USD limps into year-end

Notes/Observations

Asia:

- China 19th Central Committee to discuss changes to the constitution in January, sparking chatter Xi could have an extended term as President

- China Finance Ministry (MOF): Profits reinvestment by foreign firms to be temporarily exempted from provisional income tax

- BoJ releases summary of opinions of Dec meeting which reiterated stance that appropriate for BoJ to continue current easy policy. As it had a long way to achieve 2% inflation target.

- Japan Nov Preliminary Industrial Production M/M: 0.6% v 0.5%e; Y/Y: 3.7% v 3.6%e - South Korea Nov Industrial Production M/M: 0.2% v 1.3%e; Y/Y: -1.6% v 0.0%e

- Bank of Korea (BoK) annual monetary strategy for 2018: 2018 monetary policy to remain accommodative

Europe:

- EU officials indicate that UK Brexit minister may have been "sidelined"; EU negotiator Barnier has been dealing directly with another UK official

- France Nov Net Change in Jobseekers: -29.5K v +8.0K prior

Americas:

- President Trump legal team reportedly plans to attack former National Security Adviser Flynn's credibility

- US Commerce Dept. issues final ruling on aircraft subsidies in Canada: Says subsidies were provided on some of Canada's aircraft exports

Energy:

- Weekly API Oil Inventories: Crude: -6M v -5.2M prior

 

Economic Data:

- (RU) Russia Dec Manufacturing PMI: 52.0 v 52.0e

- (TR) Turkey Dec Economic Confidence: 95.0 v 97.9 prior

- (FI) Finland Nov House Price Index M/M: -1.0% v -0.2% prior; Y/Y: 0.1% v 0.5% prior

- (NO) Norway Nov Retail Sales W/Auto Fuel M/M: 2.1% v 1.0%e

- (CN) China Q3 Final Current Account: $40.5B v $37.1B prelim

- (SE) Sweden Nov Trade Balance (SEK): -3.0B v -3.1B prior

- (HK) Hong Kong Nov Trade Balance (HKD): -39.7B v -41.6Be, Exports Y/Y: 7.8% v 6.0%e; Imports Y/Y: 8.6% v 8.2%e

- (AT) Austria Dec Manufacturing PMI: 64.3 v 61.9 prior

- (UK) Nov BBA Loans for House Purchases: 39.5K v 40.4K prior

- (BR) Brazil Dec FGV Inflation IGPM M/M: 0.9% v 0.9%e; Y/Y: -0.5% v -0.5%e

**Fixed Income Issuance:

- (IT) Italy Debt Agency (Tesoro) sold total €4.91B vs. €3.5-5.0B indicated range in 5-year and 10-year BTP Bonds

- Sold €2.41B vs. €2.0-2.5B indicated range in 0.9% Aug 2022 BTP bonds; Avg Yield: 0.60% v 0.58% prior; Bid-to-cover: 1.74x v 1.53x prior

- Sold €1.5B vs. €1.0-1.5B indicated range in 2.05% Aug 2027 BTP bonds; Avg Yield: 1.86% v 1.73% prior; Bid-to-cover: 1.82x v 1.65x prior

- Sold €1.0B vs. €0.5-1.0B indicated range in 2.2% Aug 2027 BTP bonds; Avg Yield: 1.83% v 1.86% prior; Bid-to-cover: 2.21.919x v 1.43x prior

- (IT) Italy Debt Agency (Tesoro) sold €2.0B vs. €1.5-2.0B indicated range in Apr 2025 CCTeu (Floating Rate bond); Avg Yield: 0.48% v 0.46% prior; Bid-to-cover: 1.68x v 1.60x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.2% at 3,544, FTSE flat at 7,620, DAX -0.1% at 13,057, CAC-40 -0.1% at 5,366, IBEX-35 -0.3% at 10,133, FTSE MIB +0.1% at 22,217, SMI -01% at 9,423, S&P 500 Futures +0.1%]

- Market focal points/key themes: European markets open largely lower but adjusted to trade largely mixed as the session progressed; year-end trading remains light in final full trading day of the year; UK initial exception to downward trend; commodity prices continue to support materials stocks; energy stocks outperforming on higher oil prices ahead of US energy data; attention on US jobless data later in the session

 

Equities

- Consumer discretionary [Ceconomy CEC.DE +2.5% (death of major shareholder)]

- Financials [Banco BPM BAMI.IT +3.6% (outlook)]

- Healthcare [MDxHealth MDXHH.BE -10.1% (cuts outlook), Nanobiotix NANO.FR +7.9% (continuation following IND acceptance)]

 

Speakers

- (EU) ECB Economic Bulletin: Underlying inflation expected to gradually pick-up; region economic expansion is solid and broad-based (in-line with Draghi Dec press conference)

- Germany Wisemen Bofinger noted that Chancellor Merkel should quickly agree on a coalition with SPD as a failure would be negative for the domestic economy. Next 3-4 months would be fine without a govt but needed stability in the long term

- Turkey President Chief Adviser Ertem: 2018 GDP growth between 6.0-7.0% will not trigger inflation. Either a rapid rise or decline in TRY currency (Lira) would be negative. USD/TRY pair seen ending 2017 around 3.80 level; no sudden appreciation of USD expected in 2018

- FX Regulator SAFE: Sound domestic economy backs stable foreign debt growth

 

Currencies

- USD continued limping into year-end on a soft tone. Dealer continue to assess possible trends for 2018 noting that monetary policy convergence could weigh on the USD in 2018 as central banks other than the Fed had begun moving away from monetary stimulus, or started to raise interest rates. The USD having its worst year against the major G10 currencies in over a decade.

- EUR/USD at 1-month highs and holding above the 1.1930 area with the greenback annual performance in the pair the worst since 2003.

 

Fixed Income

- Bund futures trades at 161.84 down 52 ticks trading back below the 162 handle in light trade on mixed European Equity markets. The shorter end leads futures lower with the Shatz yield approaching 5bp up on the day. 10 Year yields approach 0.4%, with a reversal targeting day high at 162.36.

-Thursdays liquidity report showed Wednesday's excess liquidity at €1.796T. Use of the marginal lending facility fell to €216M from €275M prior.

 

Looking Ahead

- (ES) Spain Nov YTD Budget Balance: No est v -€12.9B prior

- (EG) Egypt Central Bank Interest Rate Decision:

- 06:45 (US) Daily Libor Fixing

- 07:30 (BR) Brazil Nov Primary Budget Balance (BRL): -6.0Be v +4.8B prior; Nominal Budget Balance: -41.4Be v -30.5B prior, Net Debt to GDP: 51.2%e v 50.7 prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 22nd: No est v $430.3B prior

- 08:30 (US) Initial Jobless Claims: 240Ke v 245K prior; Continuing Claims: 1.90Me v 1.932M prior

- 08:30 (US) Nov Advance Goods Trade Balance: -$67.9Be v -$68.1B prior (revised from -$68.3B)

- 08:30 (US) Nov Preliminary Wholesale Inventories M/M: +0.3%e v -0.5% prior, Retail Inventories M/M: No est v -0.1% prior ECB Forex

- 09:45 (US) Dec Chicago Purchasing Manager: 62.0e v 63.9 prior

- 10:00 (MX) Mexico Central Bank (Banxico) Dec Minutes

- 10:00 (CO) Colombia Nov National Unemployment Rate: No est v 8.6% prior, Urban Unemployment Rate: 9.1%e v 9.5% prior

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

- 11:00 (US) Weekly DOE Crude Oil Inventories

- 13:00 (US) Treasury to sell 7-Year Notes

- 14:00 (CO) Colombia Central Bank Dec Minutes

- 14:00 (AR) Argentina Nov Industrial Production Y/Y: 2.8%e v 4.4% prior; Construction Activity Y/Y: No est v 25.3% prior