Continental European PMI Services data beats expectations; UK misses

Notes/Observations

- Major European Services PMI better-than-expected (Beats: Euro Zone, France, Spain, Italy. Miss: UK; In-line: Germany)

- Equities markets across the region open lower tracking New York markets

- US markets closed in observance of Former President George H. W. Bush funeral

Asia:

- Australia Q3 GDP Q/Q: 0.3% v 0.6%e; Y/Y: 2.8% v 3.3%e

- China Nov Caixin PMI Services: 53.8 v 50.7e (5-month high)

- China Commerce Ministry (MOFCOM) reiterated to push forward trade negotiations with the US in 90-days, confident to execute trade talk results; To implement specific items agreed upon meeting 'ASAP'

- BOJ Deputy Gov Wakatabe reiterated that would maintain 'massive' stimulus to nudge up prices to 2% target

Europe:

- UK PM May lost three Brexit-related votes in the space of barely an hour, making her the first Prime Minister in 40 years to be defeated three times in one day. UK Government lost vote to delay ruling on whether it is in contempt of parliament over Brexit legal advice by 307-311; UK Parliament found Government in contempt over Brexit legal advice; UK Gov defeated in contempt motion 311-293; Ordered Gov to publish full advice immediately; UK PM May Government defeated 321-299 in Vote on Parliament Brexit Power which gave Parliament more power over next Brexit steps if PM May's deal was voted down on Dec 11th

- UK PM May: No Brexit agreement could work without Northern Ireland backstop, no backstop means no deal

- Italy Fin Min Tria: considering additional asset sales next year to cut debt. Aim to raise as much as 1% of GDP next year through privatizations and the additional sales would be on top of what has already been forecast

- Spain PM Sanchez: To present 2019 budget in January

Americas:

- White House spokesperson: Trump told German automakers he'd like to see more cars being made in the US; has no immediate plans to impose tariffs on their cars

- Chile Central Bank (BCCh) left its Overnight Rate Target unchanged at 2.75%

Energy:

Weekly API Oil Inventories: Crude: +5.4M v +3.5M prior

 

Macro

(AU) Australia: Q3 GDP grew 2.8% y/y, below consensus for a 3.3% increase and Q2's 3.4%. Growth slowed to 0.3% q/q from Q2's 0.9% and well below consensus at 0.6%. Consumption growth moderated amid slow growth in disposable income (household savings ratio hit its lowest since 2007). Business inventories and non-residential construction were also drags, partially offset by net exports and government investment. As such some in the market have started to suggest that the next move on rates from the RBA may in fact be a cut.

(UK) United Kingdom: The Government defeats yesterday showed the strength of the parliamentary majority against it at the moment. The contempt vote was extremely damaging and the Grieve amendment prevents PM May from presenting her deal as only alternative to "no deal". "No deal" risks have perhaps diminished, as such MPs could have more confidence about rejecting the Withdrawal Agreement next Tuesday. The downside though is that the Grieve amendment could also persuade pro-Brexit MPs to support May's deal to prevent a "Plan B"or Norway+ option from becoming viable.

(IT) Italy: Deputy PM Di Maio reported a change in the climate in the talks with the EU on the budget. At the same time, Di Maio promised that plans to lower the retirement age and the citizens income will start next year, with former in February/March, the latter in late March. Overall reports on the budget talks remain confusing with Finance Minister Tria reportedly more tempted to resign than ever, while PM Conte is taking more control of the talks.

(EU) Eurozone: Nov Services PMI was revised up to 53.4 from 53.1 preliminary number but still down from 53.7 in October . It was the lowest reading since October 2016. Equally, the composite was revised up to 52.7 from 52.4, but still down over the month. There is mounting evidence that there won't be a strong rebound and that the balance of risks remain tilted to the downside. Not sufficient to prevent the ECB from confirming the phasing out of net asset purchases this year, but enough to keep for an open ended re-investment schedule and a dovish leaning message at the December meeting.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.79% at 355.82, FTSE -0.95% at 6,955.72, DAX -0.79 at 11,245.29, CAC-40 -0.84% at 4,971.93, IBEX-35 -0.69% at 8,999.35, FTSE MIB -0.17% at 19,320.50, SMI -0.97% at 9,003.80, S&P 500 Futures +0.57%]

Market Focal Points/Key Themes: European Indices trade lower across the board following sharp losses in the US over night and weaker Asian Equities. Indices have rebounded off the lows tracking higher US futures. On the corporate front shares of Stagecoach, Clas Ohlson and Systemair outperform following upbeat earnings, while Bayer trades higher after providing mid to long term guidance at its Capital Markets day. To the downside Derichebourg trades under pressure after a fall in profits and cautious outlook. In other news numerous names trade lower following analyst downgrades including Tarkett, Landis+Gyr, Kaz Minerals, Tele Columbus, Electrolux, Standard Chartered and Osram Licht. Looking ahead US cash markets are closed in observance of Former President George H. W. Bush funeral.

 

Equities

- Consumer discretionary: Joules Group [JOUL.UK] +9% (earnings)

- Energy: Regal Petroleum [RPT.UK] +4.5% (well testing update)

- Financials: Numis Corporation [NUM.UK] -2% (earnings)

- Healthcare: Bayer AG [BAYN.DE] +2% (affirms targets on Capital Markets Day), Cerenis Therapeutics Holding SA [CEREN.FR] -51% (study missed primary endpoint)

- Industrials: Stagecoach Group PLC [SGC.UK] +12% (earnings), Astaldi [AST.IT] +4.5% (Sound Point Capital and Fortress to provide bridge loan to Astaldi), Saint-Gobain [SGO.FR] -3.5% (analyst action), Derichebourg [DBG.FR] -12% (earnings)

 

Speakers

- Italy PM Conte stated that the govt was attempting to bring down yield spread to levels that reflect the economic fundamentals. Q3 GDP decline seen as temporary and growth would be robust in the future

- Italy Fin Min Tria reportedly 'more tempted' to resign now than previously (Reports have circulated that Tria would resign after parliament approved the 2019 fiscal budget)

- Italian govt said to consider reducing citizen's income costs to save up to €2B

- EU Budget Commissioner Oettinger stated that EU could not accept a draft budget from Italy that would violate all stability criteria.

- Sweden Central Bank (Riksbank) Business Survey: economic conditions continued to be good but companies have unease over how household income would be affected by higher interest rates and uncertainty in the housing market

- German Auto Industry Assoc VDIK expected 2018 number of new vehicles in Europe to reach 15.8M cars, similar number in 2019

- Turkey Central Bank (CBRT) 2019 Outlook: Main priority continues to be price stability, had no nominal or real exchange rate target

- India Central Bank (RBI) Policy Statement noted that the vote was unanimous to keep policy steady (6-0) and it maintained its policy stance as calibrated tightening. Medium-term outlook for crude oil remained uncertain. RBI Staff Forecasts raised FY18/19 GDP growth forecast from 7.4% to 7.5% and cut H2 CPI (Oct-Mar period) from 3.9-4.5% range to 2.7-3.2%

- India Central Bank (RBI) Gov Patel post rate decision press conference noted that iIf inflation risks did not materialize then there was space opening up for commensurate policy action

- OPEC said to want Russia to cut oil production by 300K bpd (**Reminder: On Dec 3rd reports circulated that OPEC and Russia had differing views on production cuts. Russia had indicated it wants to cut by a maximum of 150K bpd, while Saudi Arabia wanted a more even distribution of the production cuts)

 

Currencies/Fixed Income

- USD caught in the cross currents of safe-havens flows as global equity markets remained volatile and favoring more downside price action and realignment of Fed rate hike expectations. Greenback little changed against the major pairs in mid-session.

- EUR/UISD basically steady at 1.1335 despite some upward revisions in the major European Services PMI data.

- GBP/USD was initially higher as the Grieve amendment was perceived to support the pound on reduced Brexit risk of a ‘no-deal Brexit'. However, a miss in Nov PMI Services data took out some of the tailwinds for the GBP currency in the session. GBP/USD little changed at 1.2720 just ahead of the US morning.

 

Economic Data

- (IN) India Nov PMI Services: 53.7 v 52.2 prior (6th month of expansion); PMI Composite: 54.5 v 53.0 prior

- (SE) Sweden Sept Maklarstatistik Housing Prices Y/Y: 0% (flat) v -1% prior; Apartments Y/Y: -2% v -4% prior

- (RU) Russia Nov PMI Services: 55.6 v 55.9e; PMI Composite: 55.0 v 55.8 prior

- (IE) Ireland Nov PMI Services: 57.1 v 57.2 prior; PMI Composite: 56.6 v 56.1 prior

- (NO) Norway Q3 Current Account Balance (NOK): 91.8 v 79.1B prior

- (ZA) South Africa Nov PMI (whole economy): 48.2 v 47.0e (5th straight contraction)

- (SE) Sweden Nov PMI Services: 62.2 v 56.4 prior

- (ES) Spain Oct Industrial Output NSA Y/Y: +3.6% v -3.0% prior; Industrial Output SA Y/Y: +0.8% v -0.3%e; Industrial Production M/M: 1.2% v 0.5%e

- (HU) Hungary Oct Retail Sales Y/Y: 5.7% v 5.8%e

- (HU) Hungary Q3 Final GDP Q/Q: 1.3% v 1.2%e; Y/Y: 4.9% v 4.8%e

- (TW) Taiwan Nov CPI Y/Y: 0.3% v 0.9%e; CPI Core Y/Y: 0.7% v 0.6%e; WPI Y/Y: 3.3% v 6.0% prior

- (ES) Spain Nov PMI Services: 54.0 v 53.9e (59th month of expansion); PMI Composite: 53.9 v 53.3e

- (TW) Taiwan Nov Foreign Reserves: $461.4B v $460.2B prior

- (SE) Sweden Oct Private Sector Production M/M: 1.1% v 0.2%e; Y/Y: 4.6% v 2.0%e

- (SE) Sweden Oct Industrial Orders M/M: 1.0% v 0.6% prior; Y/Y: 3.1% v 0.4% prior

- (SE) Sweden Oct Industry Production Value Y/Y: 3.6% v 2.7% prior; Service Production Value Y/Y: 5.9% v 3.6% prior

- (IT) Italy Nov PMI Services: 50.3 v 49.3e (moves back into expansion); PMI Composite: 49.3 v 49.1e

- (NG) Nigeria Nov PMI Services: 55.5 v 54.4 prior

- (FR) France Nov Final Services PMI: 55.1 v 55.0e (confirms 29th month of expansion); Composite PMI: 54.2 v 54.0e

- (DE) Germany Nov Final Services PMI: 53.3 v 53.3e (confirms 65th month of expansion); Composite PMI: 52.3 v 52.2e

- (EU) Euro Zone Nov Final Services PMI: 53.4 v 53.1e (confirms 65th month of expansion); Composite PMI: 52.7 v 52.4e

- (UK) Nov New Car Registrations Y/Y: -3.0% v -2.9% prior

- (IN) India Central Bank (RBI) left the Repurchase Rate unchanged at 6.50% (as expected)

- (UK) Nov PMI Services: 50.4 v 52.5e (28th month of expansion but lowest since July 2016); PMI Composite: 50.7 v 52.1e

- (UK) Oct Official Reserves Changes: $0.5B v $0.1B prior

- (EU) Euro Zone Oct Retail Sales M/M: 0.3% v 0.2%e; Y/Y: 1.7% v 2.0%e

- (NO) Norway Oct House Price Y/Y: 2.0% v 2.4% prior

**Fixed Income Issuance**

- (IN) India sold total INR150B vs. INR150B indicated in 3-month, 6-month and 12-month bills

- (DK) Denmark sold total DKK2.46B in 2023 and 2027 Bonds

- (ES) Spain Debt Agency (Tesoro) sold total €2.923B vs. €2.5-3.5B indicated range in 2021, 2023 and 2028 bonds

- Sold €553M in 0.05% Oct 2021 SPGB; Avg yield: 0.021% v 0.126% prior, Bid-to-cover: 3.65x v 1.77x prior

- Sold €1.27B in 0.35% July 2023 SPGB; Avg yield: 0.412% v 0.613% prior; Bid-to-cover: 1.65x v 1.78x prior

- Solds €1.1B in 1.40% July 2028 SPGB; Avg yield: 1.456% v 1.607% prior, Bid-to-cover: 1.93x v 1.57x prior

- (NO) Norway sold NOK2.0B in 2.0% Apr 2028 bonds; Avg Yield: 1.80% v 1.94% prior, Bid-to-cover: 3.13x v 3.86x prior

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 6-month Bills; Avg Yield: -0.6075% v -0.7940% prior; bid-to-cover: 1.35x v 2.70x prior

- (GR) Greece Debt Agency (PDMA) sold €1.625B v €1.25B indicated in 26-week bills; Avg yield: 0.90% v 0.85% prior; Bid-to-cover: 1.33x v 1.31x prior

 

Looking Ahead

- 05:30 (PT) Portugal Debt Agency (IGCP) to hold bond exchange auction

- 06:00 (IR) Ireland Oct Industrial Production M/M: No est v 2.1% prior; Y/Y: No est v 6.7% prior

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

- 06:30 (CL) Chile Oct Economic Activity Index (Monthly GDP): M/M: 0.4%e v 0.4% prior; Y/Y: 4.1%e v 2.3% prior; Economic Activity (Ex-mining): No est v 2.5% prior

- 06:30 (UK) Govt publishes full Brexit legal text advice

- 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil Nov PMI Services: No est v 50.5 prior; PMI Composite: No est v 50.5 prior

- 07:00 (US) MBA Mortgage Applications w/e Nov 30th: No est v +5.5% prior

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

- 07:00 (RU) Russia to sell combined RUB25B in OFZ bonds (2 tranches)

- 08:00 (HU) Hungary Central Bank Nov Minutes

- 08:10 (UK) Baltic Dry Bulk Index

- 09:00 (MX) Mexico Nov Consumer Confidence Index: 101.3e v 103.0 prior

- 09:30 (BR) Brazil weekly Currency Flow data

- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.75%

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

- 10:15 (US) Fed Chair Powell before Joint Economic Committee (canceled due to Bush 41 funeral)

- 14:00 (US) Federal Reserve Beige Book

- 15:30 (MX) Mexico Citibanamex Survey of Economists

- 17:15 (US) Fed's Quarles

- 19:00 (CO) Colombia Nov CPI M/M: 0.2%e v 0.1% prior; Y/Y: 3.3%e v 3.3% prior