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European Dec Inflation Data Softer Compared To Month-Ago Levels

Notes/Observations

  • German State CPI data softer from month-ago levels with bulk of today’s reading below forecasts of the upcoming German Composite Nov CPI data

Asia:

  • South Korea Nov Industrial Production M/M: -1.7% v -0.2%e; Y/Y: 0.1% v 1.4%e
  • Japan Nov Jobless Rate: 2.5% v 2.4%e (2nd straight rise)
  • Japan Dec Tokyo CPI Y/Y: 0.3% v 0.5%e; CPI Ex-Fresh Food Y/Y: 0.9% v 0.9%e; CPI Ex-Fresh Food/Energy Y/Y: 0.6% v 0.6%e
  • Japan Nov Preliminary Industrial Production M/M: -1.1% v -1.5%e; Y/Y: 1.4% v 0.6%e
  • Japan Nov Retail Sales M/M: -1.0% v -0.4%e; Retail Trade Y/Y: 1.4% v 2.1%e Department Store/Supermarket Sales: -0.4%e v -0.8% prior
  • Japan 10-year JGB yield turned negative for the first time since 2017
  • China said to plan to expedite reviews related to foreign-controlled brokerages

Europe:

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  • Finland’s Liikanen said to be seen as most likely candidate to become the head of the ECB
  • UK Labour Party Leader Corbyn (opposition) called on PM May to recall parliament early from Christmas break to hold the “meaningful vote” on Brexit

Americas:

  • US government shutdown continued, Senate has adjourned until Dec 31st. Shutdown likely to extend into Jan

Energy:

  • Weekly API Oil Inventories: Crude: +6.9M v +3.5M prior

Macro

  • (EU) Eurozone: ECB’s Knot played down growth slowdown, indicating that while it is “unmissable” that growth is now slowing down, “a large part of the world economy is now operating at full capacity. Then you can hardly expect anything else than that growth falls back a little.” He also said that in the Eurozone core inflation is still not showing any signs of life, although while he repeated that QE is now part of the ECB’s toolkit, it isn’t “a standard instrument, and it should therefore only be used in the future if the risk of deflation is evident”.
  • (ES) Spain: Preliminary December HICP inflation dipped to just 1.2% y/y down from 1.7% y/y in November. The initial German states also lower reported lower headline rates. It all suggests that Eurozone HICP is set to close out the year below the 2% limit, which will give the ECB justification to continue with it’s very accommodative policy stance.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +1.7% at 335.2, FTSE +1.7% at 6697, DAX +1.8% at 10589, CAC-40 +1.7% at 4675, IBEX-35 +1.4% at 8484, FTSE MIB +1.6% at 18357, SMI +2.4% at 8394, S&P 500 Futures 0.3%]

Market Focal Points/Key Themes:

Equities

  • European Indices trade higher across the board rebounding after sharp losses over the past week, aided by relative strength in the US after a sharp reversal late in the US session. On a light morning for corporate news, Xaar trades over 10% lower after warning on Full year Revenues. Damiani trades higher after receiving a €8.55/shr tender offer from Leading Jewels, while CRH trades over 2% higher on commencement of its €200M share buyback. Elsewhere Airbus and Leonardo trades slightly higher on reports of a €1.4B Helicopter deal in Spain.
  • Materials: CRH PLC [CRH.UK] +2.5% (share buyback program)
  • Financials: MedioBanca [MB.IT] +1.5% (CEO comments on acquisitions), Baloise Holding [BALN.CH] +2% (investment)
  • Industrials: Leonardo-Finmeccanica Spa [LDO.IT] +1%, Airbus [AIR.FR] +2% (said to have been awarded order wit Airbus), Sequana [SEQ.FR] +3% (terminated divestments)
  • Technology: Xaar [XAR.UK] -12.5% (trading update)

Speakers

  • Italy PM Conte year-end press conference reiterated that govt was committed to avoiding VAT increase in coming years. Saw 2019 minimum GDP growth at 1.0%
  • Poland Labor Min Rafalska stated that 2019 unemployment rate was seen declining
  • Hungary Fin Min Varga: 2019 net borrowing seen at HUF998B. Plans net HUF-denominated bond issuance at HUF947B (includes buybacks and switch auctions). Govt planned to double the stock of govt debt held by retail investors in coming years
  • Indonesia Chief Economy Min Nasution: 2019 GDP growth seen between 5.3-5.4%
  • China Ministry of Finance (MOF) To step up local govt debt management in 2019; to prevent and mitigate debt risks. To strictly curb local govt implicit debts in 2019 and largely increase local govt special bond quota. To cut taxes and fees at a larger scale during the upcoming year and reiterated govt stance to adopt proactive fiscal policy

Currencies/Fixed Income

  • The recent pick-up in equity price volatility has prompted flows into various safe-haven currencies like the Japanese yen and the Swiss franc. The European equity price action saw gains in the session but continued concerns on global growth still weighed on overall risk sentiment

Economic Data

  • (NL) Netherlands Dec Producer Confidence Index: 7.5 v 7.2 prior
  • (RU) Russia Dec PMI Manufacturing: 51.7 v 52.6 prior
  • (NO) Norway Nov Retail Sales (includes auto/fuel) M/M: 0.9% v 0.8%e
  • (FI) Finland Nov House Price Index M/M: +0.7 v -1.0% prior; Y/Y: 1.0 v 0.2% prior
  • (TR) Turkey Dec Economic Confidence: 75.2 v 73.7 prior
  • (TH) Thailand Nov Current Account Balance: $1.6B v $1.1Be; Overall Balance of Payment (BOP): +$0.4B v -$0.9B prior; Trade Account Balance: $0.7B v $1.3B prior; Exports Y/Y: 0.2% v 8.4% prior; Imports Y/Y: 16.2% v 13.3% prior
  • (CN) Wee