All EU flash PMI's miss estimates as pressure mounts on ECB to cut rates sooner

Notes/observations

- Surprise weakness in European flash PMIs makes a case that ECB may pivot for rate cuts sooner than expected, in very similar tones to Fed, despite multiple ECB policymakers this morning saying cuts were not discussed at yesterday’s policy meeting. Miss in Manufacturing, Services and Composite PMIs from France, Germany and Eurozone. France was notably weak at lows not seen since May 2020 (pandemic).

- UK Services PMI unexpectedly beats for 2nd straight expansion, giving GBP and gilt yields a slight lift. BoE still in a more difficult place on growth and inflation compared to ECB and Fed.

- German Bundesbank saw the domestic economy barely growing in 2024.

- Ship attacks continue to increase in region near Yemen amid escalating aggression by Iran-backed Houthis.

- In European geopolitics, positive developments seen for Poland after EU turns more favorable towards new Polish Govt, while Hungary remains defiant on views to block Ukraine EU membership unless EU releases fund for them first.

- Asia closed mixed with Hang Seng out-performing +2.6%. EU indices are -0.2% to +0.7%. US futures are +0.3%. Gold +0.3%, DXY +0.1%; Commodity: Brent +0.3%, WTI +0.4%, TTF -2.4%; Crypto: BTC -0.1%, ETH -0.4%.

Asia

- China PBoC conducted CNY1.450T vs. CNY975.0Be in 1-year Medium-Term Lending Facility (MLF) with Rate: unchanged at 2.50%. Net injection CNY800B [record monthly amount].

- China Nov New Home Prices M/M: -0.4% v -0.4% prior.

- China Nov Industrial Production Y/Y: 6.6% v 5.7%e (fastest pace since Feb 2022).

- China Nov Retail Sales Y/Y: 10.1% v 12.5%e [(fastest growth since May).

- China Nov YTD Fixed Urban Assets Y/Y: 2.9% v 3.0%e [slowest pace since Dec 2020].

- China Nov YTD Property Investment Y/Y: -9.4% v -9.5%e.

- China Nov Surveyed Jobless Rate: 5.0% v 5.0%e.

- Australia Dec Preliminary PMI Manufacturing registered its (10th month of contraction (47.8 v 47.7 prior.

- Japan Dec PMI Manufacturing: registered its 7th month of contraction (47.7 v 48.3 prior).

- China to set 2024 budget deficit at 3.0% of GDP (3.8% is expected for 2023), reiterates China likely to set the 2024 GDP growth target at ~5.0%.

- Japan Fin Min Suzuki: Reiterates closely watching market moves; aware of various market talk but will not comment on any of them.

Mid-East

- Hapag-Lloyd [HLAG.DE] stated that its Al Jasrah container ship was attacked close to Yemeni coast; No crew injured.

Europe

- ECB's Muller (Estonia, hawk): Still little early to declare victory over inflation.

- ECB officials were united in pushing back on early rate cuts being projected by markets.

- UK Dec GfK Consumer Confidence: -22 v -22e [highest since Jan 2022].

- EU said to extend trade truce with US until after presidential election.

- EU Michel: Opens accession talks with Ukraine and Moldova (**Note: bypassing Hungarian objections on Ukraine).

Americas

- Treasury Sec Yellen noted that the financial stability oversight council added AI to the list of potential financial system risks.

- Mexico Central Bank (Banxico) left the Overnight Rate unchanged at 11.25% (as expected) with the decision to keep policy steady being unanimous. Stressed that rates will remain unchanged for some time.

- Venezuela and Guyana agree not to use force to settle a border dispute over the disputed Essequibo region; Talks will continue within three months in Brazil.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.31% at 478.04, FTSE -0.07% at 7,643.58, DAX +0.60% at 16,853.50, CAC-40 +0.36% at 7,603.05, IBEX-35 -0.45% at 10,126.30, FTSE MIB +0.40% at 30,482.00, SMI -0.22% at 11,185.60, S&P 500 Futures +0.31%].

Market Focal Points/Key Themes: European indices open higher across the board and remained upbeat through the early part of the session; sectors pushing into the green include energy and materials; but sectors that were lagging include consumer discretionary and real estate; oil & gas subsector seen support after Brent holds on to gains; Banco PPM acquires majority stake in Vera from Generali; reportedly Airbus looking to acquire Atos’ big data and cybersecurity unit; earnings expected in the upcoming US session include Darden Restaurants.

Equities

- Consumer discretionary: Hennes & Mauritz [HMB.SE] -2.0% (Q4 sales), Campari [CPR.IT] -2.5% (acquisition).

- Financials: Munich Re [MUV2.DE] +1.5% (outlook).

- Industrials: Hapag-Lloyd [HLAG.DE] +1.5% (its Al Jasrah container ship was attacked close to Yemeni coast; No crew injured).

- Technology: Atos [ATO.FR] +14.5% (report that Airbus in advanced talks to acquire Atos’ big data and cybersecurity (BDS) unit), Trainline [TRN.UK] +16.5% (UK govt decision to abandon plans to create a rival rail ticketing platform), STMicroelectronics [STM.FR] +2.0% (analyst upgrades), Auto1 [AG1.DE] +8.5% (analyst upgrade).

- Telecom: Nokia [NOKIA.FI] -1.5% (analyst downgrade).

Speakers

- ECB’s Villeroy (France) reiterated that Council did not talk about rate hikes and nobody suggested rate cuts at last meeting (**Note: in-line with Lagarde press conference). Rate hikes were over barring any surprises and would get inflation back to target by 2025.

- ECB’s Holzmann (Austria, hawk) reiterated council statement that there was no discussion of changing rates at last meeting.

- ECB's Vasle (Slovenia) reiterated Council stance that current rate level would help return inflation to the 2% target.

- BOE's Ramsden stated that the banking sector was well capitalized; must continue to improve resolution tools.

- EU Commission Chief Von der Leyen stated that Poland made a payment request for blocked EU funds (**Reminder Pro-EU stance Poland PM Tusk was recently sworn into office).

- German Bundesbank semi-annual forecasts cut the 2024 GDP growth from 1.2% to 0.4% and cut 2025 GDP growth from 1.3% to 1.2%. Projections cut the 2024 CPI forecast from 3.1% to 2.7% and cut 2025 CPI forecast from 2.7% to 2.5%.

- German VCI (Chemical Industry Association) stated that it expected another rough year for sector with no signs of a recovery in 2024.

- China PBoC reiterated its stance to keep liquidity reasonably ample.

Currencies/fixed income

- USD continued to languished near four-month lows following the recent pivot by the Fed on the rate path.

- EUR/USD was hovering around the 1.10 handle as the session began but drifted away as various major EU Preliminary PMI readings missed consensus and moved deeper into contraction territory. Various ECB speak echoed the Lagarde press conference noting it was too early to debate rate cuts and would make decisions based upon the data (not calendar).

- USD/JPY was just under the 142 level. Japan Fin Min Suzuki reiterated that govt was closely watching market moves and was aware of various market speculation on rates. As Usual he would not comment on any of them.

Economic data

- (FI) Finland Oct GDP Indicator Y/Y: -0.8 v -0.9% prior.

- (FI) Finland Oct Final Retail Sales Volume Y/Y: -1.3 v -0.8% prelim.

- (SE) Sweden Nov Unemployment Rate: 7.1 % v 7.4% prior; Unemployment Rate (seasonally adj): 7.9% v 8.0%e; Trend Unemployment Rate: 7.9% v 7.9% prior.

- (NO) Norway Nov Trade Balance (NOK): 80.1B v 85.8B prior.

- (DK) Denmark Nov PPI M/M: -2.2% v +0.1% prior; Y/Y: -2.1% v -0.8% prior.

- (TR) Turkey Central Bank (TCMB) Dec Inflation Expectation Survey: Next 12 Months: 41.2% v 43.9% prior.

- (TH) Thailand Dec Foreign Reserves w/e Dec 8th: $218.6B v $220.4B prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 34.4K v 30.3K tons prior.

- (FR) France Nov Final CPI M/M: -0.2% v -0.2% prelim; Y/Y: 3.5% v 3.4% prelim; ; CPI (ex-tobacco) Index: 117.33 v 117.28e.

- (FR) France Nov Final CPI EU Harmonized M/M: -0.2% v -0.3% prelim; Y/Y: 3.9% v 3.8% prelim.

- (ES) Spain Oct House Transactions Y/Y: -11.1% v -23.7% prior.

- (RU) Russia Narrow Money Supply w/e Dec 8th (RUB):18.15T v18.12 T prior.

- (TR) Turkey Nov Central Govt Budget Balance (TRY): +75.6B v -95.5B prior.

- (FR) France Dec Preliminary Manufacturing PMI 42.0 v 43.3e (12th month of contraction); Services PMI: 44.3 v 46.0e; Composite PMI: 43.7 v 45.0e.

- (DE) Germany Dec Preliminary Manufacturing PMI: 43.1 v 43.2e (18th month of contraction); Services PMI: 48.4 v 49.8e; Composite PMI: 46.7 v 48.2e.

- (EU) Euro Zone Dec Preliminary Manufacturing PMI 44.2 v 44.6e (18th month of contraction); Services PMI: 48.1 v 49.0e; Composite PMI: 47.0 v 48.0e.

- (IT) Italy Nov Final CPI M/M: -0.5% v -0.4% prelim; Y/Y: 0.7% v 0.8% prelim; CPI (ex-tobacco): 118.7 v 119.2 prior.

- (IT) Italy Nov Final CPI EU Harmonized M/M: -0.6% v -0.4% prelim; Y/Y: 0.6% v 0.7% prelim.

- (PL) Poland Nov Final CPI M/M: 0.7% v 0.7% prelim; Y/Y: 6.6% v 6.5% prelim.

- (UK) Dec Preliminary Manufacturing PMI 46.4 v 47.5e (17th month of contraction); Services PMI: 52.7 v 51.0e; Composite PMI: 51.7 v 51.0e.

- (IT) Italy Oct General Government Debt: €2.868T v €2.844T prior.

- (EU) Euro Zone Oct Trade Balance: €10.9B v €10.0Be; Trade Balance NSA (unadj): €11.1B v €10.0B prior.

- (EU) Euro Zone Q3 Labour Costs Y/Y: 5.3% v 4.5% prior.

- (IT) Italy Oct Total Trade Balance: €4.7B v €2.4B prior; EU Trade Balance: -€0.7B v -€0.4B prior.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 2028, 2033 and 2073 bonds.

Looking ahead

- (NG) Nigeria Nov CPI Y/Y: 27.9%e v 27.3% prior.

- (CO) Colombia Central Bank Economists Survey.

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

- 05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to raise One-Week Auction Rate by 100bps to 16.00%.

- 06:00 (IE) Ireland Oct Trade Balance: No est v €4.2B prior.

- 06:00 (BR) Brazil Dec FGV Inflation IGP-10 M/M: 0.5%e v 0.5% prior.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£1.5B, £2.0B and £2.0B respectively).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell Bonds via Ori Auction.

- 06:20 (EU) Various ECB members (Vasle, Kazimir, Muller, Scicluna, Simkus, Vujcic) at digital Euro conference.

- 06:30 (IN) India Weekly Forex Reserve w/e Dec 8th: No est v $604.0B prior.

- 06:30(IN) India announces upcoming bill issuance (held on Wed).

- 06:30 (IS) Iceland Switch auction.

- 07:00 (IL) Israel Nov CPI M/M: -0.1%e v +0.5% prior; Y/Y: 3.6%e v 3.7% prior.

- 07:00 (RU) Russia Central Bank Gov Nabiullina post rate decision press conference.

- 07:00 (NL) Netherlands Debt Agency (DSTA) on 2024 issuance.

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

- 08:15 (CA) Canada Nov Annualized Housing Starts: 260.0Ke v 274.7K prior.

- 08:30 (US) Dec Empire Manufacturing: 2.6e v 9.1 prior.

- 08:30 (CA) Canada Oct Int’l Securities Transactions (CAD): No est v -15.1B prior.

- 08:30 (CA) Canada Oct Wholesale Sales (ex-petroleum) M/M: -1.1%e v +0.4% prior.

- 09:15 (US) Nov Industrial Production M/M: +0.3%e v -0.6% prior; Capacity Utilization: 79.1%e v 78.9% prior; Manufacturing Production: +0.5%e v -0.7% prior.

- 09:45 (US) Dec Preliminary S&P Manufacturing PMI: 49.5e v 49.4 prior; Services PMI: 50.7e v 50.8 prior; Composite PMI: 50.5e v 50.7 prior.

- 10:00 (MX) Mexico Central Bank Economist Survey.

- 10:00 (PE) Peru Nov Unemployment Rate: 6.6%e v 6.6% prior.

- 10:00 (PE) Peru Oct Economic Activity Index (Monthly GDP) Y/Y: -0.9%e v -1.3% prior.

- 10:00 (CO) Colombia Oct Manufacturing Production Y/Y: -5.7%e v -6.9% prior; Industrial Production Y/Y: -2.4%e v -2.8% prior.

- 10:00 (CO) Colombia Oct Retail Sales Y/Y: -8.0%e v -9.3% prior.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 14:00 (AR) Argentina Q3 GDP Q/Q: No est v -2.8% prior; Y/Y: -0.7%e v -4.9% prior.

- 16:00 (US) Oct Net Long-term TIC Flows: No est v -$1.7B prior; Total Net TIC Flows: No est v -$67.4B prior.