US-China phase-1 trade deal still said to be moving forward despite recent Trump rhetoric

Notes/Observations

- Headline roulette on trade news whips markets

- Renewed US-China trade worries began the session but some calm restored on reports a phase 1 deal remained on course despite recent Trump rhetoric and US Congressional bill passage on Chinese matters

- The major European PMI Services data saw upward revisions to aid a feeling of stabilization in region (Beats: Euro Zone, Germany, Spain; Misses: France, Italy)

Asia:

- US House passes China human rights bill on Uighurs that will sanction China officials over human rights violations; the vote was 407 to 1

- China Ministry of Foreign Affairs urged US to stop wrongdoing related to Xinjiang bill; reiterated US should not interfere with China matters, vowed to further respond to the human rights bill

- Japan Parliament approved trade agreement with the US (as expected)

- Australia Q3 GDP data misses expectations boosting bets the RBA will cut interest rates next year (QoQ: 0.4% v 0.5%e; YoY: 1.7% v 1.7%e)

- China Nov Caixin PMI Services for its highest reading since April (53.5 v 51.2e)

- China Securities Journal: PBOC is likely to cut banks' RRR in Q1 of next year to offset the impact from rising liquidity demand due in Jan

Americas:

- Commerce Sec Ross: US had not ruled out future tariffs on auto imports; agreeing on a China-US deal by this December or next December "is much less important than getting a proper deal"

Energy:

- Weekly API Oil Inventories: Crude: -3.7M v +3.6M v prior

- Iraq Oil Min Ghadhban: additional 400K bpd cut for OPEC+ is in circulation but is not final; additional OPEC cut is required because of slowing demand

- OPEC+committee did NOT discuss deeper output cuts ahead of meetings this week

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.99% at 402.44, FTSE +0.34% at 7,183.31, DAX +1.05% at 13,125.74, CAC-40 +1.21% at 5,796.75, IBEX-35 +1.24% at 9,249.00, FTSE MIB +1.13% at 22,994.67, SMI +0.83% at 10,317.50, S&P 500 Futures +0.42%] Market Focal Points/Key Themes: European indices trading higher following indices in Asia lower and higher US futures. Elior and Clas Ohlson both rallying 8% and 15%, respectively, on strong earnings results. M&C Saatchi plunges 43% on profit warning and Quiz dives 11% following H1 earnings results that saw a large profit decline. Orange down after unveiling strategic update and issuing long-term guidance, as well as selling towers in Spain to Cellnex. Manz Automation up on securing two orders and Cancom down on capital increase announced after market close yesterday. Notable earnings today include Campbell Soup and Royal Bank of Canada.

 

Equities

- Consumer discretionary: Elior [ELIOR.FI] +9% (earnings), Ubisoft [UBI.FR] +4% (analyst action), Ahold Delhaize [AD.NL] +1% (buyback), WM Morrison [MRK.UK] -0.5% (new CFO and COO)

- Consumer staples: Character [CCT.UK] -9% (trading update)

- Industrials: Manz Automation [M5Z.DE] +8% (order)

- Technology: Cancom [COK.DE] +2% (capital increase), M&C Saatchi [SAA.UK] -43% (profit warning)

- Telecom: Orange [ORA.FR] -4% (strategy plan)

 

Speakers

- Italy PM Conti said not rule out a reviewing the country's position on reforms to the European Union's bailout fund

- Moody's raised Italy banking sector outlook to Stable from Negative, noted the decline in problem loans

- German Foreign Min Haas: To tighten conditions for Huawei 5G involvement in coming weeks

- Thailand Central Bank Deputy Gov Mathee:stated that he saw greater odds of Thai Baht (THB) currency weakening than before. notes non-residents are starting to short the Baht

- Reuters political reporter Vincent Lee tweeted: Another Chinese official, who also declined to be identified, warned that US implementation of the new round of tariffs scheduled on Dec. 15 will be countered by China with retaliatory tariffs

- an outcome the official said would seriously disrupt ongoing negotiations.

- US and China said to be moving closer to a Phase 1 trade agreement despite recent rhetoric over Hong Kong and Xinjiang tensions

- Hong Kong Finance Sec Chan announced a 9 measure program to help boost the economy; initiatives included household electricity subsidy. Hong Kong to have a budget deficit in 2020 and 2021 and noted that the city needed a political solutions to resolve the unrest

- Oman Oil Min: OPEC+ main aim is to extend the current production cut agreement for oil and that Gulf Arab OPEC+ members were in consensus to extend production cuts (**Note: current expiration for 1.2M bpd is Mar 2020)

- Libya National Oil Company (NOC) Chairman Sanalla: Libya oil production between 1.25-1.3M bpd. El Feel field oil production at 75K bpd. Libya to eep its current oil production ceiling

 

Currencies/Fixed Income

- Session began with risk aversion sentiment over renewed concerns over the US-China trade negotiations. However, some reversal in tone appeared after reports circulated that despite the recent rhetoric by President Trump – the US and China were moving closer to a Phase 1 trade agreement and expected the written agreement before the next deadline of potential tariffs on Dec 15th. The major European PMI Services data saw upward revisions to aid a feeling of stabilization in Europe

- GBP/USD traded above 1.30 level for highest reading since mid-May as dealers noted that GBP would will benefit from reduced Brexit uncertainty after the UK general election. Polls continued to suggest the Conservatives would secure a majority that could break the Brexit deadlock

- USD/JPY tested the 108.45 level before seeing the JPY currency weakening on renewed optimism of a potential phase 1 trade deal. Pair at 108.70 in mid-session

 

Economic Data

- (RU) Russia Nov PMI Services: 55.6 v 54.6e (5th month of expansion); PMI Composite: 52.9 v 53.3 prior

- (NO) Norway Q3 Current Account Balance (NOK): 23.9B v 26.5B prior

- (ZA) South Africa Nov PMI (Whole Economy): 48.6 v 49.3e (7th straight contraction)

- (SE) Sweden Nov PMI Services: 47.9 v 49.5 prior; PMI Composite: 47.2 v 48.6 prior

- (CZ) Czech Q3 Average Real Monthly Wage Y/Y: 4.0% v 4.2%e

- (BR) Brazil Nov FIPE CPI M/M: 0.7% v 0.6%e

- (ES) Spain Nov Services PMI: 53.2 v 51.8e (73rd month of expansion); Composite PMI: 50.7e

- (SE) Sweden Q3 Current Account Balance (SEK): 68.8B v 37.0B prior

- (NG) Nigeria Nov PMI Services: 57.7 v 56.9 prior

- (IT) Italy Nov Services PMI: 50.4 v 51.2e (10th straight expansion); Composite PMI: 49.6 v 50.6e

- (FR) France Nov Final Services PMI 52.2 v 52.9e (confirmed 9th month of expansion); Composite PMI: 52.1 v 52.7e

- (DE) Germany Nov Final Services PMI: 51.7 v 51.3e (confirmed 77th month of expansion); Composite PMI: 49.4 v 49.2e

- (EU) Euro Zone Nov Final Services PMI: 51.9 v 51.5e (confirmed 78th month of expansion); Composite PMI: 50.6 v 50.3e

- (UK) Nov Final Services PMI: 49.3 v 48.5e (confirmed 1st contraction in 3 months); Composite PMI: 49.3 v 48.6e

- (UK) Nov Official Reserves Changes: $0.1B v $2.2B prior

**Fixed Income Issuance**

- (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills

- (DK) Denmark sold total DKK1.74B in 2022 and 2029 DGB bonds

- (SE) Sweden sold total SEK1.5B v SEK1.5B indicated in 2023, 2029 bonds

- (NO) Norway sold NOK2.0B v NOK2.0B in 2.0% May 2023 bonds; Avg Yield: 1.27% v 1.42% prior; Bid-to-cover: 2.53x v 3.13x prior

 

Looking Ahead

- 05:30 (DE) Germany to sell €3.0B in 0% Aug 2029 Bunds

- 05:30 (GR) Greece Debt Agency (PDMA) to sell 26-week bills

- 06:00 (PL)) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%

- 06:00 (RU) Russia to sell OFZ bonds

- 06:30 (TR) Turkey Nov Real Effective Exchange Rate (REER): No est v 76.9 prior

- 07:00 (US) MBA Mortgage Applications w/e Nov 29th: No est v 1.5% prior

- 07:00 (BR) Brazil Nov PMI Services: No est v 51.2 prior; PMI Composite: No est v 51.8 prior

- 07:00 (BR) Brazil Oct Industrial Production M/M: 0.9%e v 0.3% prior; Y/Y: 1.4%e v 1.1% prior

- 07:00 (MX) Mexico Nov Vehicle Domestic Sales: No est v 107.1K prior

- 07:00 (UK) Parliament weekly PM Q&A in Commons

- 08:00 (HU) Hungary Central Bank Nov Minutes

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

- 08:15 (US) Nov ADP Employment Change: +135Ke v +125K prior

- 08:30 (CA) Canada Q3 Labor Productivity Q/Q: No est v 0.2% prior

- 09:00 (EU) EU Finance Ministers (Eurogroup) meet in Brussels

- 09:45 (US) Nov Final Markit Services PMI: 51.6e v 51.6 prelim; Composite PMI: No est v 51.9 prelim

- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: expected to leave Interest Rates unchanged at 1.75%

- 10:00 (US) Nov ISM Non-Manufacturing Index: 54.5e v 54.7 prior

- 10:00 (US) Fed's Vice Chairman Quarles

- 10:30 (US) Weekly DOE Oil Inventories

- 16:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to cut Overnight Rate Target by 25bps to 1.50%

- 16:45 (NZ) New Zealand Q3 Volume of All Buildings Q/Q: +1.0%e v -1.5% prior

- 18:00 (KR) South Korea Oct Current Account Balance: No est v $7.5B prior; Balance of Goods (BOP): No est v $8.8B prior

- 19:00 (NZ) New Zealand Central Bank (RBNZ) Gov Orr

- 19:30 (AU) Australia Oct Retail Sales M/M: 0.3%e v 0.2% prior

- 19:30 (AU) Australia Oct Trade Balance: $6.5Be v A$7.1B prior

- 20:00 (PH) Philippines Nov CPI Y/Y: 1.2%e v 0.8% prior

- 20:00 (PH) Philippines Oct Unemployment Rate: No est v 5.4% prior

- 20:05 (NZ) New Zealand to sell NZD250M in 2.5% 2040 Bonds

- 20:30 (JP) BOJ's Harada

- 22:35 (JP Japan to sell 30-year JGB