Markets awaits Trump's 1st press conference

Notes/Observations

- Focus on the content of President-elect Trump's press conference

- Risk of Sino-US trade war rising as frictions seem hard to avoid

- UK Trade deficit widens in Nov

- UK Nov production data beat expectations but mainly due to reopening of one of the country's major North Sea oil fields after a period of prolonged maintenance

 

Overnight:

Asia:

- BOJ's Exec Dir Amamiya: Japan's experience shows negative rates combined with QQE can exert strong downward pressure on long term rates

- China Vice Fin Min Liu Kun has stepped down

Americas:

- World Bank Global Economic Prospects report cuts 2017 and 2018 global growth forecasts; warns Trump tariff proposals could trigger protectionist retaliation

- US intelligence officials have told President-elect Trump about unsubstantiated allegations that Russian intelligence agencies have embarrassing personal information about him (**Note: refuted by Russia)

Energy:

- Weekly API Oil Inventories: Crude: +1.5M v -7.4M prior

 

Economic data

- (JP) Japan Nov Preliminary Leading Index: 102.7 v 102.6e; Coincident Index: 115.1 v 115.0e

- (TR) Turkey Nov Current Account: -$2.3B v -$2.8Be

- (UK) Nov Industrial Production (beat) M/M: 2.1% v 1.0%e; Y/Y: 2.0% v 0.7%e

- (UK) Nov Manufacturing Production (beat) M/M: 1.3% v 0.5%e; Y/Y: 1.2% v 0.4%e

- (UK) Nov Visible Trade Balance (miss): -£12.2B v -£11.2Be, Total Trade Balance: -£4.2B v -£3.5Be, Trade Balance Non EU: -£3.6B v -£3.0Be

**Fixed Income Issuance:

- (PT) Portugal Debt Agency (IGCP) opened book to sell Apr 2027 OT bond; guidance seen +355-360bps to mid-swaps

- (DK) Denmark sold total DKK2.1B in 2018 and 2025 bonds

- (EU) ECB allotted $265M in 7-day USD Liquidity Tender at 1.16% vs. $2.1B prior

- (SE) Sweden sold total SEK3.0B in 2022 and 2026 bonds

- (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 12-month Bills; Avg Yield: -0.250% v -0.196% prior; Bid-to-cover: 1.66x v 1.73x prior

- (VN) Vietnam sold total VND2.13T vs. VND3.0T indicated in 5-year, 7-year and 30-year bonds

- (CH) Switzerland sold CHF104.7M in 0.5% 2058 Bonds

- (GR) Greece Debt Agency (PDMA) sold €812.5M vs. €625M indicated in 13-Week Bills; Avg Yield: 2.70% v 2.70% prior; Bid-to-cover: 1.3x v 1.3x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

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

Indices [Stoxx50 +0.1% at 3,311, FTSE +0.2% at 7,288, DAX +0.2% at 11,607, CAC-40 +0.2% at 4,896, IBEX-35 -0.2% at 9,436, FTSE MIB +0.2% at 19,458, SMI +0.1% at 8,458, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European equity indices are trading mixed but generally higher after a relatively mixed end to the Asian session overnight; Market participants remain jittery ahead of a speech by US President-elect Donald Trump scheduled later today; No notable sector drivers in the Eurostoxx; shares of E.On trading notably higher after receiving an analyst upgrade, with shares of Engie the notable laggard after the French Govt sold a 3.7% stake; shares of Sainsbury leading the gains in the FTSE 100 after releasing its Q3 sales results, shares of TUI the notable laggard after receiving an analyst downgrade; Banking stocks mixed across Europe.

Upcoming scheduled US earnings (pre-market) include Corus Entertainment, MSC Industrial Direct, and Supervalu Inc.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [PageGroup PAGE.UK +3.7% (Q4 profit), TUI TUI.UK -5.1% (analyst downgrade)]

- Consumer Staples: [CHR Hansen CHR.DK +6.5% (Q1 results), Sainsbury SBRY.UK +5.5% (Q3 sales)]

- Energy: [Tullow Oil TLW.UK -2.9% (trading update outlook)]

- Financials: [Capital and Regional CAL.UK -0.5% (trading update), Foxtons FOXT.UK -3.8% (prelim FY16 results, outlook)]

- Industrials: [Bouygues EN.FR +0.6% (Hinckley Point contract), Cobham COB.UK -13.9% (prelim FY16 profit warning, does not recommend dividend), Taylor Wimpey TW.UK -1.5% (FY16 completions), PSA UG.FR +2.4% (FY16 sales)]

- Materials: [CropEnergies CE2.DE -2.9% (final 9M results)]

- Utilities: [E.On EOAN.DE +2.7% (analyst upgrade), Engie ENGI.FR -3.6% (France Govt divests 3.7% stake)]

 

Speakers

- Euro Zone bank resolution body (SRB) chief Koenig: Italian measures to strengthen banking sector were welcomed

- Russia govt spokesperson Peskov stated that Russia had no compromising material on President-elect Trump or Clinton. Possible new sanctions affecting US investment in Russian energy would damage Russia and the global economy

- Japan Chief Cabinet Sec Suga reiterated view that both Govt and BOJ to watch market moves carefully. Guiding policy to end deflation and spur economic growth

- China govt advisors note that one-off CNY currency devaluation could cause market panic. Would be very unwise to allow a one-off devaluation of the yuan given that the domestic economy is under downward pressure

- Nigeria oil union starts 3-day strike to protest job cuts (as expected)

- Philippines Central Bank Gov Tetangco reiterated they have enough policy tools to manage volatility

 

Currencies

- EUR/USD was slightly lower in quiet trading. Dealers took note of the higher level of Eonia and seemed not too convinced about the ECB's pledge to keep rates low beyond the end of QE as inflation rose but had little impact on price action in the session.

- GBP was softer after Nov trade data exhibited largest-than-expected deficits. FX markets brushed off better production data in the UK. GBP/USD lower by 0.5% as the pair approached the lower part of the 1.21 handle

- Turkish lira hits a fresh record low against the USD as the pair approached the 3.90 area.

- China CNY currency (Yuan) saw calmer price action with onshore and offshore prices little changed after Beijing barely moved the daily fix's midpoint today

**Fixed Income:

- Bund futures trade at 163.17 up 5 ticks coming off highs at 163.34 as Equities rebound off lows. Support remains at 162.85 followed by Monday low of 162.47 then 162.24. Resistance moves to 163.36 just above today's high followed by 163.76 then 164.52.

- Gilt futures trade at 124.43 down 9 ticks trading towards lows after strong Industrial and Manufacturing data out of the UK. Continuation lower sees support at 124.17 followed by 123.86. Upside targets 124.94 high then 125.13 followed by 125.51. Short Sterling futures trade flat to down 1bp with Jun17Jun18 remaining at 15/16bp.

- Wednesday's liquidity report showed Tuesday's excess liquidity rose to €1.256T a rise of €4B from €1.252T prior. This was primarily due to AFs and MonPol portfolios falling to negative €784.6B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €377M from €137M prior.

- Corporate issuance slowed somewhat to $2.6B via 2 deals headlined by Nissan Motor 4 part $2B offering. Weekly issuance stands at $13.3B with MTD currently at $68.3B. Analyst forecast weekly issuance to be around the $30B mark.
Flows continues to be strong in EUR denominated issuance, with Linde, Intesa Sanpaolo and Israel coming to market this morning.

**Political/In the Papers:

- China FX Regulator SAFE said to be telling banks to keep its instructions about curbing capital outflows secret. Reiterated govt stance that research analysts keep any negative views about the yuan's prospects to themselves

 

Looking Ahead

- (IT) Italy Constitutional Court reviews trade union request for a referendum on labor market reform

- 05:30 (CL) Chile Central Bank's Traders Survey

- 05:30 (DE) Germany to sell €5.0B in new 0.25% 2027 Bunds

- 06:00 (PT) Portugal Dec CPI M/M: No est v -0.5% prior; Y/Y: No est v 0.6% prior

- 06:00 (PT) Portugal Dec CPI EU Harmonized M/M: No est v -1.0% prior; Y/Y: No est v 0.5% prior

- 06:00 (BR) Brazil Dec IBGE Inflation IPCA M/M: 0.3%e v 0.2% prior; Y/Y: 6.3%e v 7.0% prior

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

-06:00 (RU) Russia to sell combined RUB40B in OFZ bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Jan 6th: No est v 0.1% prior

- 07:00 (UK) PM May weekly question time in House of Commons

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

- 08:15 (UK) Baltic Dry Bulk Index

- 09:00 (MX) Mexico Nov Industrial Production M/M: 0.2%e v 0.1% prior; Y/Y: +0.5%e v -1.4% prior, Manufacturing Production Y/Y: +2.7%e v -0.6% prior

- 09:15 (UK) BOE gov Carney testifies at Treasury Select Committee

- 09:50 (UK) Bank of England Bond Buying Operation

- 10:00 (UK) Dec NIESR GDP Estimate: 0.5%e v 0.4% prior

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

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

- 11:00 (US) President-elect Trump press conference

- 11:30 (AT) Austrian Chancellor Kern speaks on Austria's Future

- 12:00 (CA) Canada to sell 2-Year Bonds

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

- 14:00 (AR) Argentina Dec National CPI M/M: 1.4%e v 1.6% prior

- 16:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Rate by 50bps to 13.25%