German Business Sentiment hits fresh record high

Notes/Observations

- Continental European data continues to show growth firing on all cylinders; German Nov Business Survey reading of 117.5 was the highest level since German reunification (Major European PMI Manufacturing hit multi-year highs on Thursday)

- UK PM May to meet EU's Tusk to help clarify Brexit stance

- Ireland govt faces election threat in Brexit showdown

Asia:

- Japan Nov Preliminary Nikkei Manufacturing PMI: 53.8 v 52.8 prior

- BoJ announces planned daily bond purchases: Cuts over 25-year JGB purchases to ¥90B from ¥100B prior

- China Ministry of Finance (MOF): To adjust import tariff for some consumer goods IN effort to boost consumption, effective Dec 1st

Europe:

- ECB's Coeure (France): ECB deposit rate will stay at -0.4% for a long time; EU recovery is robust and homogeneous across countries and sectors

- German SPD Party head Schultz said to face calls from his own party to drop his refusal to form a minority Govt

- Germany Green Party said to call for Chancellor Merkel to enter coalition with the SPD Party

- SNB's Jordan: CHF currency (Franc) currency remains highly valued; SNB currency purchases to weaken the franc are not a deliberate 'beggar-thy-neighbor' strategy

- Ireland Ruling Fine Gael Party: Stood behind Deputy PM, did not want election (**Note: Ireland's government was on the verge of collapse after the opposition Fianna Fail party whose votes PM Varadkar depends on to pass laws said it would seek to remove deputy PM Fitzgerald)

 

Economic Data:

- (FI) Finland Oct PPI M/M: 0.5% v 0.5% prior; Y/Y: 3.6% v 4.0% prior

- (FI) Finland Oct Preliminary Retail Sales Volume Y/Y: 2.5% v 2.6% prior

- (TW) Taiwan Q3 Final GDP Y/Y: 3.1% v 3.1%e

- (ES) Spain Oct PPI M/M: 0.8% v 0.6% prior; Y/Y: 2.8% v 3.5% prior

- (CZ) Czech Nov Business Confidence: 16.2 v 16.9 prior; Consumer Confidence: 7.8 v 6.3 prior,

- (CH) Swiss Q3 Industrial Output Y/Y: 8.6% v 3.2% prior, Industry & Construction Output WDA Y/Y: 7.4% v 3.6% prior

- (SE) Sweden Oct PPI M/M: 0.3% v 0.4% prior; Y/Y: 2.5% v 4.3% prior

- (DE) Germany Nov IFO Business Climate: 117.5 v 116.7e (record high); Current Assessment: 124.4 v 125.0e, Expectations Survey: 111.0 v 108.8e

- (PL) Poland Oct Unemployment Rate: 6.6% v 6.7%e, Q3 Unemployment Rate: 4.7% v 4.8%e

- (UK) Oct BBA Loans for Housing Purchases: 40.5K v 40.7Ke

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 flat at 386.9, FTSE -0.3% at 7399, DAX flat at 13013, CAC-40 +0.2% at 5392, IBEX-35 +0.7% at 10098, FTSE MIB +0.5% at 22507, SMI -0.1% at 22505, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European indices trade mixed this morning in quiet trade. Outperformance in the Spanish Ibex and FTSE MIB while the FTSE 100 under performs. US futures tick higher after closure yesterday in obervance of Thanks Giving Holiday. On the Earnings front RealDolmen trades higher, while WYG is the notable decliner after guiding FY17 op materially below expectations. Gocompare.com trades lower after ZPG said it doees not intend to make a further offer, Gocompare notes it can deliver superior shareholder value as an independent company. On the M&A front Altice trades lower after reports of a potential sale of Dominican operations, while Clariant met with activist investor White tale

 

Equities

- Industrials: [James Fisher & Sons [FSJ.UK] -4.6% (Earnings) , WYG [WYG.UK] -34% (Profit warning)]

- Financials: [Gocompare [GOCO.UK] -2.7% (ZPG confirms no intention to make a further offer)]

- Technology: [ RealDolmen [REA.BE] +5% (Earnings)]

- Healthcare:[Bayer [BAYN.DE] -0.3% (Phase III INHALE trial fails to meet primary endpoint)]

 

Speakers

- BOE's Tenreyro: Nov rate hike was not premature; saws signs of wage pick-up and domestic inflation pressures. Two rate hikes over the coming three years seemed appropriate; Markets have understood the BOE's message. Policy moves to depend on how the economy develops

- ECB could tighten banking sector use of treasury shares

- UK PM May: Both EU and Britain must move forward together in the Brexit talks (**Note: PM May will hold fresh talks with EU's Tusk during a summit in Brussels today and is due to travel to the Belgian capital again on December 4th to meet EU Commission president Jean-Claude Juncker in what is being seen as a final opportunity to meet Mr Tusk's deadline of Brexit clarity)

- German President Steinmeier said to invite Chancellor Merkel, CDU's Seehofer and SPD's Schultz to meet for talks

- German SPD official Schwesig: Schultz has the backing of party leadership (**Note: reports circulated that German SPD leader Schultz could resign in near future)

- Germany said to reject part of the EU plans for reducing non-performing loans (NPLs). EU plans that would make it easier to seize collateral are hardly an expedient legal development

- German IFO Economists forecasted German Q4 GDP at 0.7% and overall 2017 growth at 2.3%. ECB decision to reduce bond purchases appeared not to have affected business sentiment. German coalition situation to slow down Brexit but believed that either a grand coalition or minority govt could work

- Turkey President senior advisor Karahan: Political tensions does increase the uncertainty for the TRY currency (Lira); Dec 4th is a key day. Reiterated view that Central Bank was independent and would tighten policy whenever it needed too

- Russia Parliament (Duma) passes 2018-20 draft budget in its 3rd reading

- Taiwan govt updated its economic forecasts which cut 2017 inflation from 0.7% to 0.6% while raising 2018 inflation outlook from 0.9% to 1.0%. Raised 2017 GDP growth forecast from 2.1% to 2.6%

- Japan PM Advisor Honda: Did not discuss BOJ governor candidates with Abe during lunch

 

Currencies

- The USD maintained a soft tone against most major FX pairs in the aftermath of the Nov FOMC minutes from Wed which showed that some policymakers were unsure about raising interest rates due to low inflation. USD Index was lower by 0.2% at 93.06 for 5-week lows

- EUR/USD was trading at 6-week highs above 1.1860 as Continental European economic data continued to show growth was firing on all cylinders; German Nov Business Survey reading of 117.5 was the highest level since German reunification (Major European PMI Manufacturing hit multi-year highs on Thursday.

- GBP/USD was holding above the 1.33 level as UK PM May was in Brussels to hold fresh talks with EU's Tusk during a summit. The key deadline on the current stalemate seen as December 4th when she meets EU Commission president Jean-Claude Juncker in what is being seen as a final opportunity to meet Mr Tusk's deadline of Brexit clarity

 

Fixed Income

- Bund futures trades lower by 31 ticks to 162.75 in quiet trade weighed by declines in French OATS as the Bund-OAT spread continues to widen. Continued downside targets 162.61 then 162.38, while upside sees 163.30 then 163.40.

- Friday's liquidity reports Thursday's excess liquidity rose to €1.840T from €1.835T prior. USe of the marginal lending facility rose to €343M from €291M prior.

 

Looking Ahead

- Nov 24 EU Barnier's deadline for UK to provide 'sufficient progress'

- Nov 24 PM May to meet senior MEPs

- (PT) Portugal Finance Ministry Oct YTD Budget - 05:30 (ZA) South Africa to sell combined ZAR900M in I/L 2-25, 2029 and 2050 bonds

- 05:30 (EU) ECB's Nouy (SSM chief) in Frankfurt

- 06:00 (UK) DMO to sell combined £4.0B in 1-month, 3-month and 6-month Bills (£1.0B, £1.0B and £2.0B respectively)

- 06:30 (TR) Turkey Nov Capacity Utilization: No est v 79.7% prior

- 06:30 (TR) Turkey Nov Real Sector Confidence (Seasonally Adj): No est v 112.2 prior; Real Sector Confidence (unadj): No est v 109.5 prior

- 06:30 (IN) India Weekly Forex Reserves

- 06:30 (IS) Iceland to sell bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (CL) Chile Oct PPI M/M: No est v -0.6% prior

- 07:30 (BR) Brazil Oct Total Outstanding Loans (BRL): No est v 3.049T prior; M/M: No est v -0.3% prior, Personal Loan Default Rate: No est v 5.6% prior

- 07:30 (BR) Brazil Oct Tax Collections (BRL): 116.3Be v 105.6B prior

- 07:30 (PT) ECB's Constancio (Portugal) in Madrid

- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance

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

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Weekly USDA Net Export Sales

- 09:00 (MX) Mexico Q3 Final GDP Q/Q: -0.2%e v -0.2% prelim; Y/Y: 1.6%e v 1.6% prelim, GDP Nominal Y/Y: 8.3%e v 8.1% prior

- 09:00 (MX) Mexico Sept IGAE Economic Activity (Monthly GDP) Y/Y: 1.5%e v 2.3% prior

- 09:45 (US) Nov Preliminary Markit Manufacturing PMI: 55.0e v 54.6 prior, Services PMI: 55.3e v 55.3 prior, Composite PMI: No est v 55.2 prior

- 10:00 (MX) Mexico Q3 Current Account: -$6.7Be v -$0.3B prior

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

- (ZA) South Africa Sovereign Debt to be rated by Moody's

- (ZA) South Africa Sovereign Debt to be rated by S&P

- 12:00 (FR) France Oct Net Change in Jobseekers: No est v -64.8K prior, Total Jobseekers: No est v 3.48M prior

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

- 13:15 (FR) ECB's Coeure (France) in Paris

- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 5.00%

weekend

- (DE) Greens Hold National Convention to Decide on Coalition Talks