PMI hurdles remain for Europe as major countries readings failed to show signs of stabilization

Notes/Observations

- PMI hurdles remain for Europe as major countries readings failed to show signs of stabilization (Beats: None; Misses: France, Germany, Euro Zone)

- Improvement in China's Nov economic data said to have been driven mainly by one-off factors

Asia:

- China govt officials noted that the 1st phase of trade talks achieved 'major progress'; US and China agreed on text of first phase trade deal; US promised to step up waivers for Chinese products; Decided to cancel retaliatory tariffs scheduled to take effect on Sunday (Dec 15th); China to import more US wheat and corn after the deal and step up protection of intellectual property at its own pace

- China Nov Industrial Production registered its fastest pace since Jun (YoY 6.2% v 5.0%e

- China Nov Retail Sales Y/Y: 8.0% v 7.6%e

- Australia Dec Preliminary PMI Manufacturing: registered its 2nd straight contraction and lowest since May 2016 (49.4 v 49.9 prior)

- Japan Dec Preliminary PMI Manufacturing: registered its 8th straight contraction 48.8 v 48.9 prior)

- North Korea conducted another test at long-range rocket site. Noted that the "crucial test" will further strengthen our nuclear deterrent; hostile forces including the US should refrain from provocation if they want to spend the year end peacefully

Europe/Mideast:

- Trump administration said to be considering 100% tariffs on additional European goods, from Spanish olive oil and French Swiss cheese to Irish and Scotch whiskies

- Fitch affirmed France AA sovereign rating; outlook stable

- Fitch affirmed Spain sovereign rating at A-; outlook Stable

- Canadian ratings agency DBRS affirmed UK sovereign rating at AAA with Stable trend

Brexit:

- UK PM Johnson is looking for parliament vote on Brexit before Christmas in order to get it done by exit deadline of Jan 31, 2020

Americas:

- During the fall of 2019, US government 'covertly' moved to expel two China officials from the Chinese embassy

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +1.11% at 416.58, FTSE % at #, DAX +0.62% at 13,364.53, CAC-40 +0.91% at 5,972.70, IBEX-35 +0.81% at 9,641.00, FTSE MIB +0.54% at 23,454.55, SMI +0.86% at 10,518.50, S&P 500 Futures +0.33%]

Market Focal Points/Key Themes: European indices in the green following indices in Asia lower and higher US futures. H&M up following Q4 sales and Sports Direct rallying after strong earnings results. Chemring also up on earnings results. Electrolux shares dive after issuing a profit warning for the North American business. Hexagon down as the CEO sold over half his shares after market close on Friday. Cineworld trading down on acquisition of Canadian Cineplex for C$34/shr in cash, in a deal valued at C$2.1B. EFG International down as the company refuted on Friday that it is holding discussions to be acquired by Julius Baer. Adler Real Estate up on news that it is being acquired by ADO Properties in an all-stock deal; ADO Properties shares dive 11%. Kerry down as the company missed out on acquiring Dupont's nutrition and biosciences business; Kerry was reportedly interested in the unit but it was purchased by IFF.

Equities

- Consumer discretionary: Sports Direct [SPD.UK] +13% (earnings), Cineworld [CINE.UK] -5% (acquisition)

- Real Estate: ADLER Real Estate [ADL.DE] +4% (offered to be acquired)

- Financials: London Stock Exchange [LSE.UK] +2% (COO steps down), EFG International [EFGN.CH] -7% (dismisses takeover reports)

- Industrials: Chemring Group [CHG.UK] +1.5% (earnings), Electrolux [ELUXB.SE] -10% (profit warning)

Speakers

- ECB's Holzmann (Austria) stated that he saw possible ECB rate changes if the inflation trough passed during 2020

- France Fin Min Le Maire: 2019 GDP growth seen at 1.3% with growth slowing in 2020

- Netherlands govt said to see 2019 GDP growth at 2.0% and slowing to 1.5% in 2020

- Germany Economy Ministry Monthly Report noted that it saw the "first signs" of an end to the manufacturing downturn. Industry orders and sales had stabilized along with business sentiment and exports had picked up

- Office of Budget Responsibility (OBR) revised its Forecasts. Revised 2019-20 budget deficit from -£29.3B March level to -£46.7B and revised 2020-21 budget deficit from -£21.2B March level to -£40.2B. Saw budget surplus in 2022-23 period

- Reserve Bank of India (RBI) Gov Das: There is space for monetary action. Govt and RBI acted ahead of time on rates to address slowdown; coordinated, timely actions needed from all economies to revive growth

- China Foreign Ministry spokesperson Geng Shuang: To release more trade information in due course; reiterates that working level officials from both sides are in contact

- China President Xi reiterated support for Hong Kong Chief Exec Lam. China noted that the Hong Kong faced complicated situation this year while Lam had made efforts to solve the economic issues. China also strongly supported HK police to uphold the law

Currencies/Fixed Income

- USD consolidated some of its soft tone in the session as PMI hurdles remained for Europe as major countries readings failed to show signs of stabilization (Beats: None; Misses: France, Germany, Euro Zone, UK)

- EUR/USD higher by 0.1% at 1.1130 while USD/JPY was at 109.45 area.

- GBP/USD was off last week post-election high. Pair was little changed by mid-session at 1.3345. Dealers norted that 1.36

Economic Data

- (IN) India Nov Wholesale Prices (WPI) Y/Y: 0.6% v 0.8%e

- (DK) Denmark Nov PPI M/M: 0.3% v 0.4% prior; Y/Y: -2.6% v -3.0% prior

- (NO) Norway Nov Trade Balance (NOK): 18.8B v 6.0B prior

- (TR) Turkey Sept Unemployment Rate: 13.8% v 14.0% prior

- (CZ) Czech Nov PPI Industrial M/M: -0.1% v -0.1%e; Y/Y: 0.9% v 0.9%e

- (TR) Turkey Nov Central Gov't Budget Balance (TRY): +7.8B v -14.9B prior

- (FR) France Dec Preliminary Manufacturing PMI : 50.3 v 51.5e (5th consecutive month of expansion); Services PMI: 52.4 v 52.1e; Composite PMI: 52.0 v 52.0e

- (DE) Germany Dec Preliminary Manufacturing PMI: 43.5 v 44.6e (12th straight contraction); Services PMI: 52.0 v 52.0e; Composite PMI: 49.4 v 49.9e

- (EU) Eurozone Dec Preliminary Manufacturing PMI: 45.9 v 47.3e (11th straight month of contraction); Services PMI: 52.4 v 52.0e; Composite PMI: 50.6 v 50.7e

- (CH) Swiss Weekly Total Sight Deposits (CHF): 586.8B v 587.8B prior; Domestic Sight Deposits: 499.8B v 499.9B prior

- (CZ) Czech Oct Current Account Balance (CZK): B v 12.6Be

- (IT) Italy Nov Final CPI M/M: -0.2% v 0.0% prelim; Y/Y: 0.2% v 0.4% prelim; CPI Index (ex-tobacco): 102.3 v 102.4 prior

- (IT) Italy Nov Final CPI EU Harmonized M/M: -0.3% v -0.1% prelim; Y/Y: 0.2% v 0.4% prelim

- (UK) Dec Preliminary PMI Manufacturing: 47.4 v 49.1e (8th straight month of contraction); Services PMI: 49.0 v 49.5e; Composite PMI:48.5 v 49.5e

- (IT) Italy Oct General Government Debt : €2.447T v €2.439T prior

- (EU) Euro Zone Q3 Labour Costs Y/Y: 2.6% v 2.8% prior

**Fixed Income Issuance**

- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills; Avg Yield: 1.26% v 1.25% prior; Bid-to-cover: 1.51x v 2.39x prior

Looking Ahead

- 06:00 (IE) Ireland Oct Trade Balance: No est v €6.1B prior

- 06:00 (BR) Brazil Dec FGV Inflation IGP-10 M/M: 1.6%e v 0.2% prior

- 06:00 (RO) Romania to sell 3.65% 2031 bonds

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 07:30 (IE) ECB's Lane (Ireland, chief economist)

- 07:30 (ES) Bank of Spain updates its economic outlook

- 08:00 (PL) Poland Oct Current Account Balance: €0.3Be v €0.2B prior; Trade Balance: €0.4Be v €0.5B prior; Exports: €21.7Be v €19.3B prior; Imports: €21.3Be v €18.8B prior

- 08:00 (PL) Poland Nov CPI Core M/M: 0.0%e v 0.3% prior; Y/Y: 2.5%e v 2.4% prior

- 08:00 (RU) Russia Nov Industrial Production Y/Y: 2.6%e v 2.6% prior

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:30 (US) Dec Empire Manufacturing: 4.0e v 2.9 prior

- 08:30 (CA) Canada Oct Int'l Securities Transactions (CAD): No est v 4.8B prior

- 09:00 (CA) Canada Nov Existing Home Sales M/M: No est v 0.0% prior

- 09:00 (BE) Belgium Oct Trade Balance: No est v -0.2B prior

- 09:45 (US) Dec Preliminary Manufacturing PMI: 52.6e v 52.6 prior; Services PMI: 52.0e v 51.6 prior; Composite PMI: No est v 52.0 prior

- 10:00 (US) Dec NAHB Housing Market Index: 70e v 70 prior

- 11:00 (UK) BOE publishes Financial Stability Report, Stress Tests

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 15:00 (NZ) New Zealand Q4 Westpac Consumer Confidence: No est v 103.1 prior

- 16:00 (US) Oct Net Long-term TIC Flows: No est v $49.5B prior; Total Net TIC Flows: No est v -$37.6B prior

- 17:30 (AU) ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 109.0 prior

- 19:00 (NZ) New Zealand Dec ANZ Business Confidence: No est v -26.4 prior; Activity Outlook: No est v - 12.9 prior

- 19:30 (SG) Singapore Nov Non-oil Domestic Exports M/M: +5.9%e v -2.9% prior; Y/Y: -5.3%e v -12.3% prior; Electronic Exports Y/Y: -19.3%e v -16.4% prior

- 19:30 (AU) RBA Dec Minutes

- 19:30 (AU) Australia Oct Home Loans M/M: No est v 3.6% prior; Investment Lending: No est v -4.0% prior

- 21:00 (NZ) New Zealand Nov Non Resident Bond Holdings: No est v 52.8% prior

- 22:00 (TH) Thailand Central Bank to sell combined THB70B in 3-month and 6-month bills

- 22:35 (JP) Japan to sell 20-year JGB bonds

- 23:30 (TW) Taiwan to sell TWD40B in 2-year Certificate of Deposits (NCD)