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UK data mixed in session; Nordic central banks viewed more hawkish

Written Staff | 2018-01-10 05:58:00 GMT

- Riksbank Dec Minutes viewed as more hawkish as Gov Ingves hopes to hike rates before the ECB

- Norway CPI data validating Norges view of bringing its 1st potential hike forward


- China Dec CPI M/M: 0.3% v 0.3%E; Y/Y: 1.8% v 1.9%e; Overall 2017 CPI: 1.6% v 3.0% target

- China Dec PPI Y/Y: 4.9% v 4.8%e (lowest reading since Nov 2016)

- China PBoC injects CNY120B combined in 7, 14-day reverse repos operation (resumes OMO after skipping last 12)


- World Bank raised its 2018 global economic growth outlook from 2.9% to 3.1% (1st time since 2008)


- Germany is said to show opposition to Brexit trade deal plan proposed by the UK. Chancellor Merkel is strongly opposed to the UK's managed divergence from the EU after Brexit; believes the idea is another ruse for Britain to have its cake and eat it

- UK Chancellor of the Exchequer Hammond and Brexit Sec Davis wrote a joint article in the German Press suggesting close cooperation between the EU and UK regulators following Brexit. Both Davis and Hammond are expected to be in Germany on Wed; Jan 10th and want to give German business leaders message that transition period takes priority before final exit from single market, customs union

- UK Brexit Ministry: proposes 3-mth window after Brexit to start court cases under general principles of EU law

- British Chambers of Commerce (BCC): Survey shows UK services and manufacturing companies less confident about 2018 revenues; set to continue "underwhelming growth trajectory" over near term


- President Trump: would like to see bipartisan immigration reform; maybe we can do something on DREAMERS

- Fed Discount Rate minutes: 9 out of 12 regional Fed banks sought discount rate hike in Dec (3 prior). Reminder: Fed raised rates 25 bps in Dec 2017


- Weekly API Oil Inventories: Crude: -11.2M v -5M prior


Economic Data:

- (DK) Denmark Dec CPI M/M: -0.3% v +0.1%e; Y/Y: 1.0% v 1.4%e

- (DK) Denmark Dec CPI EU Harmonized M/M: -0.4% v +0.1%e; Y/Y: 1.1% v 1.4%e

- (NO) Norway Dec CPI M/M: 0.0% v -0.1%e; Y/Y: 1.6% v 1.5%e

- (NO) Norway CPI Underlying M/M: +0.1% v -0.1%e; Y/Y: 1.4% v 1.2%e

- (NO) Norway PPI including Oil M/M: 2.9% v 3.2% prior; Y/Y: 7.3% v 9.7% prior

- (FR) France Nov Industrial Production M/M: -0.5% v -0.5%e; Y/Y: 2.5% v 2.6%e

- (FR) France Nov Manufacturing Production (beat) M/M: -1.0% v -1.4%e; Y/Y: 3.0% v 2.9%e

- (CZ) Czech Dec CPI M/M: 0.1% v 0.1%e; Y/Y: 2.4% v 2.4%e

- (CZ) Czech Q3 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 5.0% v 5.0%e

- (UK) Nov Industrial Production (beat) M/M: 0.4% v 0.4%e; Y/Y: 2.5% v 1.8%e

- (UK) Nov Manufacturing Production (beat) M/M: 0.4% v 0.3%e; Y/Y: 3.5% v 2.8%e

- (UK) Nov Visible Trade Balance (miss): -£12.2B v -£11.0Be, Overall Trade Balance: -£2.8B v -£1.5Be, Trade Balance Non EU: -£4.7B v -£2.6Be


Fixed Income Issuance:

- (IN) India sold total INR140B vs. INR140B indicated in 3-month, 6-month and 12-month bills

- (EU) EFSF opened its book to sell EUR-denominate 7-year bonds; guidance seen -16bps to mid-swaps; order book over €10B

- (PT) Portugal Debt Agency (IGCP) opened its book to sell 10-year OT bonds; guidance seen +117bps to mid-swaps; order book over €13B

- (IL) Israel to sell USD-denominated 10-year and 30-year notes

- (DK) Denmark sold total DKK2.72B in 2020 and 2027 Bonds

- (SE) Sweden sold SEK5B vs. SEK5B indicated in 3-month bills; Avg Yield: -0.7251% v -0.8586% prior; Bid-to-cover: 2.45x v 2.13x prior

- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2% May 2023 bonds; Avg Yield: 1.19% v 1.10% prior; Bid-to-cover: 1.88x v 2.41x prior

- (IT) Italy Debt Agency (Tesoro) sold €7.5B vs. €7.5B indicated in 12-month Bills; Avg yield: -0.420% v -0.407% prior; Bid-to-cover: 1.41x v 2.1x prior




Indices [Stoxx600 -0.1% at 399.6, FTSE +0.3% at 7752, DAX -0.5% at 13320, CAC-40 -0.1% at 5520, IBEX-35 +0.4% at 10468, FTSE MIB +0.4% at 23095, SMI -0.3% at 9587 , S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European markets opened slightly lower but later performance was mixed; oil prices continued to support energy stocks; Derichebourg priced at €8.10/shr; Com Hem and Tele2 agree to merge; attention turning to upcoming inflation data from the US; corporate events expected later in the US session include earnings from Lennar, Supervalu and KB Home.



- Consumer discretionary [Brunello Cucinelli BC.IT -3.5% (placement), Continental CON.DE -1.9%(Prelim results), Inter Parfumes ITP.FR +4.0% (outlook), Sainsbury SBRY.UK +1.5% (trading update), TKWY.NL -3.9% (trading update), Ted Baker TED.UK +8.2% (trading update)]

- Energy [Tullow Oil TLW.UK +2.1% (outlook)]

- Financials [Plus500 PLUS.UK +4.2% (FCA review)] - Industrials [Gima TT GIMA.IT +4.6% (analyst action), Interserve IRV.UK +22.6% (trading update), Taylor Wimpey TW.UK -3.6% (outlook)]

- Technology [CapGemini CAP.FR +1.7% (analyst action)]

- Telecom [Altice ATC.NL-4.6% (analyst action), Claranova CLA.FR +13.2% (partnership with Sprint), Com Hem COMH.SE +7.1% (merger), Tele2 TEL2A.SE -4.1% (merger)]

- Utilities [Suez SEV.FR -2.0% (analyst action), Veolia VIE.FR -3.8% (analyst action)]



- Sweden Central Bank (Riksbank) Dec Minutes: Policy needed to continue to be expansionary

- Riksbank Gov Ingves stated in the minutes that was coming bit closer to point where monetary policy was expected to change direction but not yet there. Possible to raise interest rates before ECB. Important to note that even if current QE bond buying program was concluded; did not rule out potential needs for future purchases to safeguard inflation target

- Riksbank Dep Gov Floden: Appropriate to hold Repo rate until middle of next year; subdued price pressures not problematic. Did not support proposal to reivest bonds from QE program

- Riksbank Dep Gov Skingsley: Strong economy increases scope to diverge from ECB; must proceed cautiously to avoid FX volatility

- Riksbank Dep Gov Jochnick: Housing market is now a more obvious risk factor

- Riksbank Member Jansson: Keeping rate path unchanged was difficult to digest but normalization of policy must not start too early. Inflation expectations going forward was crucial for central bank scope of keeping inflation close the 2% target

- ECB again lowered emergency liquidity assistance (ELA) cap for Greece banks from €24.8B to €22.0B

- Ireland Agricultural Min Creed: Sensible Brexit more likely following the Dec agreement

- South Africa President Zuma said to seek an easing of calls for his resignation or impeachment

- Catalan Separatists said to have agree to vote Puigdemont as the regional President later in January

- Thailand Fin Min Apisak: Government plans THB100B mid-year budget; plans THB450B FY19 budget deficit

- Russia Energy Min Novak: Russian Dec. oil production was 301K bpd lower compared to Oct. 2016 level (in-line with agreed upon OPEC arrangement)



- USD/JPY dipped further in the aftermath when BoJ trimmed the size of a bond-buying operation that sent JGB yields higher on Tuesday viewed as stealth tapering by some. Some technical damage was done when the pair moved below the 112 level. Discounting for Fed rate hike in March will be UST/JPY recovery gauge by most analysts (Fed seen provided 6-7 hikes over the coming two years).

- Mixed UK data forced the GBP currency lower in the session. GBP/USD tested below 1.35 as wider trade deficit in Nov offset better Industrial Production data.

- EUR/NOK fell to 2-month lows after higher-than-expected Norwegian CPI data for Dec. Pair tested 9.60 before stabilizing.

- EUR/SEK cross was lower by 0.3% as the Dec Riksbank minutes were deemed a bit more hawkish than expected. USD/ZAR was higher by over 1% on reports that South Africa President Zuma was seeking to eae of calls for his resignation or impeachment


Fixed Income

- Bund Futures trade down 3 ticks at 161.26 closing the gap after reaching 160.92 low on slight weakness in European Indices. Continued upside targets 161.55 then 162.00, while a move below 160.92 low targets 160.71 then 160.45.

- Gilt futures trade at 124.26 down 1 tick trading off a session low of 124.07, with slightly better UK Industrial and Manufacturing data keeping futures lower. Initial support lies at 124.07 then 123.83, with upside resistance at 124.73 then 124.96.

-Wednesday's liquidity report showed Tuesday's excess liquidity stood at €1.860T. Use of the marginal lending facility fell to €2M from €40M prior.

-Corporate Issuance saw Engie, Caxia Bank and CBA announce Euro denominated issuance this morning, while Israel announced the launch of a $2B bond issuance, and Oman also announced the launch of a 3 tranche dollar denominated issuance.


Looking Ahead

- (MX) Mexico Dec Nominal Wages: No est v 5.1% prior

- (RU) Russia Dec Sovereign Wealth Funds: Reserve Fund: $B v $17.1B prior; Wellbeing Fund: $B v $66.9B prior

- (ZA) South Africa Ruling ANC Party meets (**Note: could oust Zuma)

- (ZA) South Africa Parliament to meet on Jan 10-11th on impeachment rules

- 05:30 (DE) Germany to sell €5.0B in new Feb 2028 Bunds

- 06:00 (IE) Ireland Nov Industrial Production M/M: No est v 10.5% prior; Y/Y: No est v 13.0% prior

- 06:00 (IL) Israel Dec Consumer Confidence: No est v 125 prior

- 06:00 (BR) Brazil Dec IBGE Inflation IPCA M/M: 0.3%e v 0.3% prior; Y/Y: 2.8%e v 2.8% prior

- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%

- 06:30 (CL) Chile Central Bank Economists Survey

- 06:30 (CL) Chile Central Bank Traders Survey

- 06:45 (US) Daily Libor Fixing 07:00 (RU) Russia to sell combined RUB40B in 2021 and 2028 OFZ bonds

- 07:00 (US) MBA Mortgage Applications w/e Jan 5th: No est v +0.7% prior

- 07:00 (CZ) Czech Central Bank to comment on CPI data

- 07:30 (EU) ECB account of the monetary policy meeting (Dec Minutes)

- 08:00 (UK) Dec NIESR GDP Estimate: 0.5%e v 0.5% prior

- 08:00 (HU) Hungary Central Bank (NBH) Dec Minutes

- 08:00 (RU) Russia Dec Final CPI M/M: No est v 0.4% prelim; Y/Y: No est v 2.5% prelim; CPI YTD: No est v 2.5% prelim

- 08:00 (RU) Russia Dec Core CPI M/M: 0.4%e v 0.2% prior; Y/Y: 2.4%e v 2.3% prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Dec Import Price Index M/M: 0.4%e v 0.7% prior; Y/Y: 3.1%e v 3.1% prior

- 08:30 (US) Dec Export Price Index M/M: 0.3%e v 0.5% prior; Y/Y: No est v 3.1% prior

- 08:30 (CA) Canada Nov Building Permits M/M: No est v 3.5% prior

- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%

- 09:00 (MX) Mexico Nov Leading Indicators M/M: No est v -0.02 prior

- 09:00 (US) Fed's Evans (non-voter, dove) on economy and policy

- 09:10 (US) Fed's Kaplan (non-voter, dove) in Dallas

- 10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference

- 10:00 (US) Nov Final Wholesale Inventories M/M: 0.7%e v 0.7% prelim, Wholesale Trade Sales M/M: No est v 0.7% prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:00 (NZ) New Zealand Dec QV House Prices Y/Y: No est v 6.4% prior

- 13:00 (US) Treasury to sell 10-Year Notes Reopening

- 13:30 (US) Fed's Bullard (non-voter, dove) on economic outlook

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