Recent PBoC liquidity injection failed to stymie the trend in China

EU Market Update: UK Q3 GDP revised higher; Recent PBoC liquidity injection failed to stymie the trend in China

Notes/Observations

- (CN) Daily Shibor fixings continue to rise despite recent PBoC injection of CNY200B in short term liquidity on Thursday ( 1-week: 7.6540% v 6.4720%) Shanghai Composite falls for the 9th straight day by another 2%

- BOJ left both its policy and its economic assessment unchanged (as expected with decision being unanimous)

- S&P cut Supranational European Union by one notch to AA+ from AAA-; outlook stable (**Note: downgrade does not affect individual EU members)

- Italian confidence vote on budget expected soon as today; expected to be a close call and Letta govt might fail if budget isn't approved

- UK Q3 GDP YoY reading revised higher from 1.5% to 1.9% while its Current Account Balance hits a record deficit of £20.7B in Q3

Economic Data

- (RU) Russia Narrow Money Supply w/e Dec16th (RUB): 8.12T v 7.98T prior

- (UK) Retailer John Lewis reports weekly LFL sales for week ending Dec 13th (y/y): +1.4% v +1.8% prior

- (DE) Germany Nov PPI M/M: -0.1% v -0.1%e; Y/Y: -0.8% v -0.8%e

- (DE) Germany Jan GfK Consumer Confidence: 7.6 v 7.4e

- (FI) Finland Nov Unemployment Rate: 7.6% v 7.5%e

- (JP) Japan Nov Convenience Store Sales Y/Y: +0.4 v -0.8% prior

- (FR) France Dec Business Confidence: 94 v 96e; Manufacturing Confidence :100 v 99e; Production Outlook Indicator: -11 v -17 prior; Own-Company Production Outlook: v +1 prior

- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 131.1K v 141.5K prior

- (TW) Taiwan Nov Export Orders Y/Y: +0.8% v -1.8%e

- (CZ) Czech Dec Business Confidence: 9.2 v 7.9 prior; Consumer Confidence Index: -9.5 v -9.3 prior; Composite: 5.5 v +4.5 prior

- (ES) Spain Oct Total Mortgage Lending Y/Y: -15.5% v -31.9% prior; House Mortgage Approvals Y/Y: -23.2% v -30.9% prior

- (DK) Denmark Nov Retail Sales M/M: 1.0% v 0.5%e; Y/Y: +0.5 v -2.9% prior

- (DK) Denmark Dec Consumer Confidence Indicator: 2.9 v 2.0e

- (DK) Denmark Q3 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: 0.5% v 0.5%e

- (EU) ECB €90M borrowed in overnight loan facility vs. €125M prior; €43.8B parked in deposit facility vs. €44.0B prior - Daily Eurosystem Liquidity Conditions

- (NL) Netherlands Nov House Price Index M/M: -0.3% v -0.1% prior; Y/Y: -4.7% v -4.0% prior

- (SE) Sweden Nov PPI M/M: +0.4% v -0.3% prior; Y/Y: -0.4% v -0.7% prior

- (HK) Hong Kong Q3 Current Account Balance: +$33.5B v -$3.3B prior; Overall Balance of Payments (BOP): -$28.7B v +$25.4B prior

- (IT) Italy Oct Industrial Orders M/M: -2.5% v +1.7% prior; Y/Y: 1.2% v 7.3% prior

- (IT) Italy Oct Industrial Sales M/M: -0.7% v +0.1% prior; Y/Y: -1.3% v -1.0% prior

- (NO) Norway Dec Unemployment Rate: 2.6% v 2.7%e

- (IS) Iceland Dec CPI M/M: 0.5% v 0.4% prior; Y/Y: 4.2% v 3.7% prior

- (UK) Nov Public Finances (PSNCR): +£0.4B v -£16.8B prior; PSNB ex Interventions: £16.5B v £15.0Be; Public Sector Net Borrowing: £14.8B v £13.4Be

- (UK) Q3 Final GDP Q/Q: 0.8% v 0.8%e; Y/Y: 1.9% v 1.5%e

- (UK) Q3 Final Total Business Investment Q/Q: 2.0% v 1.4%e; Y/Y: -5.3% v -6.3%e

- (UK) Q3 Current Account Balance: -£20.7B v -£14.0Be; widest on record

- (UK) Oct Index of Services M/M: 0.1% v 0.3%e; 3M/3M 0.8% v 0.9%e

- (IT) Italy Oct Retail Sales M/M: -0.1% v 0.0%e; Y/Y: -1.6% v -2.8% prior

- (BR) Brazil Dec Construction Costs M/M: 0.2% v 0.4%e

- (BR) Brazil Dec FGV Consumer Confidence: 111.5 v 112.8 prior

Fixed Income:

- (IN) India sold total INR150B vs. INR150B indicated in 2020, 2027, 2030 and 2043 bond

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM 

***Equities**

Indices [Stoxx50 +0.6%, FTSE 100 +0.4% at 6,614, DAX +0.7% at 9,397, CAC-40 +0.3% at 4,191, IBEX-35 +0.5% at 9,707, FTSE MIB +0.2% at 18,496, SMI +0.5% at 8,072, S&P 500 Futures +0.2% at 1,805]

- Market Focal Points: European equity markets extend the gains seen on Thursday's session, Turkish markets underperform, Price cuts weigh on French telecom companies, Precious metals miners continue to decline

By Sector

- Financials [CPP Group CPP.UK -10% (raised cost est)]

- Telecom [Iliad ILD.FR -6% (concerns related to internet price cuts)]

- Energy [Vestas Wind VWS.DE +3% (large US order)]

- Basic Materials/Resources [Avocet Mining AVM.UK -30% (cut production forecast), Cropenergies CE2.DE -7% (cut FY profit forecast)]

- Technology [Software AG SOW.DE -4.5% (analyst commentary)]

- Stoxx50 sectors [Technology +0.6%, Energy +0.5%, Consumer Cyclicals +0.4%, Financials +0.4%, Industrials +0.3%, Utilities +0.2% Consumer Non-Cyclical +0.2%, Utilities +0.2% ; Telecom -0.3%, Basic Materials -0.2%]

Speakers:

- S&P downgraded sovereign rating on Supranational European Union by 1 notch to AA+ from AAA-; Outlook revised to Stable from Negative (**Reminder: S&P cut France's sovereign rating to AA from AA+ back on Nov 8th)

- S&P affirmed UK at AAA; outlook still negative

- S&P affirmed Ireland at BBB+; outlook still positive

- EU's Rehn commented on S&P and stated that he disagreed with the rating agency that member state obligations to the budget in a stress scenario were questionable. EU credit rating should be assessed on its own merits

- ECB's Weidmann reiterated that risk remained that gov't and private sector got used to cheap money but reiterated that ECB was prepared to act again if necessary and that regional deflation risk was very limited. He reiterated negative deposit rates could have opposite of desired impact.He also reiterated low interest rates would have side effects that increase the longer rates stay low. He was skeptical of central banks trying to force banks to lend to certain sectors and regions. And if the ECB did more LTROs, it should discourage carry trades related to sovereign debt. Bitcoin was not an alternative to money

- Spain Energy regulator: power auction from Dec 19th not be validated dut to elevated power prices in recent weeks

- Fitch report noted that 2014 European govt borrowing was seen declining by 2.9% y/y to €15.1T (15.1% of GDP)

- Turkey Central Bank: Might increase USD sales amount by 10x of the announced minimum on days of excessive FX volatility

- Greece tax authorities said to have open investigation into German car companies

- BOJ Gov Kuroda post rate decision press conference reiterated its view that BOJ policy was targeted towards domestic economy and NOT the yen exchange. He did add that the correction to excessive Yen currency rise was good for the economy. The pace of JGB bond purchases won't change much next year (unlikely to change buying sharply) and confirmed to consider extension of BoJ lending facilities. He noted that the April sale tax hike was not expected to cause problems as exports and CAPEX would be key to Japan economy in 2014. He noted that Japan core consumer inflation to exceed 1% by year end (half-way to target) but could not yet say that deflation has ended. Lastly the Fed start of tapering reflected economic recovery

- Japan Health Ministry: Japan public pension fund GPIF to begin purchases of inflation-linked JGBs starting at the beginning of the new fiscal year in Apr 2014

- Japan Vice Economic Min Nishimura: Can't wait 1 or 2 year for wage increases, need them as soon as possible so economy can enter virtuous circle

- Trans-Pacific Partnership (TPP) Cabinet level meetings for negotiations said to be postponed until mid-Feb from late Jan

Currencies/Fixed Income:

- The EUR/USD was a touch lower in quiet trading on Friday. Dealers were looking into 2014 for trade opportunities. One analyst noted that once year-end flows were complete and portfolio inflows slow down they expected the EUR to come back under pressure. Dealers will also be eyeing an Italian confidence vote today. It could be a close call and result in the collapse of the Letta govt if it did not pass. - The yen continued its soft tone. The USD/JPY continued to hit fresh 5-year highs as market participants continue to expect BoJ to increase stimulus by the end of Q2 next year as a means to offset the impact of the sales tax.

- The effect of Fed tapering continued to roil some emerging markets. The Turkish Lira continued to hit fresh record lows against the USD as the pair tested above 2.09 level. Turkey Central Bank stated that it might increase USD sales amount by 10x of the announced minimum on days of excessive FX volatility

Political/In the Papers:

-(EU) ECB's Draghi: Rate cut unlikely to impact turnover of derivatives, rate cut was not intended to be a stimulus measure for banks

- (FR) France Stats Agency (INSEE): Affirms Q4 GDP at 0.4%; 2013 GDP at 0.2%; Sees Q1 and Q2 GDP at about 0.2%.

- (DE) Germany said to be mulling various options for Bundesbank Lautenschlager's successor - German Press

- (PT) Portugal Constitutional Court intends to oppose recent Govt plans regarding pensions in a ruling expected Friday, finds plans could be unconstitutional - Portugal press

- (US) Senate Majority Leader Reid (D-NV): Senate likely to vote on Yellen in Jan

- (IR) US Senators introduce bill to place 'standby sanctions' on Iran, would only be triggered if Iran falls short on interim nuclear agreements reached in Geneva - press

Looking Ahead

All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

- (ES) Spain Oct Trade Balance: No est v -€2.6B prior

- (CO) Colombia Central Bank Interest Rate Decision: Expected to leave the Overnight Lending Rate unchanged at 3.25%

- (PE) Peru Central Bank Quarterly Inflation Report

- 05:30 (BR) Brazil Central Bank quarterly inflation report

- 06:00 (EU) ECB weekly 3-year LTRO Funds repayment vs. € (last one before 3-week suspension)

- 06:10 (UK) DMO to sell combined £2.0B in1-month, 3-month and 6-month Bills

- 06:30 (IN) India Forex Reserves w/e Dec 13th: No est v $295.7B prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (EU) EMA releases Drug Approvals & Safety Decisions

- 08:30 (US) Q3 Final GDP Annualized Q/Q: 3.6%e v 3.6% prelim; Personal Consumption: 1.4%e v 1.4% prelim

- 08:30 (US) Q3 Final GDP Price Index: 2.0%e v 2.0% prelim; Core PCE Q/Q: 1.5%e v 1.5% prelim

- 08:30 (CA) Canada Nov CPI M/M: +0.1%e v -0.2% prior; Y/Y: 1.0%e v 0.7% prior; Consumer Price Index: No est v 123.0 prior

- 08:30 (CA) Canada Nov CPI Core M/M: 0.1%e v 0.2% prior; Y/Y: 1.3%e v 1.2% prior

- 08:30 (CA) Canada Nov CPI Seasonally Adj M/M: No est v -0.1% prior; CPI Core seasonally adj M/M: No est v 0.0% prior

- 08:30 (CA) Canada Oct Retail Sales M/M: 0.2%e v 1.0% prior; Retail Sales Ex Auto M/M: 0.0%e v 0.0% prior

- 09:00 (MX) Mexico Nov Unemployment Rate: 5.0%e v 5.0% prior

- 10:00 (MX) Mexico Central Bank Monetary Policy Minutes

- 10:00 (EU) Euro Zone Dec Advance Consumer Confidence: -15.0e v -15.4 prior

- 10:30 (UK) DMO Gilt calendar for Q1 (Jan-Mar)

- 11:00 (US) Fed to purchase $2.75-3.50B in notes

- 11:00 (EU) EU- US press conference on trade negotiations

- 11:00 (US) Dec Kansas City Fed Manufacturing Activity: +6e v +7 prior

- 11:30 (BR) Brazil Nov Formal Job Creation: 54.9Ke v 95.0K prior

- 14:00 (AR) Argentina Nov Trade Balance: $663Me v $710M prior

- 14:00 (AR) Argentina Q3 GDP Y/Y: 4.9%e v 8.3% prior

- 14:00 (AR) Argentina Q3 Current Account Balance: -$1.2Be v $650M prior

- 14:00 (AR) Argentina Nov Industrial Production Y/Y: -0.5%e v -0.5% prior; Y/Y: No est v 1.4% prior