European cash equity markets are broadly higher ahead of the midway stage with the Euro Stoxx 600 touching its best level since December 5th (FTSE 1.3%, DAX +1.2%, CAC +1.5%, FTSE MIB +0.7%). Trade sensitive stocks are among the best performers following reports overnight that suggested the US were considering lifting tariffs on Chinese goods. Banks have jumped on a combination of M&A talk and positive broker action while energy related companies have followed oil prices higher – both US crude futures and Brent are up over one-percent. The improvement in risk sentiment was also evident in the bond markets with Bunds and Gilts both firmly in the red although off their worst levels after UK retail sales fell short of expectations. Treasuries declined meanwhile with the US 10-Year yield at its highest since December 28th. Turning to currencies, the Dollar Index is flat while Sterling slipped to the bottom of the G10 pile on the aforementioned retail sales miss and ongoing Brexit related uncertainty. The Swedish Krona emerged as the outperformer meanwhile after parliament approved Social Democrat leader Lofven as PM in a deal with the Centre, Liberal and Green parties. Looking ahead, futures are pointing to a higher open on Wall Street with earnings due from Schlumberger and State Street. On the data front, we await Canadian CPI plus US industrial production and Michigan Sentiment as well as possible comments from New York Fed President Williams and Philadelphia Fed President Harker.
Key Headlines/Data:
* European Corporate News:
– Commerzbank (+3.7%) | Deutsche Bank (+1.9%): FT – Germany steps up work on potential Deutsche-Commerzbank tie-up
– Banco Sabadell (+3.7%): Upgraded to a ‘buy’ at HSBC
– Ryanair (-1.7%): Lowered full-year profit guidance by €100 Mln
– Renault (+1.6%): Board are ready to replace Ghosn an Chairman
– UBS (+1.4%): Plans top management hired as part of CEO succession
– Telecom Italia (-8.0%): Sees 2018 EBITDA lower than prior guidance
* Swiss PPI Data (Dec):
– PPI M/M -0.6%, previous -0.3%
– PPI Y/Y +0.6%, previous +1.4%
* Swedish Social Democrat leader Lofven has been voted in as PM by parliament in a deal with the Centre, Liberal and Green parties.
* Euro Zone Current Account SA (Nov) €20.3 Bln, previous €24.1 Bln revised to €27.0 Bln revised to €26.8 Bln
* IEA Monthly Oil Report:
– Our estimates for global oil demand growth in 2018 and 2019 are unchanged at 1.3 mb/d and 1.4 mb/d, respectively
– Global oil supply fell by 950 kb/d in December
– OPEC crude oil output dropped by 590 kb/d in December, to 32.39 mb/d
* UK Retail Sales Data (Dec):
– Retail Sales M/M -0.9% versus -0.8% expected, previous +1.4% revised to +1.3%
– Retail Sales Y/Y +3.0% versus +3.6% expected, previous +3.6% revised to +3.4%
– Retail Sales Ex. Auto M/M -1.3% versus -0.6% expected, previous +1.2% revised to +1.0%
– Retail Sales Ex. Auto Y/Y +2.6% versus +3.9% expected, previous +3.8% revised to +3.5%
* EU Trade Commissioner Malmstrom said they are ready to put autos into negotiations with the US but not proposing any agricultural access in mandates. She added that they are not proposing to restart free trade negotiations with the US.
* Spokesman for UK PM May said has spoken with Merkel and Rutte and will have further calls with EU leaders over the weekend. He also said she ruled out a snap general election.
