Awaiting ECB

Notes/Observations

- ECB expected to extend its quantitative easing beyond next March and likely argue against any premature tapering

 

Overnight

Asia:

- China Nov Trade Balance registers a smaller-than-expected surplus ($44.6B v $46.9Be) but exports rise for 1st time in 8 months while imports rose at its fastest pace in 2 years

- South Korea Parliament introduces bill to impeach President Park, voting scheduled for Friday, Dec 9th

- Japan Q3 Final GDP data missed expectations but did confirm its 3rd straight expansion both quarterly and annualized (Q/Q: 0.3% v 0.5%e; Annualized GDP: 1.3% v 2.3%e)

Europe:

- Italy PM Renzi tenders resignation (as expected); President asked him to stay on as caretaker PM during consultations on forming new govt

- Moody's lowered Outlook for Italy's long-term issuer rating to Negative from Stable following latest referendum vote; Affirmed Baa2 sovereign rating

- UK Parliament voted 448 to 75 to support govt Brexit timetable to trigger Article 50 by end of March 2017

- UK Parliament voted 448 to 75 to back Labour motion calling on Govt to set out Brexit plans before triggering Article 50

 

Economic data

- (JP) Japan Nov Eco Watchers Current Survey: 48.6 v 46.2 prior; Outlook Survey: 49.1 v 49.0 prior

- (NL) Netherlands Nov CPI M/M: -0.3 v +0.3% prior; Y/Y: 0.6% v 0.5%e

- (FR) Bank of France Nov Business Sentiment (beat): 101 v 100e

- (CZ) Czech Nov Unemployment Rate (beat): 4.9% v 5.0%e

- (HU) Hungary Nov CPI (miss) M/M: 0.1% v 0.2%e; Y/Y: 1.1% v 1.2%e

**Fixed Income Issuance:

- (SE) Sweden sold total SEK vs. SEK750M indicated in I/L 2019 and 2032 Bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Index snapshot (as of 10:00 GMT)**

Indices [Stoxx50 +0.3% at 3,148, FTSE -0.1% at 6,898, DAX +0.3% at 11,016, CAC-40 +0.1% at 4,698, IBEX-35 +0.6% at 9,015, FTSE MIB +0.3% at 18,192, SMI -0.2% at 7,914, S&P 500 Futures flat]

Market Focal Points/Key Themes: European equity indices are currently trading mixed across the board after opening sharply higher; Major banking stocks trading mixed across Europe with shares of SocGen and Santander trading higher despite shares of BNP Paribas and Deutsche Bank trading notably lower; Italian banks and peripheral lenders all trading sharply higher with the Italian FTSE MIB outperforming; shares of Capita the notable laggard in the FTSE 100 after stating headwinds will affect trading performance in H1 FY17; commodity and mining stocks underperforming in the index as copper prices trade lower intraday.

Upcoming scheduled US earnings (pre-market) include CIENA Corp, Cantel Medical, Dell Technologies, Acushnet Company, Hovnanian Enterprises, Methode Electronics, SAIC, Sears Holding, Toro, and Yingli Green Energy.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Air France AF.FR +0.7% (Nov metrics), Capita CPI.UK -8.1% (trading update), Ocado OCDO.UK -3.4% (Q4 sales), Sports Direct SPD.UK -8.9% (H1 results, adjusts outlook), TUI TUI1.DE +2.3% (FY15/16 results), William Hill WMH.UK -8.0% (reportedly MPs demanding stricter controls on betting terminal stakes)]

- Financials: [Bank Pekao BP1.DE -1.9% (PZU and PFR agree to acquire 32.8% stake for PLN123/shr), EFG International EFGN.CH +7.1% (BSI integration synergies), Unicredit UCG.IT +0.8% (PZU and PFR agree to acquire 32.8% stake in Bank Pekao for PLN123/shr)]

- Healthcare: [UCB UCB.BE +0.1% (phase 3 CIMPASI-1 trial meets co-primary efficacy endpoints)]

- Industrials: [DS Smith SMDS.UK +3.9% (H1 results, raises dividend)]

- Materials: [Glencore GLEN.UK +0.8% (confirms final stage negotiations to acquire 19.5% stake in Rosneft)]

- Technology: [Cap Gemini CAP.FR +1.5% (increases share buyback), Soitec SOI.FR +9.3% (H1 results)]

- Telecom: [Ericsson ERICB.SE -0.3% (cost and efficiency program update), Fingerprint Cards FINGB.SE -10.6% (outlook)]

- Utilities: [National Grid NG.UK +0.8% (divests 61% interest in NG Gas Distribution for £13.8B)]

 

Speakers

- Germany Chancellor Merkel Adviser Feld: ECB should not keep supporting Italy. A crisis of the euro was still possible, though ECB was good at fighting any possible crisis; much depended on path of reforms in Italy. ECB was expected to continue with the quantitative easing purchases beyond March

- ECB's Supervisory Board to meet on Thursday and could possible discuss Banca Monte Paschi

- Swiss Stats Office updated its inflation forecasts which maintained 2016 CPI at -0.4%, cut 2017 CPI forecast from +0.3% to 0.0%and set 2018 CPI forecast at +0.2%

- Poland Central Bank Financial Stability Report: System remains stable but threats have intensified

- Russia Dep PM Dvorkovich: Govt would not issue separate orders for Russian oil companies to cut production

- Germany Chemical Industry Group (VCI): Forecats 2017 production +0.5% and sales +1.0%

- BOJ Gov Kuroda: This year's political uncertainties had a big impact on the economy and seen continuing. Saw both Japan and global economies heading in the right direction. Reiterates view that domestic inflation to rise to 2% aided by improving private consumption

- Japan Upper House to vote on Trans Pacific Partnership (TPP) on Friday, Dec 9th

 

Currencies

- USD continued to consolidate against the major pairs and was softer across the board.

- Focus on ECB within tight ranges ahead of the rate decision with position adjustment action seen. ECB was expected to announce a six-month extension to its quantitative easing program while keeping the size of asset purchases unchanged at €80/month. Dealers noting that it If ECB decided on QE extension without hint of tapering the EUR currency could weaken against the major pairs.

- EUR/USD holding steady around the 1.08 level near 3-week highs

- USD/JPY was lower by 0.2% to test below the 113.50 level just ahead of the NY morning.

**Fixed Income:

- Bund futures trade at 161.31 down 43 ticks reversing some of yesterday's gains ahead of the ECB rate meeting and press conference later today. A continued move lower targets 160.96y 160.92 Month low. Upside targets 161.99 followed by 162.15 then 162.60.

- Gilt futures trade at 123.73 down 24 ticks tracking Bunds lower in light trade. Downside support lies at 123.65 initially then 123.21 followed by 122.46 contract lows with continuation eyeing 122.00. A move higher targets 124.12 followed by 124.51. Short Sterling futures trade up 1bp at the front to flat i nthe reds with Jun17Jun18 remaining at 18/19bp.

- Thursday's liquidity report showed Wednesday's excess liquidity rose to €1.185T a rise of €10B from €1.175T prior. This was primarily due to AFs and MonPol portfolios falling to negative €755.7B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €278M from €7M prior.

- Corporate issuance saw $2.45B come to market via 3 issuers led by $1.25B 2 part issuance from Bank of Montreal, and $750M issuance from BNP Paribas. For 2017 analysts calling year issuance to see a slight decline to $1.2T from $1.27T seen this year. In Euro denominated issuance volume remained quiet ahead of the ECB rate decision and press conference today. For the year issuance has reached €1.12T which is 0.3% higher y/y.

 

Looking Ahead

- (UR) Ukraine Nov CPI M/M: No est v 2.8% prior; Y/Y: No est v 12.4% prior

- (RU) Russia Nov Light Vehicle Car Sales Y/Y: No est v -3.0% prior

- 05:30 (HU) Hungary Debt Agency (AKK) sells bonds

- 06:00 (IE) Ireland Nov CPI M/M: No est v -0.5% prior Y/Y: No est v -0.3% prior

- 06:00 (IE) Ireland Nov CPI EU Harmonized M/M: No est v -0.4% prior Y/Y: No est v -0.4% prior

- 06:00 (ZA) South Africa Oct Manufacturing Production M/M: 0.3%e v 1.5% prior; Y/Y: 0.8%e v 0.0% prior

- 06:00 (BR) Brazil CONAB Crop Report

- 06:00 (TR) Turkey PM Yildirim announces decisions from economic coordination meeting

- 06:45 (US) Daily Libor Fixing

- 07:00 (UK) Ukraine Central Bank Interest Rate Decision: Expected to leave Key Rate unchanged at 14.00%

- 07:45 (EU) ECB Interest Rate Decision: Expected to keep key rates unchanged, Main Refinancing Rate seen unchanged at 0.00%, Deposit Facility Rate seen unchanged at -0.40%, Marginal Lending Facility seen unchanged at 0.25% and ECB Asset Purchase Target unchanged at €80B

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 2nd: No est v $385.7B prior - 08:15 (CA) Canada Nov Annualized Housing Starts: 192.0Ke v 192.9K prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Initial Jobless Claims: 255Ke v 268K prior; Continuing Claims: 2.048Me v 2.081M prior

- 08:30 (CA) Canada Q3 Capacity Utilization Rate: 81.5%e v 80.0% prior

- 08:30 (CA) Canada Oct New Housing Price Index M/M: 0.2%e v 0.2% prior; Y/Y: No est v 2.8% prior

- 08:30 (CA) Canada Oct Building Permits M/M: +2.0%e v -7.0% prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (EU) ECB chief Draghi holds post rate decision press conference

- 08:30 ECB updates Staff projections

- 08:30 (CA) Bank of Canada (BOC) Gov Poloz on bank notes

- 09:00 (MX) Mexico Nov CPI M/M: 0.8%e v 0.6% prior; Y/Y: 3.3%e v 3.1% prior; CPI Core M/M: 0.3%e v 0.3% prior

- 09:00 (BR) Brazil to sell 2022 LFT Bills

- 09:00 (BR) Brazil to sell 2017, 2018 and 2020 LTN Bills

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (US) Treasury announcement for upcoming 3-year, 10-year and 30-year bond auctions

- 12:00 (US) Fed reports Q3 Financial Accounts: Household Change in Net Worth: No est v $1.075T prior

- 12:00 (CA) Canada to sell 30-Year Real Return Bonds