Germany annual inflation pace slows into year-end (as expected); South African court delivers Zuma impeachment blow

Notes/Observations

- European inflation annual inflation place slows into year-end (as expected)

- South African court delivers Zuma impeachment blow

Asia:

- South Korea Dec CPI M/M: 0.3% v 0.3%e; Y/Y: 1.5% v 1.4%e (**Note: inflation target is 2.0%)

- China PBoC skipped its OMO for 6th straight session; Weekly net drain CNY290B v CNY200B injection w/w; For 2017, the PBoC drained CNY65B

- Milk Producer Fonterra cuts New Zealand milk collections forecast on dry weather conditions

Europe:

- Italian President Mattarella signed decree to dissolve parliament ahead of elections (as expected) with general election set for March 4th

Americas:

- US President Trump: Been ‘soft' on trade with China

Energy:

- WTI Crude Oil Futures traded above $60/bbl, highest since June 2015 amid US weekly inventories data

 

Economic Data:

- (NL) Netherlands Dec Producer Confidence: 8.9 v 9.1 prior

- (RU) Russia Dec PMI Services: 56.8 v 55.6e (23rd month of expansion), PMI Composite: 56.0 v 56.3 prior

- (ZA) South Africa Nov M3 Money Supply Y/Y: 6.6% v 5.8%e; Private Sector Credit Y/Y: 6.5% v 6.2%e

- (TR) Turkey Nov Trade Balance: -$6.3B v -$6.3Be

- (TH) Thailand Nov Current Account: $5.3B v $3.9Be; Overall Balance of Payments (BOP): $2.3B v $2.1B prior; Trade Account Balance: $3.3B v $1.6B prior; Exports Y/Y: 12.3% v 13.4% prior; Imports Y/Y: 11.9% v 16.6% prior

- (ES) Spain Dec Preliminary CPI M/M: 0.1% v 0.3%e; Y/Y: 1.2% v 1.5%e

- (ES) Spain Dec Preliminary CPI EU Harmonized M/M: 0.1% v 0.2%e; Y/Y: 1.3% v 1.5%e

- (DE) Germany Dec CPI Saxony M/M: 0.6% v 0.3% prior; Y/Y: 1.7% v 2.0% prior

- (SE) Sweden Nov Household Lending Y/Y: 7.1%e v 7.1% prior

- (EU) Euro Zone Nov M3 Money Supply Y/Y: 4.9% v 4.9%e

- (DE) Germany Dec CPI Hesse M/M: 0.6% v 0.4% prior; Y/Y: 1.7% v 2.0% prior

- (DE) Germany Dec CPI Bavaria M/M: 0.5% v 0.4% prior; Y/Y: 1.7% v 1.8% prior

- (ES) Spain Oct Current Account: €1.7B v €2.1B prior

- (CZ) Czech Nov M2 Money Supply M2 Y/Y: 8.3% v 9.1% prior

- (NO) Norway Central Bank (Norges) Jan Bank Daily FX Purchases (NOK): -900M v -900M prior

- (IT) Italy Nov PPI M/M: 0.4% v 0.4% prior; Y/Y: 2.8% v 2.2% prior

- (DE) Germany Dec CPI Baden Wuerttemberg M/M: 0.6% v 0.4% prior; Y/Y: 1.8% v 1.8% prior

- (DE) Germany Dec CPI North Rhine Westphalia M/M: 0.5% v 0.3% prior; Y/Y: 1.5% v 1.8% prior

 

Fixed Income Issuance:

- (IN) India sold total INR40B vs. INR150B indicated in 2022, 2031, 2033 and 2046 bonds

- (ID) Indonesia sold total IDR10.1T n 2018 non-tradable notes via private placement

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.2% at 3,514, FTSE +0.3% at 7.647, DAX -0.3% at 12.943, CAC-40 -0.2% at 5.332, IBEX-35 -0.3% at 10.063, FTSE MIB %-0.6 at 21.997, SMI -0.3% at 9.379, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European markets opened largely flat and traded slightly down as the session progressed; truncated trading session due to holidays; Euro strength putting a damper on potential upward trends in stocks; commodity prices continue to buoy material stocks; no major upcoming data events for the rest of the year

 

Equities

- Consumer discretionary [Barry Callebaut BARN.CH -0.8% (cocoa outlook)]

- Financials [Allianz ALV.DE -0.9% (acquisition completion)]

- Healthcare [Astrazeneca AZN.UK +0.9% (analyst action)]

- Industrials [Airbus AIR.FR -0.1% (Wizz Air order)]

 

Speakers

- ECB's Nowotny (Austria): Global trade has developed better than expected. Austria's economy gave reasons for optimism; Brexit effects not noticeable domestically

- Italy Stats Agency (ISTAT) Monthly Economic Note saws growth firming up. Leading indicators improved but slowed down in pace

- German BGA exporters association: Forecasts 2018 exports at €1.34T, +5% y/y

- South Africa Constitution Court ruling on President Zuma: Parliament did not hold Zuma accountable for unlawful use of State funds to pay for upgrade to his private home

- China PBoC reiterated its stance of prudent and neutral monetary policy, to maintain reasonable and stable liquidity and effectively control macro leverage ratio. It also reiterates that it would deepen exchange rate reform

- China State planner NDRC: To examine the risks of corporate bonds as 2018 faced big redemption pressures

- China Ministry of Finance (MOF): To cut corporate taxes from overseas gains

- Taiwan President Tsai Ing-wen reiterated stance to maintain status quo with China. Defense budget to grow steadily each year as China's military ambitions were becoming more apparent. Planned changes to tax and corporate rules along with measures to help workers receive higher pay; to continue raising the minimum base salary

- India Junior Fin Min: No proposal for plans to privatize the State-run banking sector

 

Currencies

- USD continued to limp into year-end. After initially rallying after the US election back in Nov 2016, the dollar had since retreated some 9% against the GBP and 12% against the euro this year.

- Italy President. Mattarella formally dissolved parliament on Thursday and called elections for early March. Dealers noted that the vote would highlight the economic and political problems still stalking Europe and the country's role as the weakest flank in the currency union.

- EUR/USD higher by .0.4% to approach the 1.20 handle for fresh 3-month highs. The pair ends 2017 in the middle of its historical tracing range

- GBP/USD holding above the 1.35 level with the pair ending 2017 higher by over 6.5% despite all the Brexit concerns.

 

Fixed Income

-Bund Futures trade 161.70 down 8 ticks in quiet trade on the last trading day of 2017. The curve continues to steepen slightly following the regional CPI data out of Germany. Further downside targets 161.49 while a reversal targets 162.38 initially then 163.00.

-Friday's liquidity report showed Thursday's excess liquidity fell to €1.779T from €1.796T prior. Use of the marginal lending facility rose to €266M from €216M prior.

 

Looking Ahead

- 06:00 (BR) Brazil Nov National Unemployment Rate: 12.0%e v 12.2% prior

- 06:00 (PT) Portugal Nov Industrial Production M/M: No est v -2.2% prior; Y/Y: No est v 3.5% prior

- 06:00 (PT) Portugal Nov Retail Sales M/M: No est v -2.3% prior; Y/Y: No est v 1.8% prior

- 06:00 (UK) DMO does not hold Bill auction (next scheduled for Jan 5th)

- 06:30 (IN) India Weekly Forex Reserves - 06:45 (US) Daily Libor Fixing

- 07:00 (CL) Chile Nov Unemployment Rate: 6.5%e v 6.7% prior

- 07:00 (CL) Chile Nov Manufacturing Production Y/Y: -0.8%e v +0.6% prior; Industrial Production Y/Y: 2.4%e v 5.0% prior

- 07:00 (CL) Chile Nov Total Copper Production: No est v 512.7K prior

- 08:00 (DE) Germany Dec Preliminary CPI M/M: 0.5%e v 0.3% prior; Y/Y: 1.5%e v 1.8% prior

- 08:00 (DE) Germany Dec CPI EU Harmonized M/M: 0.6%e v 0.3% prior; Y/Y: 1.4%e v 1.8% prior

- 08:00 (RU) Russia Dec Preliminary CPI M/M: 0.5%e v 0.2% prior; Y/Y: 2.6%e v 2.5% prior; CPI YTD: 2.6%e v 2.1% prior

- 08:00 (RU) Russia Q3 Final GDP Y/Y: 1.8%e v 1.8% prelim

- 08:00 (RU) Russia Q3 Final Current Account: No est v $1.2B prelim

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

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

- 10:00 (MX) Mexico Nov Net Outstanding Loans (MXN): No est v 3.936T prior

- 11:00 (CO) Colombia Nov National Unemployment Rate: No est v 8.6% prior; Urban Unemployment Rate: 9.2%e v 9.5% prior

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

- 15:30 (MX) Mexico Nov YTD Budget Balance (MXN): No est v 108.5B prior

 

Weekend data

Sat:

- 20:00 (CN) China Dec Manufacturing PMI: 51.6e v 51.8 prior; Non-Manufacturing: 54.7e v 54.8 prior

Sun:

- 19:00 (KR) South Korea Dec Tarde Balance: $7.1Be v $7.8B prior; Exports Y/Y: 9.8%e v 9.6% prior; Imports Y/Y: 12.0%e v 12.3% prior

 

New Year's Day

- 00:00 (PE) Peru Dec CPI M/M: 0.2%e v -0.2% prior; Y/Y: 1.4%e v 1.5% prior