European national central bank raise growth outlook

EU Mid-Market Update: European national central bank raise growth outlook


- Various European central banks raise their growth outlook (France, Germany, Austria) in the aftermath followed ECB staff projections (Spain cut citing Catalonia crisis)


- Japan Q4 Tankan All Industry Manufacturing Index 25 v 24e (11-year high); Large Manufacturing Index: 23e v 24e; Large Manufacturers Outlook: 19 v 22e

- BoJ said to ‘tweak’ message as dissenter calls for more easing. BoJ to adjust its communication to flag risks of additional easing after some investors wrong interpreted BOJ Kuroda’s recent remarks on reversal rate theory as a hint about an early policy exit


- Minority of ECB officials sought to signal guidance may change if inflation keeps accelerating

- ECB's Weidmann (Germany): Loose EU monetary policy contributed to deceptive calm; it's a fallacy to believe the euro area was prepared for all cases

- UK PM May said expected to ‘back down’ on Brexit date plan to avoid a 2nd Commons defeat next week

- Germany Chancellor Merkel: EU leaders could move to Brexit Phase 2. EU leaders have made clear that UK PM May has made good offers which might make it possible for the EU27 to see sufficient progress and agree to move on to phase 2 discussions. There still remain many questions to be solved; time was running out

- Bank of France raised GDP growth forecasts for 2017 thru 2019 (in-line with ECB staff projections). Raised 2017 GDP growth forecast from 1.3% to 1.8% and 2018 GDP from 1.5% to 1.7%


- Senator Rubio said to vote no on tax bill unless working poor tax credit is expanded

- Speaker of House Ryan (R-WI) said ti be considering retiring from Congress after 2018

- Bank of Canada (BOC) Gov Poloz: To continue to be cautious on rates; growing increasingly confident that the economy would need less monetary stimulus over time

- Mexico Central Bank (Banxico) raised Overnight Rate by 25bps to 7.25% (as expected)


Economic Data:

- (NL) Netherlands Oct Retail Sales Y/Y: 0.2% v 6.5% prior

- (DK) Denmark Nov PPI M/M: 0.9 v 0.5% prior; Y/Y: 1.2% v 1.9% prior

- (NO) Norway Nov Trade Balance (NOK): -4.2B v 15.1B prior

- (TR) Turkey Sept Unemployment Rate: 10.6% v 10.7%e

- (CN) Weekly Shanghai copper inventories (SHFE): 142.1K v 158.1K tons prior

- (FR) France Q3 Final Wages Q/Q: 0.3% v 0.3%e

- (IT) Italy Oct General Government Debt: €2.290T v €2.284T prior

- (EU) Euro Zone Oct Trade Balance (Seasonally Adj): €19.0B v €24.3Be; Trade Balance NSA (unadj): €B v €26.4B prior


Fixed Income Issuance:

(ZA) South Africa sold total ZAR900M vs. ZAR900M indicated in I/L 2029, 2033 and 2050 bonds




Indices [Stoxx600 -0.3% at at 387.9, FTSE -0.1% at 7444, DAX -0.4% at 13020, CAC-40 -0.2% at 5345, IBEX-35 +0.1% at 10189, FTSE MIB -0.4% at 22110, SMI flat at 9382 , S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

European Indices trade largely lower across the board following the lead from Asia and US markets overnight. Markets have drifted slightly lower digesting the plethroa of rate dcesions yesterday with the BoE and ECB keeping rates unchanged.
On the corporate front Swedish retail giant trades sharply lower after big miss on Q4 Rev, citing lower footfall at their physical stores. Elsewhere SDL trades sharply lower in the UK after warning on profits, while SQS Quality software trades over 50% higher on a potential takeover; Tele2 trades higher after merging its Dutch operation with Deutsche Telekom.


-Consumer Discretionary [H&M [HMB.SE] -15.5% (Q4 Rev), Steinhoff [SNH.ZA] -7% (Chairman steps down)]

-Telecoms [Telit Comms [TCM.UK] +3.0% (Trading update), Tele2 [TELE2A.SE] +1.8% (Merges dutch ops with Deutsche Telekom)]

-Technology [SQS Quality Software [SQS] +54% (Potential takeover), SDL [SDL.UK] -26% (Profit warning)]


- ECB's Vasiliauskas (Lithuania) stated that did not see need for additional QE in 2018; measures implemented were showing results

- ECB's Nowotny (Austria) stated that ECB should look through oil-price impact on inflation

- EU's Juncker: stated ahead of the EU Leader Summit that UK PM May had made a big effort and this should be recognized

- Italy PM Gentiloni stated that 2nd phase of Brexit would not be easier than the 1st

- German Bundesbank raised its GDP growth forecasts for 2017 thru 2019 citing export-driven boom. Raised 2017 GDP from 1.9% to 2.6%; 2018 GDP from 1.7% to 2.5% and 2019 GDP from 1.6% to 1.7%. It did noted that the domestic economy was reaching an increasingly mature state. Export growth to weaken further out, particularly due to capacity constraints and labor shortages

- Bank of Italy (BOI) Quarterly Economic Bulletin: Raised GDP growth forecasts for 2017 thru 2019. It raised 2017 GDP growth from 1.4% to 1.6%; 2018 GDP growth from 1.3% to 1.4% and 2019 GDP growth from 1.2% to 1.3%

- Bank of Spain (BOS) updated its economic forecasts: Reduces growth outlook citing Catalonia crisis but see economy maintaining growth in the coming 2-3 years

Austria Central Bank updated its economic forecasts which raised the GDP growth forecast for the 2017 thru 2019 period. It also bumped up its inflation view for both 2017 and 2018

- Japan government expected to cut JGB sales to market in FY18/19 by about ¥7T from this FY to around ¥134T


- EUR/USD stayed below the 1.18 level as dealers assessed the implication of still subdued inflation in the euro zone in 2020. The session saw various national central banks follow the ECB lead in upgrading its growth forecast. However, despite the activity exceeding expectations it suspected not to generate further price pressures.

Fixed Income

- Bund futures trade 163.53 up 1 tick, following a record high in German manufacturing PMI. Continued upside sees 163.63 then 164.25. A reversal targets 162.50 then 162.38.

- Gilt futures trade at 126.29 down 1 tick near the highs for the week. Continued upside eyeing 126.15 then 126.65. Downside targets include 125.24 then 124.75.

- Friday’s liquidity report showed Thursday's use of the marginal lending facility fell to €203M from €633M prior.

- Corporate issuance saw four issuers raise $2.2B in primary market. Primary expected to close for the year after this week.


Looking Ahead

- (BR) Brazil Dec CNI Industrial Confidence: No est v 56.5 prior

- 05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 1-Week Auction Rate by 25bps to 8.00%

- 06:00 (IE) Ireland Q3 GDP Q/Q: 1.6%e v 1.4% prior; Y/Y: No est v 5.8% prior

- 06:00 (IE) Ireland Q3 Current Account Balance: No est v -€0.9B prior

- 06:00 (IE) Ireland Oct Trade Balance: No est v €3.6B prior

- 06:00 (BR) Brazil Oct IBGE Services Sector Volume Y/Y: -0.8%e v -3.2% prior

- 06:00 (UK) DMO to sell combined £5.0B in 1-month, 3-month and 6-month Bills (£2.0B, £1.0B and £2.0B respectively)

- 06:30 (IN) India Weekly Forex Reserves

- 06:45 (US) Daily Libor Fixing

- 07:00 (IS) Iceland Nov Unemployment Rate: No est v 1.9% prior

- 07:00 (IL) Israel Nov CPI M/M: -0.2%e v +0.3% prior; Y/Y: 0.4%e v 0.2% prior

- 07:00 (UK) BOE Quarterly Bulletin:

- 08:00 (IN) India announces upcoming Bill auction (held on Wed)

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Dec Empire Manufacturing: 18.8e v 19.4 prior

- 08:30 (CA) Canada Oct Manufacturing Sales M/M: 0.9%e v 0.5% prior

- 09:00 (BE) Belgium Oct Trade Balance: No est v €1.4B prior

- 09:15 (US) Nov Industrial Production M/M: 0.3%e v 0.9% prior; Capacity Utilization: 77.2%e v 77.0% prior, Manufacturing Production: 0.3%e v 1.3% prior

- 10:00 (CO) Colombia Oct Industrial Production Y/Y: +0.8%e v -1.9% prior, Retail Sales Y/Y: 1.2%e v 1.4% prior

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

- 11:00 (EU) Potential sovereign ratings after EU close

- (PT) Portugal Sovereign Debt to be rated by Fitch

- (IE) Ireland Sovereign Debt to be rated by Fitch

- (UK) United Kingdom Sovereign Debt to be rated by DBRS

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

- 16:00 (US) Oct Total Net TIC Flows: No est v $51.3B prior; Net Long-Term Tic Flows: No est v $80.9B prior

Weekend events:

- (DE) Bavaria's Ruling CSU Party Holds Convention

- (ZA) South Africa ruling African National Congress (ANC) leadership election

- (BR) Brazil Oct Economic Activity Index (monthly GDP) M/M: No est v 0.4% prior; Y/Y: No est v 1.3% prior

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