Poor Dec UK rateial sales data keeps door open for Jan BOE rate cut hopes

Notes/Observations

- Softer UK Dec Retail sales data keeps hop alive for Jan BOE rate cut

Asia:

- China Q4 GDP Q/Q: 1.5% v 1.4%e; Y/Y: 6.0% v 6.0%e; GDP YTD Y/Y: 6.1% v 6.2%e

- China Dec Retail Sales Y/Y: 8.0% v 7.9%e

- China Dec Industrial Production Y/Y: 6.9% v 5.9%e

- China Stats Bureau reiterated stance that China to maintain proactive fiscal policy and prudent monetary policy in 2020. Gov to roll out more support measures in 2020 as economy faced downward pressure. Overall 2019 Jobs created at 13.52M

- Bank of Korea (BoK) left the 7-Day Repo Rate unchanged at 1.25%. Decision was again not unanimous to keep policy steady. Dissenters Shin In-seok and Cho Dong-Chul both called rate cut (Note: Only one dissenter back in Nov)

- Japan Cabinet Office Mid-term Economic Projections noted that it did not see balanced budget this decade in baseline view ( previous base case hadn't ruled out primary balance in FY29). Optimistic forecast saws primary balance in FY27

Europe:

- EU Trade Chief Hogan stated that EU wanted to deepen economic ties with the US; pointed to 'cooperative spirit' in meetings US Trade Rep Lighthizer over the last few days

Americas:

- Nov Net Long-term TIC Flows: $22.9B v $31.5B prior

- Treasury to issue new 20-year bond in H1'20. Move seen to bolster its ways to fund a ballooning deficit. Treasury expected 'strong demand'; planned to issue this product in a regular and predictable manner in benchmark size (Note: Treasury had noted in Oct 2019 that it was considering several possible new fixed income products including a 20-year bond. The new 20-year bond was chosen after officials considered proposals for a 50-year or 100-year bond)

- President Trump confirmed plans to nominate Judy Shelton and Christoper Waller for open Fed board seats

- US official confirmed Labor Dept will ban computers from data pre-release lockup room, effective March 1st

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.68% at 423.40, FTSE +0.53% at 7,650.11, DAX +0.67% at 13,519.60, CAC-40 +0.85% at 6,090.15, IBEX-35 +1.15% at 9,683.00, FTSE MIB +0.43% at 24,044.38, SMI +0.79% at 10,778.50, S&P 500 Futures +0.20%]

Market Focal Points/Key Themes:

European indices in the green following mixed Asian indices and modestly higher US futures.
Rio Tinto trades higher on a production update after close yesterday. Richemont up on sales update and peer Swatch up on sympathy. Zehnder jumps on sales update and Swedish Orphan Biovitrum on prelim FY19 results. Virbac, Cranswick, Experian, Gym Group and Beter Bed Holdings also up on trading updates. Casino dives after reporting Q4 prelim sales, falling the most in over 16 months. FNAC Darty tanks after reporting lower y/y FY19 prelim results. Character Group declines on a profit warning and Hastings Group, GVC, Devro and Premier Foods down as well following trading updates. Notable earners today include Fastenal, JB Hunt Transport Services, Kansas City Southern, Regions Financial Corp, Schlumberger and State Street Corp.

Equities

- Consumer discretionary: Richemont [CFR.CH] +5% (sales), GVC Holdings [GVC.UK] -1.5% (trading update), Casino Guichard-Perrachon [CO.FR] -9% (prelim sales), FNAC [FNAC.FR] -11% (prelim earnings)

- Consumer staples: Cranswick [CWK.UK] +6% (trading update)

- Financials: Hastings [HSTG.UK] -8% (trading update), Experian [EXPN.UK] -1.5% (trading update)

Speakers

- Norway Fin Min Jensen reiterated view that high household debt is a vulnerability

- Ukraine PM Hroisman said to offer his resignation; President to consider the resignation offer

- Iran Supreme Leader Khamenei: By killing Soleimani the US showed its terrorist nature. Three European parties (UK, France and Germany) cannot be trusted as they serve US interests

- China FX Regulator SAFE spokesperson Wang Chunying stated that the domestic economy resilient despite uncertainties. Cross-border net inflows beginning to rise and look to steady in 2020. Reiterated stance that FX supply and demand are largely balanced. NY currency (Yuan) basically stable at equilibrium level in 2019.

Currencies/ Fixed Income

- Weaker UK Retail Sales data kept the door open for a Jan BOE rate cut. GBP/USD fell over 50 pips in the aftermath of the data miss to probe the 1.3050 area. UK 10-year gilt yield declined by 4bps to test 0.61% as markets now saw a 75% probability that BOE will cut in Jan as UK consumers stayed away from the stores during the key Christmas trading period.

- The USD held steady against the other major pairs.

- EUR/USD was lower by 0.1% at 1.1125 as EU Final Dec CPI kept the directional path towards improvement intact ahead of next week’s ECB meeting. Italian yields moved higher after Italy's Constitutional Court rejected a request by the hard-right League party to hold a referendum to introduce a first-past-the-post electoral system.

- USD/JPY holding above 110 level with focus turning to next week's BOJ policy decision and updated outlook projections

Economic Data

- (CH) Swiss Dec Producer & Import Prices M/M: +0.1% v -0.4% prior; Y/Y: -1.7% v -2.5% prior

- (CN) Weekly Shanghai copper inventories (SHFE): 134.8K v 133.7K tons prior

- (FR) France Nov YTD Budget Balance: -€113.9B v -€107.7B prior

- (AT) Austria Dec CPI M/M: 0.7% v 0.2% prior; Y/Y: 1.7% v 1.1% prior

- (RU) Russia Narrow Money Supply w/e Jan 10th (RUB): 10.80T v 11.07T prior (Dec 27th)

- (EU) Euro Zone Nov ECB Current Account (Seasonally Adj): €33.9B v €35.8B prior;

- (IT) Italy Nov Total Trade Balance: €4.9B v €8.1B prior; Trade Balance EU: €0.7B v €2.1B prior

- (IT) Italy Current Account Balance: €4.9B v €8.6B prior

- (UK) Dec Retail Sales (ex-auto/fuel) M/M: -0.8% v +0.8%e; Y/Y: 0.7% v 3.0%e

- (UK) Dec Retail Sales (Including auto/fuel) M/M: -0.6% v +0.6%e; Y/Y: 0.9% v 2.7%e

- (EU) Euro Zone Dec Final CPI Y/Y: 1.3% v 1.3%e; CPI Core Y/Y: 1.3% v 1.3%e; CPI M/M: 0.3% v 0.3%e

- (EU) Euro Zone Nov Construction Output M/M: +0.7% v -0.5% prior; Y/Y: 1.4% v 0.9% prior

- (IT) Italy Dec Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 0.5% v 0.5% prelim; CPI (ex-tobacco Index: 102.5 v 102.3 prior

- (IT) Italy Dec Final CPI EU Harmonized M/M: 0.2% v 0.2% prelim; Y/Y: 0.5% v 0.5% prelim

Fixed Income Issuance

- (ZA) South Africa sold total ZAR1.04B vs. ZAR1.04B indicated in 2025, 2033 and 2046 I/L bonds

- (IN) India sold total INR160B vs. INR160B indicated in 2021, 2026, 2029, 2039 and 2059 bonds

Looking Ahead

- 06:00 (PT) Portugal Dec PPI Y/Y: No est v -1.9% prior

- 06:00 (UK) DMO to sell €3.5B in 1-month, 3-month and 6-month bills

- 06:30 (IN) India Weekly Forex Reserve w/e Jan 10th: No est v $461.2B prior

- 06:45 (US) Daily Libor Fixing

- 08:00 (RU) Russia Nov Trade Balance: $12.2Be v $12.4B prior; Exports: $35.9Be v $36.1B prior; Imports: $23.5Be v $23.7B prior

- 08:00 (RU) Russia Q4 Preliminary Current Account Balance: $21.8Be $10.6B prior

- 08:00 (RU) Russia Q4 Consumer Confidence Index: No estv v -13 prior

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

- 08:00 (IN) India announces upcoming bill issuance (held on Wed)

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

- 08:30 (US) Dec Housing Starts: 1.380Me v 1.365M prior; Building Permits: 1.460Me v 1.482M prior

- 08:30 (CA) Canada Nov Int'l Securities Transactions (CAD): No est v 11.3B prior

- 09:00 (US) Fed's Harker on Economic Outlook

- 09:15 (US) Dec Industrial Production M/M: -0.2%e v 1.1% prior; Capacity Utilization: 77.0%e v 77.3% prior; Manufacturing Production: -0.1%e v +1.1% prior

- 10:00 (US) Jan Preliminary University of Michigan Confidence: 99.3e v 99.3 prior

- 10:00 (US) Nov JOLTS Job Openings: 7.250Me v 7.267M prior

- 10:00 (CO) Colombia Nov Retail Sales Y/Y: 5.2%e v 7.4% prior

- 10:00 (CO) Colombia Nov Manufacturing Production Y/Y: 1.5%e v 2.1% prior

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

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

- 14:00 (CO) Colombia Nov Industrial Production Y/Y: No est v 3.1% prior