Major European PMI Manufacturing data suggest the regional economy is running on all cylinders

Notes/Observations

- Major European Manufacturing PMI registers strong beats (Euro Zone near a 18-yer high with France and Germany at roughly 7-year highs to 6 ½ year highs

- Pressure was growing within Germany's Social Democratic Party to at least discuss the possibility of forming a new government with Chancellor Merkel's conservatives

Europe:

- EU official: Have seen willingness for UK PM May to act; hope she could deliver on key conditions but not clear what room she had for maneuver

- German Finance Ministry Oct Monthly Report: indicators suggested upward economic trend to continue in the coming months

- UK Citi/Yougov Nov 12-month inflation expectations: 2.6% v 2.8% prior

Americas:

- FOMC Nov Minutes: Many policy makers saw near-term rate hike as appropriate. Some members were opposed citing weak inflation with several others noting that a move was hinged on data. Most participants continued to think tighter labor markets would ultimately produce higher inflation

Energy:

- Venezuela Oil Min Del Pino: OPEC production cut extension should be agreed upon by consensus. Six OPEC ministers to informally discuss production cuts at meetings in Bolivia to help form consensus before OPEC meeting

 

Economic Data:

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

- (DE) Germany Q3 Private Consumption Q/Q: -0.1% v +0.2%e, Government Spending Q/Q: 0.0% v 0.2%e, Capital Investment Q/Q: 0.4% v 1.4%e, Construction Investment Q/Q: -0.4% v -0.3%e, Domestic Demand Q/Q: 0.4% v 0.6%e, Exports Q/Q: 1.7% v 1.0%e, Imports Q/Q: 0.9% v 0.8%e

- (FR) France Nov Business Confidence: 111 v 109e; Manufacturing Confidence: 112 v 111e, Production Outlook: 31 v 33e, Own-Company Production: 16 v 17 prior

- (TW) Taiwan Oct Industrial Production Y/Y: 2.9% v 4.0%e v

- (FR) France Nov Preliminary Manufacturing PMI: 57.5 v 55.9e (14th month of expansion and highest since Apr 2011), Services PMI: 60.2 v 57.0e, Composite PMI: 60.1 v 57.2e

- (DE) Germany Nov Preliminary Manufacturing PMI: 62.5 v 60.4e (36th month of expansion and highest since Feb 2011), Services PMI: 54.9 v 55.0e, Composite PMI: 57.6 v 56.7e

- (GR) ECB lowers emergency liquidity assistance (ELA) cap for Greece banks from €26.9B to €25.8B

- (EU) Euro Zone Nov Preliminary Manufacturing PMI: 60.0 v 58.2e; (52nd month of expansion and highest since Apr 2000), Services PMI: 56.2 v 55.2e, Composite PMI: 57.6 v 56.0e

- (UK) Q3 Preliminary GDP (2nd reading) Q/Q: 0.4% v 0.4%e; Y/Y: 1.5% v 1.5%e

- (UK) Q3 Preliminary Private Consumption Q/Q: 0.6% v 0.4%e; Govt spending Q/Q: 0.3% v 0.3%e; Gross Fixed Capital Formation Q/Q: 0.2% v 0.4%e; Exports Q/Q: -0.7% v -0.7%e; Imports Q/Q: 1.1% v 0.9%e

- (UK) Q3 Preliminary Total Business Investment Q/Q: 0.2% v 0.3%e; Y/Y: 1.3% v 1.4%e

Fixed Income Issuance:

- (SE) Sweden sold SEK500M vs. SEK500M indicated in I/L 2027 Bonds; Avg Yield: -1.1900% v -1.1505% prior; Bid-to-cover: 5.49x v 2.09x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.2% at 386.5, FTSE -0.3% at 7397, DAX -0.1% at 13004, CAC-40 +0.2% at 5366, IBEX-35 +0.4% at 10058, FTSE MIB +0.3% at 22385, SMI flat at 9293, S&P 500 Futures flat]

Market Focal Points/Key Themes:

European Indices trade off the lower with most indices in the green, following strong PMI data in Europe where Manufacturing PMI registered a near 18 year high in the Eurozone.
Trading acitivity has been light as the US markets are closed today in observance of Thanks Giving Holiday.
In the UK Centrica trades sharply lower after warning Full year EPS will be below views, while Telit Comms trades over 10% lower after warnings on profits. In Germany ThyssenKrupp reported positive Full year results, while Remy Cointreau trades lower in France after slightly missing estimates.
On the M&A front Servelec trades higher after receiving a takeover offer, while Fingerprint Cards trades sharply higher after bid talk.

 

Equities

- Consumer discretionary [ Mothercare [MTC.UK] -15% (Earnings) , Rovio [ROVIO.FI] -19% (Earnings), Remy Cointreau [RCO.FR] -2.8% (Earnings)]

- Industrials: [ThyssenKrupp [TKA.DE] +1.3% (Earnings)]

- Financials: [CMC Markets [CMCX.UK] +6.6% (Earnings)]

- Technology: [Fingerprint Cards [FINGB.SE] +21% (Reports Beijing Watertek Information Tech preparing offer) , Servelec [SERV.UK] +20% (Receives takover offer) ]

- Telecom: [Telit Communications [TCM] -12.7% (Profit warning)]

- Energy: [Centrica [CNA.UK] -15.5% (FY17 adj EPS below views)]

 

Speakers

- EU Commissioner Moscovici calls for a credible tax haven list from EU ministers by Dec 5th

- Reports circulating that German SPD leader Schultz could resign in near future (as soon as today)

- Italy Economy Min Podoan: 2017 GDP growth could exceed 1.5%, recovery seen sustainable in 2018-2019 period

- Norway oil and gas investment survey: 2018 gas and investment seen at NOK144.3B v NOK141.7B prior view (Aug).

- Norway Central Bank (Norges) Q4 Household Expectation Survey raised its 12-month expectations from 2.6% to 2.9% and maintained thes 2-3-year inflation outlook at 3.2%

- Turkey President Chief Adviser Ertem: Central bank is not targeting foreign exchange; would not ‘drift to crisis’ with ‘FX attacks. Central bank had instrumental independence and free to take any step it saw necessary; could break the hands of speculators

- Turkey President senior advisor Karahan: Central would tighten policy whenever it needed too. President Erdogan was sensitive about inflation and wanted it lower

- Poland Dep PM Gowin: Opposition no-confidence vote could delay Cabinet reshuffle into Jan

 

Currencies

The USD maintained a soft tone in the aftermath of the Nov FOMC minutes which showed that some policymakers were unsure about raising interest rates due to low inflation

- EUR/USD was further aided by much better Manufacturing PMI data for France, Germany and the Euro Zone. The data suggesting that the regional economy was running on all cylinders. The pair tested a 1-week high near 1.1850 area.

- GBP/USD saw its 8-day winning streak under pressure as Q3 Preliminary GDP came in-line with expectations and showing a slowdown taking effect as the Brexit negotiation continued. GBP/USD lower by 0.1% and hovering around the 1.33 area.

- USD/JPY posted 2-month lows to test below 111.10 in the session.

 

Fixed Income

- Bund futures trade up 2 ticks at 163.00 despite strong PMI data out of Europe. Trading remains quiet with upside targeting 163.30 initially followed by 163.40. Downside sees analysts targeting 162.88 then 162.61.

- Thursday's liquidity report showed Wednesday Excess liquidity rose to €1.835T from €1.832T prior. Use of the marginal lending facility increased to €291M from €284M prior.

 

Looking Ahead

- (AR) Argentina Nov Consumer Confidence: No est v 51.1 prior

- (BR) Brazil Nov CNI Industrial Confidence: No est v 56.0 prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)

- 05:30 (PL) Poland to Sell Bonds

- 06:00 (UK) Nov CBI Retailing Reported Sales: +3e v -36 prior; Total Distribution: No est v 1 prior

- 06:00 (BR) Brazil Mid-Nov IBGE Inflation IPCA-15 M/M: 0.4%e v 0.3% prior; Y/Y: 2.8%e v 2.7% prior

- 06:00 (IL) Israel Oct Unemployment Rate: No est v 4.1% prior

- 06:00 (RO) Romania to sell 12-month Bills; Avg Yield: % v 0.79% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (FR) ECB’s Villeroy (France) in London

- 07:00 (HU) Hungary Premier Chief of Staff Lazar

- 07:30 (EU) ECB account of the monetary policy meeting (Nov Minutes)

- 07:30 (BR) Brazil Oct Current Account: -$0.9Be v +$0.4B prior; Foreign Direct Investment (FDI): $7.0Be v $6.3B prior

- 08:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rate unchanged at 6.75%

- 08:00 (PL) Poland Central Bank (NBP) Nov Minutes

- 08:00 (PL) Poland Oct M3 Money Supply M/M: 0.7%e v 0.5% prior; Y/Y: 5.5%e v 5.4% prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 17th: No est v $426.4B prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada Sept Retail Sales M/M: +1.0%e v -0.3% prior; Retail Sales Ex Auto M/M: +1.0%e v -0.7% prior

- 09:00 (BE) Belgium Nov Business Confidence: 0.8e v 0.5 prior

- 09:00 (MX) Mexico Sept Retail Sales M/M: 0.2%e v 0.2% prior; Y/Y: +0.8%e v -0.2% prior

- 09:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds

- 09:00 (BR) Brazil to sell 2018, 2019 and 2021 LTN Bills

- 10:00 (MX) Mexico Central Bank (Banxico) Nov Minutes

- 11:30 (CH) SNB President Jordan speaks in Basel

- 13:00 ECB’s Coeure (France) in Paris
13:30 (FR) ECB’s Villeroy (France) at London School of Economics

- 14:00 (AR) Argentina Sept Economic Activity Index (Monthly GDP) M/M: No est v 0.3% prior; Y/Y: 4.5%e v 4.3% prior

- 14:00 (AR) Argentina Oct Trade Balance: -$0.7Be v -$0.8B prior

- 16:00 (KR) South Korea Nov Consumer Confidence: No est v 109.2 prior

- 16:45 (NZ) New Zealand Oct Trade Balance (NZD): -0.8Be v -1.1B prior

- 19:30 (JP) Japan Nov Preliminary Manufacturing PMI: No est v 52.8 prior

- 20:10 (JP) BOJ Outright Bond Purchase 10~25 Years; over 25 Years~

- 23:00 (MY) Malaysia Oct CPI Y/Y: 4.1%e v 4.3% prior