European cash equity markets are broadly lower ahead of the midway stage as risk sentiment begins the new year firmly on the back foot (FTSE -0.9%, DAX -0.3%, CAC -1.6%). Basic resource stocks are among the worst performers, weighed by weak Chinese macro data released overnight and ongoing trade tensions between the US and China. Bank stocks are also firmly in the red with Italian institutions leading declines after the ECB appointed temporary administrators to Banca Carige (Consob have suspended trading). The risk-off theme has also been evident in the bond markets as Bunds and Gilts powered higher and scaled new session highs in recent trade. Gilts were unresponsive to a stronger UK manufacturing PMI print of 54.2 (f/c. 52.6) while the Euro Zone reading was unrevised from the flash estimate at 51.4. In currency space, the Dollar Index has reversed an earlier drop to trade higher on the day at around 96.3 (+0.3%). The Japanese Yen is the strongest of the G10’s on safe-haven demand while the Swedish Krona and Australian Dollar are the weakest, followed by the pound. Elsewhere, oil prices are firmly in the red with US crude futures and Brent around over one-percent. Spot gold has added +0.3%. Looking ahead, futures are pointing to a lower open on Wall Street ahead of a meeting between Trump and Congressional leaders to try and end the government shutdown. On the data front, US and Canadian manufacturing PMI are due for release.
Key Headlines/Data:
* European Corporate News:
– Banca Carige (–%): CONSOB suspends trading after ECB appoints temporary administrators
– Deutsche Telekom (-0.4%): To sue the German government over 5G auction
– Renault (-3.5%): Renault brand sales dropped 19% YoY in December
* Spanish Manufacturing PMI (Dec) 51.1 versus 52.4 expected, previous 52.6
* Swedish Manufacturing PMI (Dec) 52.0 versus 56.7 expected, previous 56.7 revised to 55.4
* Italian Manufacturing PMI (Dec) 49.2 versus 48.6 expected, previous 48.6
* French Manufacturing PMI (Dec F) 49.7 versus 49.7 flash/expected, previous 50.8
* German Manufacturing PMI (Dec F) 51.5 versus 51.5 flash/expected, previous 51.8
* Euro Zone Manufacturing PMI (Dec F) 51.4 versus 51.4 flash/expected, previous 51.8:
– Fall in new work signalled for third month running
– Confidence about the future hits fresh six-year low during December
* Commenting on the final Euro Zone Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
– A disappointing December rounds off a year in which a manufacturing boom faded away to near stagnation
– The last three months of 2018 saw manufacturers report the worst quarterly performance in terms of production since the second quarter of 2013.
* UK Manufacturing PMI (Dec) 54.2 versus 52.6 expected, pervious 53.1 revised to 53.6
* UK Foreign Minister Hunt said PM May will find a way to get her Brexit deal through parliament.
