European GDP data shows a broad-based recovery underway

Notes/Observations

- German economic engine humming along; other European GDP data beats expectations as well (Italy, Poland); could increase the pressure from Germany for monetary policy to be normalized more quickly than seen currently

- UK CPI registered a slight miss but remained elevated; won't change the trajectory of interest rates; GBP remains soft on political concerns

 

Overnight

Asia:

- China Oct Industrial Production Y/Y: 6.2% v 6.7%e

- China Oct Retail Sales Y/Y: 10.0% v 10.5%e

- China National Stats Bureau (NBS): Jobless rate below 5%; CPI is at ideal level

- China State Researcher Zhu sees 2018 GDP growth of 6.5% and CPI at 3%

- Australia Oct NAB Business Conditions: 21 v 14 prior (record high);

- Bank of Japan (BOJ) Gov Kuroda: Need continue to pursue powerful monetary easing to make sure that positive inflation developments are not cut short

Europe:

- PM May has granted parliament full vote on Brexit deal. Brexit Secretary Davis made the concession to Labour and pro-European Tories, allowing parliament to vote on the exit agreement and implementation bill.

- Davis insisted Britain would still leave the EU in March 2019 regardless of whether parliament rejected the exit deal

- Brexit Min Davis: Parliament will get a vote on the final Brexit deal before the country leaves EU; if parliament rejects the Brexit deal, a no-deal Brexit ensue

Americas:

- Bipartisan group of senators reportedly have come to tentative agreement on loosening post-crisis banking regulations. Would exempt banks with under $100B in assets from tougher oversight and they would not have to perform annual stress tests. Would exempt banks with $100-250B in assets from the stricter Fed regulation after 18 month, but would give the Fed leeway to re-designate these banks at their discretion

- Treasury Sec Mnuchin: Looks forward to successful House tax vote this week; Imposes 183.4-194.9% duties on China plywood imports. US job mkt has more room to grow; Trump won't bend on 20% corporate tax rate. very supportive of President Trump's decision to pick Powell for Fed Chair

- Mexico Foreign Min Videgaray: aware that a "no deal" scenario is possible on NAFTA; hope to have a good outcome but Mexico is preparing for many scenarios

 

Economic Data:

- (SE) Sweden Oct Maklarstatistik Housing Prices Y/Y: 7.0% v 9.0% prior

- (NO) Norway Q4 Consumer Confidence: 17.3 v 15.7 prior

- (IN) India Oct Wholesale Prices (WPI) Y/Y: 3.6% v 3.0%e

- (DE) Germany Q3 Preliminary GDP Q/Q: 0.8% v 0.6%e; Y/Y: 2.8% v 2.3%e; GDP NSA Y/Y: 2.3% v 2.0%e

- (DE) Germany Oct Final CPI M/M: 0.0% v 0.0%e; Y/Y: 1.6% v 1.6%e

- (DE) Germany Oct Final CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 1.5% v 1.5%e

- (FI) Finland Oct CPI M/M: 0.0% v 0.2% prior; Y/Y: 0.5% v 0.8% prior

- (FI) Finland Sept GDP Indicator Y/Y: 3.8% v 3.7% prior

- NO) Norway Q3 Overall GDP Q/Q: 0.7% v 1.1% prior; Mainland GDP Q/Q: Y/Y: 0.6% v 0.5%e

- (RO) Romania Q3 Advance GDP Q/Q: 2.6% v 1.1%e; Y/Y: 8.8% v 6.2%e

- (ES) Spain Oct Final CPI M/M: 0.9% v 0.9%e; Y/Y: 1.6% v 1.6%e

- (ES) Spain Oct Final CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: 1.7% v 1.7%e

- (ES) Spain Oct CPI Core M/M: 0.6% v 0.1%e; Y/Y: 0.9% v 1.2%e

- (CZ) Czech Q3 Advance GDP Q/Q:0.5% v 0.3%e; Y/Y: 5.0% v 4.7%e

- (HU) Hungary Q3 Preliminary GDP Q/Q: 0.8% v 0.7%e; Y/Y: 3.6% v 3.7%e

- (CH) Swiss Oct Producer & Import Prices M/M: 0.5% v 0.5% prior; Y/Y: 1.2% v 0.8% prior

- (SE) Sweden Oct CPI M/M: -0.1% v +0.1%e; Y/Y: 1.7% v 1.8%e

- (SE) Sweden CPI CPIF M/M: -0.1% v +0.1%e; Y/Y: 1.8% v 2.0%e, CPI Level: 323.38 v 323.86e

- (NL) Netherlands Q3 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 3.0% v 3.4%e

- (IT) Italy Q3 Preliminary GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.8% v 1.7%e

- (PD) Poland Q3 Preliminary GDP Q/Q: 1.1% v 0.8%e; Y/Y: 4.7% v 4.5%e

- (UK) Oct CPI M/M: 0.1% v 0.2%e; Y/Y: 3.0% v 3.1 %e; CPI Core Y/Y: 2.7% v 2.8%e; CPIH Y/Y: 2.8% v 2.9%e

- (UK) Oct RPI M/M: 0.1% v 0.2%e; Y/Y: 4.0% v 4.1%e, RPI-X (ex-mortgage interest payment) Y/Y: 4.2% v 4.2%e

- (UK) Oct PPI Input M/M: 1.0% v 0.8%e; Y/Y: 4.6% v 4.8%e

- (UK) Oct PPI Output M/M: 0.2% v 0.3%e; Y/Y: 2.8% v 2.9%e

- (UK) Oct PPI Output Core M/M: 0.1% v 0.3%e; Y/Y: 2.1% v 2.9%e

- (UK) Sept ONS House Price Index Y/Y: 5.4% v 4.8% prior

- (PT) Portugal Q3 Preliminary GDP Q/Q: 0.5% v 0.7%e; Y/Y: 2.5% v 2.8%e

- (DE) Germany Nov ZEW Current Situation Survey: 88.8 v 88.0e; Expectations Survey: 18.7 v 19.5e

- (EU) Euro Zone Q3 Preliminary GDP (2nd reading) Q/Q: 0.6% v 0.6%e; Y/Y: 2.5% v 2.5%e

- (EU) Euro Zone Sept Industrial Production M/M: -0.6% v -0.6%e; Y/Y: 3.3% v 3.2%e

- (EU) Euro Zone Nov ZEW Expectations Survey: 30.9 v 26.7 prior

**Fixed Income Issuance:

- (ID) Indonesia sold total IDR19.4T in 3-month,12-month Bills; 5-year; 10-year and 15-year Project-based Sukuk (PBS)

- (NL) Netherlands Debt Agency (DSTA) sold €2.5B vs. €2.0-3.0B indicated range in 0.75% 2027 DSL bonds; Avg Yield: 0.511% v 0.475% prior

- (ES) Spain Debt Agency (Tesoro) sold total €5.97B vs. €5.5-6.5B indicated range in 6-month and 12-month Bills

- (ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2031, 2037, 2044 and 2048 bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 -0.2% at 385.5, FTSE +0.1% at 7425, DAX +0.1% at 13085, CAC-40 +0.1% at 5347, IBEX-35 +0.2% at 10066, FTSE MIB +0.2% at 22487, SMI flat at 9158, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European Indices trade little changed in a relatively flat session so far coming off the earlier highs as the Euro strengthens on better German GDP and ZEW numbers. In the UK large caps Vodafone and Tesco trade sharply higher, helping prop up the index, as Vodafone raised its outlook and the CMA provisionally cleared Tesco's takeover of Bookers Group. In Germany Infineon trades almost 5% higher after upbeat 2018 guidance, while Henkel trades slower after results. Miners are among the leading decliners on the Stoxx 600 as copper prices fall. Looking ahead notable earners include retailers Home Depot and TJX.

 

Equities

- Consumer discretionary [- Bookers [BOK.UK] +5.0%, Tesco [TSCO.UK] +4.9% (CMA provisionally clears Tesco acquisition of Bookers), ITV [ITV.UK] -6% (Earnings), DCC [DCC.UK] +1.0% (Earnings), B&M [BME.UK] -2.0% (Earnings)]

- Industrials: [Henkel [HEN.DE] -3.5% (Earnings), Alstom [ALO.FR] +3.5% (Earnings)]

- Technology: [Infineon [IFX.DE] +4.3% (Earnings), Computacenter [CCC.UK] +7.5% (trading update)]

- Telecom: [Vodafone [VOD.UK] +4.3% (Earnings)]

- Energy: [RWE [RWE.DE] -1.2% (Earnings)]

- Real Estate:[Bovis [BVS.UK] +1.3% (Earnings)]

 

Speakers

- Fed Chair Yellen, ECB's Draghi, BOE Gov Carney and BOJ Gov Kuroda all participated on an ECB panel in Frankfurt

- ECB's Draghi: noted that forward guidance had become a full policy instrument

- ECB's Nouy (SSM chief): The clock was ticking for banks to move quickly if they wanted to leave the UK after Brexit - comments from Frankfurt

- ECB's Lautenschlaeger (Germany): Imperative to sort out non-performing loans. ECB has led the way with its work on NPLs; to begin providing feedback later in Nov

- EU Presidency office said to be eyeing capping deposit withdrawals if banks are found to be failing

- Spain PM Rajoy: Catalan takeover was working well and saw 2018 GDP around 3% if regional issue were resolved. Aim was to stop the separatist from winning at the Dec 21st regional elections but if separatists did win they must respect the law. A separatist win would not force any general election as Rajoy vowed to serve a full 4-year term

- German Finance Ministry stated that domestic economy continued its strong upturn driven by growth in global demand for industrial goods

- German ZEW Economists noted that high levels of growth in Europe supported further growth within Germany and raised expectations for the coming six months

- IMF raised South Korea 2017 GDP growth forecast from 3.0% to 3.2%

- Fed's Evans (dove, voter) spoke at the ECB conference in Frankfurt and called for a new approach to rate-setting that would allow the central bank to respond to shocks when interest-rate cuts alone were not enough. Price level targeting might be a good way to go but needed more study. For any new policies to succeed the Fed must deliver on current 2% inflation target

 

Currencies

- USD was mixed in the session.

- EUR/USD was back above the 1.17 handle as European GDP data beat expectations (Germany, Italy, Poland). Dealers noted that the better growth outlook could increase the pressure from Germany for monetary policy to be normalized more quickly than seen currently

- GBP was softer after Oct CPI data came in below expectations. The 3.0% annual reading matched the highest level from 2012. Dealers noted that the inflation data won't change the trajectory of interest rates. Dealers noted that weakness in today's session still simmering from political uncertainty and Brexit concerns within the UK.

- SEK currency was softer following some disappoint CPI data for Oct. EUR/SEK rose from 9.80 to above 9.85 as dealers now saw the 1st potential repo-rate increase from Swedish Central Bank (Riksbank) in October 2018 with risk tilted toward an even later hike

 

Fixed Income

- Bund futures trade at 162.11 up 6 ticks, with technical levels in focus. Support lies at 162.00, followed by 161.50. Resistance stands initially at 163.51, followed by 164.25.

- Gilt futures trade at 124.50 unchanged after inflation remained static at 3% in October, defying expectations of a rise among economists and at the Bank of England. Continued upside eyeing 125.75 then 126.47. Downside targets include 124.24 then 123.74.

- Tuesday's liquidity report showed Monday's excess liquidity rose from €1.8595T to €1.864T and use of the marginal lending facility dropped to €96M from €118M - Corporate issuance saw a wrath of corporate IG supply come to market via 11 deals totaling over $11B

 

Looking Ahead

- (PT) Bank of Portugal Reports Oct ECB financing to Portuguese Banks: €B v €22.8B prior

- 05.30 (UK) Weekly John Lewis LFL sales data

- 05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender

- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

- 05:30 (DE) Germany to sell €5.0B in new 0% Dec 2019 Schatz

- 06:00 (PT) Portugal Q3 Labor Costs Y/Y: No est v 2.9% prior

- 06:00 (BR) Brazil Sept Retail Sales M/M: +0.2%e v -0.5% prior; Y/Y: 5.4%e v 3.6% prior

- 06:00 (BR) Brazil Sept Broad Retail Sales M/M: 0.8%e v 0.1% prior; Y/Y: 8.9%e v 7.6% prior

- 06:00 (US) Oct NFIB Small Business Optimism: 104.0e v 103 prior

- 06:00 (TR) Turkey to sell 2019 and 2027 bonds

- 06:30 (EU) ESM to sell €1.0B in 0% 2022 bonds (syndicated on Oct 23rd 2017

- 06:45 (US) Daily Libor Fixing

- 07:00 (IS) Iceland Oct Unemployment Rate: No est v 1.8% prior

- 07:45 (US) Weekly Goldman Economist Chain Store Sales

- 07:45 (FR) ECB's Villeroy (France) in Paris

- 08:00 (PL) Poland Oct CPI Core M/M: 0.4%e v 0.1% prior; Y/Y: 0.9%e v 1.0% prior

- 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)

- 08:00 (RO) Romania Central Bank (NBR) Nov Minutes

- 08:05 (UK) Baltic Dry Bulk Index

- 08:15 (US) Fed's Bullard (non-voter, Dove)

- 08:30 (US) Oct PPI Final Demand M/M: 0.1%e v 0.4% prior; Y/Y: 2.3%e v 2.6% prior

- 08:30 (US) PPI Ex Food and Energy M/M: 0.2%e v 0.4% prior; Y/Y: 2.2%e v 2.2% prior

- 08:30 (US)Oct PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.2% prior; Y/Y: No est v 2.1% prior

- 08:30 (FR) ECB's Coeure (France) in Brussels

- 08:55 (US) Weekly Redbook Sales

- 09:00 (EU) Weekly ECB Forex Reserves: € v € prior

- 09:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

- 10:00 (CO) Colombia Sept Trade Balance: -$0.4Be v -0.9B prior

- 10:30 (FR) ECB's Coeure (France)

- 11:00 (IS) Iceland Oct International Reserves (ISK): No est v 688B prior

- 11:30 (US) Treasury to sell 4-Week Bills - 12:30 (UK) BOE's Cunliffe in Oxford

- 13:00 (AR) Argentina Oct National CPI M/M: No est v 1.9% prior

- 13:05 (US) Fed's Bostic (non-voter) on monetary policy outlook

- 16:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 2.50%

- 16:30 (US) Weekly API Oil Inventories

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