European cash equity markets are broadly higher ahead of the midway stage with the Euro Stoxx 600 touching its best level since December 17th (FTSE +0.9%, DAX +0.8%, CAC +1.3%, FTSE MIB +0.5%). Retail stocks are among the best performers, led higher by Carrefour after Bank of America upgraded the stock to ‘buy’ from ‘hold’. Risk sentiment has also been underpinned by hopes that the US and China can resolve their ongoing trade dispute as they entered a second day of mid-level talks in Beijing. In fixed, both UK and German 10-year bonds are in the red although have recovered off their worst levels after Euro Zone confidence indicators saw broad declines. The UK DMO did sell £2.25 Bln of a 2028 Gilt with a 2.17 cover and 0.1 basis point yield tail. Turning to currencies, the Dollar Index has edged up +0.2% having hit a multi-month low yesterday although the Greenback is flat versus the Japanese Yen. The Antipodean currencies are the weakest of the G10’s meanwhile with the Aussie Dollar falling overnight on soft trade data. Sterling has been choppy as earlier reports that Article 50 could be extended have been played down by UK government officials. Elsewhere, oil prices have continued their recent move higher with US crude futures up over one-percent while spot gold has lost -0.5%. Looking ahead, futures are pointing to a higher open on Wall Street despite little indication the government shutdown is nearing an end. US President Trump will speak overnight (02:00 GMT) and is expected to declare a national emergency to force through funding for the border wall. On the data front, we await the US trade balance and JOLTS job openings plus a $38.0 Bln 3-year note auction.
Key Headlines/Data:
* European Corporate News:
– Sainsbury’s (+0.5%): Kantar – UK sales (12-weeks to Dec 30th) -0.4%
– Tesco (+2.8%): Nielsen – UK sales (12-weeks to Dec 30th) +0.4%
– Morrisons (-4.0%):Kantar – UK sales (12-weeks to Dec 30th) +0.1%
– Carrefour (+1.9%): Upgraded to ‘buy’ at Bank of America
– Bouygues (-1.4%): Cut to ‘neutral’ at Credit Suisse
– Ashtead Group (+3.6%): Upgraded to ‘neutral’ at UBS
– Unilever (-0.3%): UBS warns U-turn on relocation plans is unhelpful to shares
* British officials ‘putting out feelers’ with EU for Article 50 extension (Telegraph):
– British and European officials are discussing the possibility of extending Article 50 amid fears a Brexit deal will not be completed by March 29, the Telegraph can reveal.
* UK Brexit Minister Barclay said there would be real obstacles in extending Article 50 and no such discussions have taken place.
* Swiss Unemployment Rate (Dec) 2.4% versus 2.4% expected, previous 2.4%
* German Industrial Production Data (Nov):
– Industrial Production M/M -1.9% versus +0.3% expected, previous -0.5% revised to -0.8%
– Industrial Production Y/Y -4.7% versus -0.8% expected, previous +1.6% revised to +0.5%
* Norwegian Manufacturing Production M/M (Nov) 0.0%, previous +1.5%
* German Economy Minister Altmaier said the German economy is in good shape and expects the domestic upswing to continue.
* Irish Times: The European Union is willing to give fresh, written assurances about the nature of the Northern Ireland backstop ahead of next week’s key vote at Westminster on the Brexit deal, Taoiseach Leo Varadkar has said.
* Swiss Retail Sales Y/Y (Nov) -0.5%, previous +0.8% revised to +1.0%
* French Trade Balance (Nov) -€5.1 Bln versus -€4.9 Bln expected, previous -€4.1 Bln
* French Current Account (Nov) -€2.8 Bln, previous -€4.1 Bln
* UK Halifax House Price Data (Dec):
– House Price Index M/M +2.2% versus +0.2% expected, previous -1.4% revised to -1.2%
– House Price Index 3M/YoY +1.3% versus +0.4% expected, previous +0.3%
* Swedish parliament speaker said to have received a forma report on forming a government from Social Democrat Lofven and Moderate Kristofferson.
* Euro Zone Consumer Confidence (Dec F) -6.2 versus -6.2 flash/expected:
– Business Climate Indicator 0.82 versus 0.99 expected, previous 1.09 revised to 1.04
– Economic Confidence 107.3 versus 108.2 expected, previous 109.5
– Services Confidence 12.0 versus 12.3 expected, previous 13.3 revised to 13.4
– Industrial Confidence 1.1 versus 2.9 expected, previous 3.4
* UK DMO sold £2.25 Bln of a 2028 Gilt:
– Bid to Cover: 2.17
– Yield Tail: 0.1
* EU’s Dombrovskis said Italy may face major issues with its 2020 budget
* @faisalislam (Sky News Political Editor) – EU sources say there will be “no summit” and there are “no actual talks”, some discussions on reassurances. Another diplomatic source tells me even those will not come before the vote next week
