Cautious tone in holiday-induced market

Notes/Observations

- Market tone a tad cautious on potential fallout after President Trump signed the Hong Kong Democracy bill into law; China warned of unspecified countermeasures

- Closely-watched Yougov/MRP poll for the Dec 12th UK general election suggested the Conservatives were on course for a comfortable majority

- German State CPI data shows inflation softer into year-end 9as expected by ECB)

- US markets closed for Thanksgiving Day holiday

Asia:

- Japan Oct Retail Sales registered its biggest decline since March 2015 (M/M: -14.4% v -10.4%e; Y/Y: -7.1% v -3.8%e) Reminder: On Oct 1st, Japan enacted its planned 2nd phase of the sales tax increase from 8% to 10%. (The 1st phase took place back in 2014)

- China Foreign Ministry reiterated stance that was strongly opposed US bill on Hong Kong and would retaliate; to use firm countermeasures if US continued in this way. Bill severely meddled in China's internal affairs

- Hong Kong Govt: US bill obviously intervened in internal affairs; hoped US would treat HK as a separate customs territory

- Hong Kong Monetary Authority (HKMA) Lee: US bill was not welcome news to financial markets; reaction has been calm no immediate impact, haven't seen outflows in the past few months. HK$ peg will survive, confidence in the link is very strong

- China Hong Kong Affairs Office: US was the biggest "black hand" behind the unrest in Hong Kong

- Global Times: Trump might have selectively implement provisions of the HK act as leverage in the trade talks, might put on hold the sanctions that were unfavorable for the trade talks

Brexit:

- Yougov MRP General Election Poll: Tories on track for 359 seats (majority); Labour Party on track for 211 seats (Note: Polling model that accurately predicted the election outcome two years ago)

Americas:

- Federal Reserve Beige Book noted that the economy expanded modestly from Oct to Mid-Nov period (wording revised from ‘slight-to-modest)

- White House: US President Trump had signed Hong Kong bill into law; Trump stated that the bills were enacted in the hope China and HK settle differences

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.23% at 408.86, FTSE -0.54% at 7,389.46, DAX -0.33% at 13,243.28, CAC-40 -0.24% at 5,911.81, IBEX-35 +0.08% at 9,370.00, FTSE MIB -0.40% at 23,390.86, SMI -0.02% at 10,527.50, S&P 500 Futures -0.29%]

Market Focal Points/Key Themes: European indices trading mostly down following indices in Asia lower and lower US futures. Remy Cointreau shares fall following earnings that saw sales and profits decreasing y/y; operations were negatively impacted by strife in Hong Kong. Go-Ahead down following trading update; good performance in UK was offset by challenges in Germany rail operations. Elekta also slightly down on mixed earnings results. Vitec shares tanked 11% following profit warning. Virgin Money rallying 21% following dividend payment suspension as losses widened on higher Payment Protection Insurance (PPI) compensation and CYBG merger costs. Stanley Gibbons also jumps 11% as the company expands revenues and tapers PBT losses y/y. Other risers on earnings/trading updates include CVS Group, Phoenix, Innogy, John Menzies and Motorpoint. On the M&A front, Granges down on announcement that the company is acquiring privately-held Aluminium Konin for SEK 2.3B. In other news, Faron Pharmaceuticals increasing 45% on receipt of regulatory approval from FDA to expand MATINS trial for Clevegen into the US.

Equities

- Consumer discretionary: Remy Cointreau [RCO.FR] -2% (earnings), Go-Ahead [GOG.UK] -2% (trading update)

- Energy: Innogy [IGY.DE] +0.5% (earnings)

- Healthcare: Faron Pharmaceuticals [FARN.UK] +35% (FDA approval), CVS Group [CVSG.UK] +4% (trading update), Elekta [SKTAB.SE] -1% (earnings)

Speakers

- ECB officials said to see minor changes from its strategic review. Saw 2% inflation target as likely result from upcoming policy review (**Note: currently seen as 'around 2%') Recognized flaws in inflation gauge but saw no good alternatives

- Sweden FSA Financial Stability Report noted that the overall resilience of banking sector was satisfactory. Low interest rates were a challenge for financial stability in the longer term and lLower rates could make pension firms less resilient . Commercial property market could see large credit loss for banks in period of major financial stress

- Romania Central Bank Gov Isarescu: Recent RON currency (Lei) price movement was not a cause for alarm; recent weakness in currency helped to ease pressure on economy

- South Korea Finance Ministry Dir Yoon: KRW currency (won) emerging status should be reevaluated; reiterated did not look at certain level or direction for FX

- China Commerce Ministry (MOFCOM) spokesperson Gao Feng: No new information to announce on the trade front or unreliable list. Ke had no comment on US signing of Hong Kong Democracy bill into law

- China Foreign Ministry Geng Shuang: Reiterates that US should not implement HK bill and it would to be met with strong countermeasures

- North Korea said to have launch a projectile but likely fell outside the EEZ (exclusive economic zone) of Japan

- USTR listed products eligible for Chinese tariff exclusion for tariffs imposed on Chinese products in September 2018

- OPEC said to see a balanced oil market in 2020 with current production cut agreement

Currencies/Fixed Income

- A cautious trade environment evolved in a thin/holiday induced market due to potential fallout on trade talks after President Trump signed the Hong Kong Democracy bill into law; China has warned of unspecified countermeasures.

- GBP/USD was holding above the 1.2930 level after a closely-watched Yougov/MRP poll for the Dec 12th UK general election suggested the Conservatives were on course for a comfortable majority. EUR/GBP cross fell to 0.8497 for a six-month low

- EUR/USD was steady despite softer inflation data out of Europe (German States and Spanish) Nov CPI missed expectations. ECB had indicated that inflation would slow into year end. USD/JPY was steady despite the cautious tone in equity markets from potential side-effects from US signing the HK Democracy bill into law. Pair at 109.40 in mid-session.

Economic Data

- (NL) Netherlands Nov Producer Confidence Index: 2.8 v 3.6 prior

- (CH) Swiss Q3 GDP Q/Q: 0.4% v 0.2%e; Y/Y: 1.1% v 0.8%e

- (UK) Nov Nationwide House Price Index M/M: 0.5% v 0.1%e; Y/Y: 0.8% v 0.2%e

- (NO) Norway Oct Credit Indicator Growth Y/Y: 5.6% v 5.8% prior

- (TR) Turkey Nov Economic Confidence: 91.3 v 89.8 prior

- (DE) Germany Nov CPI Saxony M/M: -0.8% v +0.1% prior; Y/Y: 1.1% v 1.0% prior

- (ES) Spain Nov Preliminary CPI M/M: 0.2% v 0.2%e; Y/Y: 0.4% v 0.4%e

- (ES) Spain Nov Preliminary CPI EU Harmonized M/M: 0.0% v 0.1%e; Y/Y: 0.5% v 0.5%e

- (ES) Spain Oct Adjusted Retail Sales Y/Y: 2.6% v 3.4% prior; Retail Sales (unadj) Y/Y: 2.4% v 3.6% prior

- (SE) Sweden Nov Consumer Confidence: 91.9 v 92.3e; Manufacturing Confidence: 96.1 v 94.8e; Economic Tendency Survey: 94.7 v 93.4e

- (SE) Sweden Oct Retail Sales M/M: 0.2% v 0.0%e; Y/Y: 3.3% v 3.1%e

- (DE) Germany Nov CPI Brandenburg M/M: -0.8% v 0.0% prior; Y/Y: 1.3% v 1.1% prior

- (DE) Germany Nov CPI Hesse M/M: -0.8% v +0.1% prior; Y/Y: 0.9% v 1.2% prior

- (DE) Germany Nov CPI Bavaria M/M: -0.8% v +0.1% prior; Y/Y: 0.9% v 0.9% prior

- (EU) Euro Zone Oct M3 Money Supply Y/Y: 5.6% v 5.5%e

- (DE) Germany Nov CPI North Rhine Westphalia M/M: % v 0.1% prior; Y/Y: 1.2% v 1.2% prior

- (ZA) South Africa Oct PPI M/M: 0.3% v 0.4%e; Y/Y: 3.0% v 3.1%e

- (PT) Portugal Nov Consumer Confidence Index: -6.9 v -7.2 prior; Economic Climate Indicator: 1.2 v 2.1 prior

- (EU) Euro Zone Nov Business Climate Indicator: -0.23 v -0.14e; Economic Confidence: 101.3 v 101.0e; Industrial Confidence: -9.2 v -9.1e; Services Confidence: 9.3 v 8.8e ; Consumer Confidence: -7.2 v -7.2e

- (IT) Italy Oct PPI M/M: 0.0% v 0.1% prior; Y/Y: -4.1% v -2.4% prior

**Fixed Income Issuance**

- (DK) Denmark sold total DKK11.06B in 3-month and 6-month bills

(SE) Sweden sold SEK500M vs. SEK500M indicated in -0.125% I/L 2032 Bonds; Avg Yield: -1.6772% v -1.7187% prior; Bid-to-cover: 2.45x v 3.80x prior

- (IT) Italy Debt Agency (Tesoro) sold total €B vs. €4.0-5.0B indicated range in 5-year and 10-year BTP Bonds

- Sold €2.25B vs. €1.75-2.25B indicated range in 0.35% Feb 2025 BTP bonds; Avg Yield: 0.64% v 0.42% prior; Bid-to-cover: 1.29x v 1.38x prior (Oct 30th 2019)

- Sold €2.75B vs. €2.25-2.75B indicated range in 1.35% Apr 2030 BTP; Avg Yield: 1.29% v 1.06% prior; Bid-to-cover: 1.22x v 1.29x prior

- (IT) Italy Debt Agency (Tesoro) sold €750M v €500-750M indicated range in 0.00% Jan 2025 CCTeu (Floating Rate bonds); Avg Yield: 0.71% v 0.40% prior; Bid-to-cover: 1.75x v 2.31x prior

Looking Ahead

- (DE) Germany Nov CPI Baden Wuerttemberg M/M: No est v 0.1% prior; Y/Y: No est v 1.1% prior

- (BE) Belgium Nov CPI M/M: No est v 0.4% prior; Y/Y: No est v 0.5% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)

- 06:00 (IE) Ireland Oct Retail Sales Volume M/M: No est v 4.3% prior; Y/Y: No est v 4.2% prior

- 06:00 (CA) Canada Nov CFIB Business Barometer: No est v 59.8 prior

- 06:00 (BR) Brazil Nov FGV Inflation IGPM M/M: 0.1%e v 0.7% prior; Y/Y: 3.8%e v 3.2% prior

- 06:30 (IS) Iceland to sell 6-month Bills

- 07:00 (ES) Spain Oct YTD Budget Balance: No est v -€7.8B prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 22nd: No est v $540.1B prior

- 08:00 (DE) Germany Nov Preliminary CPI M/M: -0.6%e v +0.1% prior; Y/Y: 1.2%e v 1.1% prior

- 08:00 (DE) Germany Nov Preliminary CPI EU Harmonized M/M: -0.7%e v +0.1% prior; Y/Y: 1.1%e v 0.9% prior

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

- 08:30 (CA) Canada Q3 Current Account Balance: -$9.6Be v -$6.4B prior

- 10:00 (MX) Mexico Central Bank Monetary Policy Minutes

- 16:00 (NZ) New Zealand Nov ANZ Consumer Confidence Index: No est v 118.4 prior

- 11:35 (FR) ECB's Coeure (France) in Paris

- (BR) Brazil Oct Central Govt Budget Balance (BRL): No est v -20.4B prior

- 15:00 (IE) ECB's Lane (Ireland, chief economist) in Dublin

- 16:00 (NZ) New Zealand Government 4-Month Financial Statements

- 16:45 (NZ) New Zealand Oct Building Permits M/M: No est v 7.2% prior

- 18:00 (KR) South Korea Oct Industrial Production M/M: -0.3%e v +2.0% prior; Y/Y: -2.5%e v +0.4% prior

- 18:00 (KR) South Korea Oct Cyclical Leading Index Change: No est v 0.1 prior

- 18:30 (JP) Japan Oct Jobless Rate: 2.4%e v 2.4% prior; Job-To-Applicant Ratio: 1.56e v 1.57 prior

- 18:30 (JP) Japan Nov Tokyo CPI Y/Y: 0.6%e v 0.4% prior; CPI (ex-fresh food) Y/Y: 0.6%e v 0.5% prior; CPI (ex-fresh food/energy) Y/Y: 0.7%e v 0.7% prior

- 18:50 (JP) Japan Oct Preliminary Industrial Production M/M: -2.0%e v +1.7% prior; Y/Y: -5.2%e v +1.3% prior

- 19:01 (UK) Nov GfK Consumer Confidence: -14e v -14 prior

- 19:01 (UK) Nov Lloyds Business Barometer: No est v 6 prior

- 19:30 (AU) Australia Oct Private Sector Credit M/M: 0.3%e v 0.2% prior; Y/Y: 2.7%e v 2.7% prior

- 20:00 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 1.25%

- 21:00 (SG) Singapore Oct M2 Money Supply Y/Y: No est v 4.8% prior; M1 Money Supply Y/Y: No est v 4.0% prior

- 21:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave key rates unchanged (Deposit Rate at 7.00%; Lending rate at 8.00%)

- 22:00 (CN) China to sell 30-Year Upsized Government Bond

- 22:30 (JP) Japan to sell 3-Month Bills

- 23:00 (JP) Japan Sept Vehicle Production Y/Y: No est v -2.2% prior