downturn in risk sentiment is also evident in the bond markets with US Treasuries trading firmly in the green. Core European bonds followed their US counterparts to fresh session highs but have since eased back with the UK ten-year Gilt now negative for the day. Turning to currencies, the Dollar Index has inched up +0.15% this morning having found some support ahead of the 96.0 level. The Australia Dollar fell to the bottom of the G10 pile after RBA Governor Lowe said there is a “reasonable probability that the current setting of monetary policy will be maintained for a while yet”. On the data front, UK CBI Trends Total Orders jumped to +10 (f/c. -5) from -6 while French unemployment held steady at 9.1% (f/c. 9.2%) and German PPI met expectations at +3.3% YoY – all were largely ignored. Elsewhere, oil prices are nursing small declines with Brent crude futures down -0.3% while spot gold has lost -0.1%. Looking ahead, futures are pointing to a lower open on Wall Street with earnings still to come from Target, Best Buy, Kohl’s and TJX before the bell. We also await US building permits and housing starts plus possible comments from the ECB’s Weidmann.
Key Headlines/Data:
* European Corporate News:
– STMicroelectronics (-2.2%) | Infineon (-3.0%): Apple suppliers under pressure on reports of production cuts
– Wirecard (-5.6%): Sees FY earnings €740-800 Mln, in mid-point of guidance
– Renault (-2.6%): Stock has been subject to multiple broker downgrade after CEO Ghosn was arrested yesterday for financial violations.
– Enel (+2.2%): Plans to invest more in renewable energy and network divisions
– Julius Baer (-6.4%): Assets under management rose 2% in the first ten-months of the year
* Theresa May draws up secret plans to scrap the Irish border backstop to win back angry Brexiteers (The Sun):
– It has emerged that the PM has quietly won agreement from the EU to abandon the emergency plan if both sides can agree on “alternative arrangements” to keep the border open.
– Ground breaking new technology that could be used to keep the border invisible is now being studied afresh in No10 as one option to meet the new aim.
* Norwegian Consumer Confidence (Q4) 14.6, previous 16.4 revised to 15.2
* French Unemployment Rate (Q3) 9.1% versus 9.2% expected, previous 9.1%
* German PPI Data (Oct):
– PPI M/M +0.3% versus +0.3% expected, previous +0.5%
– PPI Y/Y +3.3% versus +3.3% expected, previous +3.2%
* Swiss Trade Balance (Oct) Chf 3.748 Bln, previous Chf 2.434 Bln revised to Chf 2.230 Bln
* Chinese Finance Ministry Official said both economic uncertainties and downward pressure on the economy have increased.
– PBOC Research Group head Zhong said the economy is facing downward pressure and called on China to rely more on fiscal policy to support it.
* Italian Deputy PM Di Maio said a solution to the budget dispute with the EU can be found but the main measures of the budget must not be touched.
* RBA Governor Lowe:
– The Board does not see a strong case for a near-term change in interest rates
– There is a reasonable probability that the current setting of monetary policy will be maintained for a while yet
– If the economy continues to move along the expected path, then at some point it will be appropriate to raise interest rates.
* Spanish PM Sanchez said Spain would vote against the draft Brexit agreement if the text is not amended.
* ECB’s Nowotny said he sees no reason to deviate from the recent growth forecasts of the Governing Council. He also noted that the associated rise in Italian government bond yields only spilled over to other countries to a very limited extent but did warn in the longer term there is the question of whether he has enough trust on the capital markets
* @mariofcenteno (Euro Group President) – Speaking @EP_Economics. On Italy: The revised budget plan did not improve the situation in terms of debt funding costs, it did not dispel concerns regarding the Italian budget strategy. We are now waiting for the @EU_Commission’s final opinion on Italy’s revised plan.
* Bank of England Governor Carney said the MPC have no intention of providing an analysis of a no-deal Brexit scenario. He also assured that he was quietly confident that they have all the measures they could have in place for financial stability.
* Bank of England’s Saunders said it seems likely that economic growth will slow in Q4 and possible Q1 after the strong gain seen in Q3.
* Bank of England Deputy Governor Cunliffe said he expects a gradual tightening of policy over the forecast horizon will be appropriate.
* Bank of England Chief Economist said they have seen signs of a potential no-deal Brexit affecting business investment.
* DUP Brexit head Wilson said his party would vote against the draft Brexit agreement.
* UK DMO sold £0.50 Bln of an inflation-linked 2056 Gilt:
– Bid to Cover: 2.13
* UK CBI Trends – Total Orders (Nov) +10 versus -5 expected, previous -6
