UK data highlights oncoming recession

Notes/Observations

- UK Final GDP reading revised lower adding to evidence the country has slipped into a recession; UK household incomes fell for a fourth straight quarter.

- Indonesia Central Bank hiked 7-day Reverse Repo Rate by 25bps, as expected; Noted decision was a front-loaded, pre-emptive measure and sees inflation as manageable.

- Quiet session for macro news as market participation remained light on run up to Christmas holiday. EU indices squeezing out small gains on optimism of historical ‘Santa Claus’ equity rally.

- EU bank sector and bonds continued to be flamed by tailwinds from ECB rate decision and hawkish commentary last week.

- Russia’s response to Ukraine Pres Zelenskiy visit to US and his address to Congress was muted, reiterating stance of US holding proxy war with Russia.

- Asia closed mostly higher, except Shanghai Composite at -0.5%. EU indices are lower, except for FTSE 100 at +0.3%. US futures are flat. Gold 0.0%, DXY -0.3%; Commodity: Brent +1.4%, WTI +1.5%, UK Nat Gas +2.0%; Crypto: BTC 0.0%, ETH +0.4%.

Asia

- Japan Govt updated its economic forecasts which maintained FY23/24 CPI forecast at 1.7%; On growth it cut the FY22/23 (current fiscal year) GDP forecast from 2.0% to 1.7% while raising the FY23/24 (next fiscal year) GDP growth forecast from 1.1% to 1.5%.

- Japan expected to sell ~¥190T in JGBs during FY23/24 and to cut short term bond issuance [vs. ¥198.

Europe

- ECB's Centeno (Portugal): Data indicates inflation is reaching peak in Q4 2022.

- German Finance Ministry Monthly Report expected subdued economic growth in winter, CPI to ease in 2023.

- NHS staff to be offered fast-tracked pay rise in bid to end strikes.

Americas

- Senate Majority Leader Schumer (D-NY) said to have moved to set up a procedural vote on the spending bill [(US) Senators left the Capitol late Wednesday as a partisan dispute over pandemic-era border restrictions blocked debate on the 2023 omnibus spending package.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.17% at 432.16, FTSE +0.44% at 7,530.10, DAX +0.03% at 14,102.04, CAC-40 +0.18% at 6,591.85, IBEX-35 +0.17% at 8,316.12, FTSE MIB +0.02% at 24,117.00, SMI -0.05% at 10,839.70, S&P 500 Futures +0.07%].

Market focal points/key themes

European indices opened higher across the board amid new miltimonths lows in European natural gas prices but then started to cut gains to trade roughly flat likely due to low liquidity conditions ahead of Christmas weekend.
On corporate front, Character Group reported final results and trades higher around 5%. ImmuPharma in London up almost 15% following its corporate update. European chip names trade 1-2% lower following Micron earnings and comments on industry’s outlook. On M&A front, Sonaecom in Lisbon also trades sharply higher as Sonae offers to acquire remaining stake.
Earnings expected in the upcoming US session include CarMax and Paychex.

Equities

- Consumer staples: Character Group [CCT.UK] -5% (earnings).

- Healthcare: ImmuPharma [IMM.UK] +15% (corporate update), Carmat [ALCAR.FR] -1% (appoints new Chair of Board).

- Industrials: SAAB [SAABB.SE] +2% (awarded SEK800M military order from Finland), Hexpol AB [HPOLB.SE] -1.5% (analyst cut to hold).

- Telecom: Sonaecom [SNC.PT] +20% (stake offer), Eutelsat [ETL.FR] +1% (adjusts outlook for new Russia/Iran sanctions).

Speakers

- ECB’s de Guindos (Spain) commented that 50bps hikes might become new normal in the near term and expected such pace for a period of time. Had no choice but to act on inflation.

- France Fin Min Le Maire stated that the US Inflation Reduction Act marked end of era for globalization.

- Finland Treasury commented on 2023 issuance; Net borrowing seen at €8.36B; gross borrowings seen at €36.4B.

- Sweden Finance Ministry updated its economic outlook which cut the 2023 GDP forecast from -0.4% to -0.7% and cut the 2024 GDP growth forecast from 2.0% to 1.0%. Sweden raised the 2022 CPIF forecast from 7.9% to 7.6% and also raised the 2023 CPIF forecast from 5.2% to 6.0%.

- Indonesia Central Bank (BI) Policy Statement noted that the decision to hike by 25bps as measured and taken as front-load, pre-emptive, forward looking step to keep core inflation.

Currencies/fixed income

- Quiet FX session heading into the year-end holidays. USD trying to stabilize after a few sessions on the defensive.

- EUR/USD drifted off its best levels to trade at 106.30 by mid-session.

- GBP/USD holding above the 1.2110 area after UK Final GDP reading was revised lower adding to evidence the country had slipped into a recession.

Economic data

- (UK) Q3 Final GDP Q/Q: -0.3% v -0.2% prelim; Y/Y: 1.9% v 2.4% prelim.

- (UK) Q3 Final Private Consumption Q/Q: -1.1% v -0.5% prelim; Government Spending Q/Q: 0.5% v 1.3% prelim; Gross Fixed Capital Formation Q/Q: 1.1% v 2.5% prelim; Exports Q/Q: 8.9% v 8.0% prelim; Imports Q/Q: -3.6% v -3.2% prelim.

- (UK) Q3 Final Total Business Investment Q/Q: -2.5% v -0.5% prelim; Y/Y: 1.3% v 3.5% prelim.

- (UK) Q3 Current Account Balance: -£19.4B v -£20.1Be.

- (SE) Sweden Nov Retail Sales M/M: +2.2% v -2.1% prior; Y/Y: -6.3% v -8.4% prior.

- (SE) Sweden Nov PPI M/M: 2.0% v -1.5% prior; Y/Y: 19.5% v 18.7% prior.

- (SE) Sweden Oct Non-Manual Workers’ Wages Y/Y: 3.3% v 3.1% prior.

- (NO) Norway Oct AKU Unemployment Rate: 3.2% v 3.4% prior.

- (MY) Malaysia mid-Dec Foreign Reserves: $110.3B v $109.7B prior.

- (ID) Indonesia Central Bank (BI) raised the 7-day Reverse Repo Rate by 25bps to 5.50% (as expected).

- (HU) Hungary Q3 Current Account: -€4.5B v -€4.5Be.

- (TW) Taiwan Nov Unemployment Rate: 3.6% v 3.7%e.

- (ES) Spain Oct Total Mortgage Lending Y/Y: 23.3% v 9.2% prior; Mortgage Approvals Y/Y: 13.5% v 4.0% prior.

- (HU) Hungary Oct Final Trade Balance: -€0.9B v -€1.0B prelim.

- (IT) Italy Oct Industrial Sales M/M: -0.8% v -1.2% prior; Y/Y: 12.5% v 18.0% prior.

- (NO) Norway Dec Unemployment Rate: 1.6% v 1.7%e.

- (IS) Iceland Dec CPI M/M: 0.7% v 0.3% prior; Y/Y: 9.6% v 9.3% prior.

- (IT) Italy Nov PPI M/M: +3.3% v -4.7% prior; Y/Y: 35.7% v 33.2% prior.

Fixed income issuance

- None seen.

Looking ahead

- (IL) Israel Dec 12-month CPI Forecast: No est v 2.9% prior.

- (EG) Egypt Central Bank Interest Rate Decision: Expected to raise Deposit Rate by 150bps to 14.75%.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bill.

- 06:00 (IE) Ireland Nov PPI M/M: No est v 2.0% prior; Y/Y: No est v 8.0% prior.

- 06:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave One-Week Repo Rate unchanged at 9.00%.

- 06:00 (RO) Romania to sell combined RON600M in 2027 and 2029 bonds.

- 06:30 (CL) Chile Central Bank (BCCh) Dec Minutes.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (BR) Brazil CONAB Sugarcane and Ethanol Production Report.

- 08:00 (PL) Poland Nov M3 Money Supply M/M: 0.8%e v 0.4% prior; Y/Y: 5.9%e v 7.0% prior.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 16th: No est v $576.5B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Q3 Final GDP Annualized: (3rd reading) Q/Q: 2.9%e v 2.9% prelim; Personal Consumption: 1.7%e v 1.7% prelim.

- 08:30 (US) Q3 Final GDP Price Index: 4.3%e v 4.3% prelim; CORE PCE Q/Q: 4.6%e v 4.6% prelim.

- 08:30 (US) Initial Jobless Claims: 222Ke v 211K prior; Continuing Claims: 1.678Me v 1.671M prior.

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

- 10:00 (US) Nov Leading Index: -0.5%e v -0.8% prior.

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

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

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 13:00 (US) Treasury to sell 5-Year TIPS Reopening.

- 18:30 (JP) Japan Nov National CPI Y/Y: 3.9%e v 3.7% prior; CPI Ex-Fresh Food (Core) Y/Y: 3.7%e v 3.6% prior; CPI Ex-fresh food/energy (Core-Core) Y/Y: 2.8%e v 2.5% prior.

- 21:35 (CN) China to sell 2-year Bond.

- 21:35 (CN) China to sell 3-month and 6-month bills.

- 23:00 (MY) Malaysia Nov CPI Y/Y: 3.9%e v 4.0% prior.