European cash equity markets are mostly higher ahead of the midway stage although have eased off their best levels in recent trade (FTSE +0.3%, DAX +0.1%, CAC +0.2%, FTSE MIB -0.2%). Trade sensitive stocks such as basic resources and autos have outperformed after China signalled additional stimulus measures to support the economy amid the ongoing trade dispute with the US. From a regional perspective, the Italian FTSE MIB is the worst performer as banks slumped on reports the ECB have asked lenders to put aside more money to cover impaired loans. In fixed, both core EU bonds and Treasuries have moved higher with little reaction shown to macro data including French and Spanish CPI plus German 2018 GDP which were all in line with forecasts. The Euro Zone trade surplus did widen to €15.1 Bln (f/c. €12.6 Bln) from €13.5 Bln. Turning to currencies, the Swiss Franc is the worst performer among the G10’s closely followed by the Euro and the Japanese Yen while the Dollar Index has gained +0.3%. Sterling is also in the red as we approach the meaningful vote on UK PM May’s Brexit deal where she is expected to face a heavy defeat (result expected around 21:00 GMT). She may have been thrown a lifeline by the German Foreign Minister however who said if the Brexit deal is defeated by the UK parliament, there could be new talks with the EU. Elsewhere, oil prices are ahead with US crude futures up around +0.7% while spot gold has lost -0.1%. Looking ahead, futures are pointing to a slightly higher open on Wall Street with earnings due from Bank of America and Wells Fargo before the bell. On the data front, US PPI and Empire manufacturing have been delayed by the ongoing government shutdown but we still expect possible comments from Fed President’s Kashkari, George and Kaplan later today.
Key Headlines/Data:
* European Corporate News:
– Peugeot (0.0%): Worldwide sales rose 6.8% in 2018 to 3.88 Mln, up from 3.15 Mln in 2017
– Provident Financial (-18.1%): Issued profit warning
– Paddy Power (-1.6%) | William Hill (-1.5%): US DoJ published opinion which could restrict online gambling revenue
* Il Sole: The European Central Bank has asked banks to put aside more money to cover impaired loans by 2026, with particular focus on Italian lenders.
* Saudi Energy Minister al-Falih said he sees growth in oil demand for the foreseeable future.
* Norwegian Trade Balance (Dec) 25.0 Bln, previous 26.2 Bln
* French CPI Data (Dec F):
– CPI M/M 0.0% versus 0.0% expected, previous 0.0%
– CPI Y/Y +1.6% versus +1.6% expected, previous +1.6%
– CPI EU Harmonized M/M +0.1% versus +0.1% expected, previous +0.1%
– CPI EU Harmonized Y/Y +1.9% versus +1.9% expected, previous +1.9%
* French Budget Balance (Nov) -€95.6 Bln, previous -€87.0 Bln
* Chinese New Yuan Loans (Dec) 1080 Bln versus 800 Bln expected, previous 1250 Bln
* Spanish CPI Data (Dec F):
– CPI M/M % versus % expected, previous %
– CPI Y/Y % versus % expected, previous %
– CPI EU Harmonized M/M % versus % expected, previous %
– CPI EU Harmonized Y/Y % versus % expected, previous %
* German government spokesman denied earlier press reports that Chancellor Merkel had offered concessions to UK PM May on Brexit.
* German Annual GDP (2018) +1.5% versus +1.5% expected
* Euro Zone Trade Balance SA (Nov) €115.1 Bln versus €12.6 Bln expected, previous €14.0 Bln revised to €13.5 Bln
* Latest analysis from Sky News predicts the UK government will lost the meaningful vote by 226 votes
* German Foreign Minister Maas said if the Brexit deal is defeated by the UK parliament, there could be new talks with the EU.
* ECB President Mario Draghi:
– In some countries, not all of the euro’s benefits have been realised in full
– Great progress has been achieved since the crisis struck, but more work still needs to be done
