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OPEC Said To Be Discussing Deeper Production Cuts

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Fundamental analysis of Forex market

Notes/Observations

  • Continued upbeat sentiment on prospects of a phase-one trade agreement providing tailwinds for risk appetite; China noted that both sides were both keeping close contact on trade in US-

China talks

  • Unexpected fall in German Oct Factory Orders
  • India RBI surprises markets with its 1st pause after 5 straight rate cuts

Asia:

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  • Japan PM Abe: To compile economic stimulus package worth about ¥13T ($119B) in fiscal spending (as speculated), total spending ¥26T (vs ¥25T speculated). Package for disaster relief, downside risks, and post-Olympics

Americas:

  • Treasury Sec Mnuchin sent letter to OECD nations, urged countries to suspend digital services taxes. OECD chief Gurria responded and said that: Mnuchin’s proposal might set back efforts to move forward by agreed deadlines

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.28% at 404.32, FTSE -0.15% at 7,178.05, DAX +0.02% at 13,142.84, CAC-40 +0.50% at 5,828.75, IBEX-35 +0.46% at 9,313.00, FTSE MIB +0.30% at 23,103.39, SMI +0.67% at 10,403.50, S&P 500 Futures +0.23%]

Market Focal Points/Key Themes:

  • European indices trading mostly in the green following indices in Asia higher and slightly higher US futures. SAS plunges 16% after reporting earnings and issuing weak outlook with increased loss in Q1. DS Smith and AJ Bell also down following earnings results. Dunelm rallying 18% on trading update and raised FY profit outlook. Other risers following trading/earnings updates include Systemair, Daily Mail, Clipper Logistics, St. Modwen Properties, Joules and MySale. Norwegian Air rises on November traffic stats. On the M&A front, Moncler jumps 11% on press speculation yesterday after market close that Kering reportedly holding early stage discussions regarding a potential takeover. Other luxury goods equities Tod’s, Ferragamo, Burberry and Hugo Boss rising as potential takeover candidates in the space. Swiss EFG International up on press speculation that the company is in M&A talks with Julius Baer. In other news, Boohoo down on secondary share placement.
  • Notable earnings today include Brown Forman, Dollar General, Kroger and Tiffany.

Equities

  • Consumer discretionary: Moncler [MONC.IT] +10% (potential acquisition), Dunelm [DNLM.UK] +16% (trading update), Daily Mail [DMGT.UK] +3% (earnings), boohoo.com [BOO.UK] -4.5% (placement)
  • Industrials: Systemair [SYSR.SE] +10% (earnings), SAS [SAS.SE] -16% (earnings), DS Smith [SMDS.UK] -2% (earnings)

Speakers

  • Eurogroup chief Centeno stated that had reached an agreement in principle on ESM reform and would hope to sign it in Q1
  • Sweden Central Bank (Riksbank) Dep Gov Floden: Economic growth was normalizing; country not facing a recession
  • India Central Bank (RBI) Policy Statement maintains its accommodative policy stance and noted that the decision to keep policy steady was unanimous (6-0) .
  • Russia Central Bank Zabotkin (Monetary Policy Chief): Do not see reasons for soft monetary policy from the inflation perspective
  • India Central Bank (RBI) Gov Das post rate decision press conference noted that global economic activity had remain subdued, ‘green shoots’ could emerge beyond Q2; Ready to act if situation warranted it. MPC decided to wait and take a temporary pause. Should allow some more time for full impact to playout and would have a better picture in Feb to reevaluate stance
  • Japan PM Abe stated that wanted to accelerate Abenomics; stimulus package was comprehensive and pre-emptive
  • Japan Fin Min Aso: Cannot say yet how to finance the extra budget. Keen on govt loans, investment programs in stimulus
  • China Commerce Ministry (MOFCOM) spokesperson Gao Feng: China-US side in close contact on trade. If two sides reach phase 1 agreement then tariffs should be reduced
  • OPEC+ said to discuss deeper oil production cuts of more than 400Kbpd as main scenario
  • Various oil ministers comment on oil
  • Nigeria Oil Min stated that would agree to deeper oil production cuts if that is the consensus but had not heard of a proposal to deepen oil production cut by 400K bpd. Believed that oil prices should be around $60/barrel
  • Iran Oil Min noted that it needed to consult with OPEC colleagues before making a decision

Currencies/ Fixed Income

  • EUR/USD saw mixed economic data in the session and was steady in its price action as the pair remained below the 1.11 level.
  • GBP/USD continued to make fresh seven-month highs (strongest since May 2017) on growing confidence that next week’s election would see the Conservative Party win a majority
  • USD/JPY was holding below the 109 level but steady aided by continued upbeat sentiment on prospects of a phase-one trade agreement between US-China. Japan govt released the details of its stimulus program but kept mum on the financing aspects of the package.

Economic Data

  • (NL) Netherlands Nov CPI M/M: 0.4% v 0.4%e; Y/Y: 2.6%v 2.6%e
  • (NL) Netherlands Nov CPI EU Harmonized M/M: -0.8% v -0.3%e; Y/Y: 2.6% v 3.0%e
  • (IN) India Central Bank (RBI) left its Repurchase Rate unchanged at 5.15% (not expected) for its 1st pause in the current easing cycle
  • (DE) Germany Oct Factory Orders M/M:-0.4 % v +0.4%e; Y/Y: -5.5% v -4.7%e
  • (RO) Romania Q3 Preliminary GDP (2nd reading) Q/Q: 0.6% v 0.6%e; Y/Y: 3.0% v 3.0%e
  • (TW) Taiwan Nov CPI Y/Y: 0.6% v 0.7%e; CPI Core Y/Y: 0.6% v 0.7%e; WPI Y/Y: -5.0% v 3.6%e
  • (ES) Spain Oct Industrial Output NSA Y/Y:1.1 % v 3.0% prior; Industrial Output SA Y/Y: -1.3% v 0.0%e; Industrial Production M/M: -0.4% v -0.4%e
  • (ES) Spain Q3 INE House Price Index Q/Q: 1.6% v 1.2% prior; Y/Y: 4.7% v 5.3% prior
  • (HU) Hungary Oct Retail Sales Y/Y: 6.2% v 5.4%e
  • (TW) Taiwan Nov Foreign Reserves: $474.1B v $472.5B prior
  • (DE) Germany Nov Construction PMI: 52.5 v 51.5prior
  • (SE) Sweden Nov Average House Prices (SEK): 2.958M v 3.017M prior
  • (ZA) South Africa Q3 Current Account Balance (ZAR): -190B v -167Be; Current Account to GDP ratio: -3.7% v -3.0%e
  • (UK) Nov New Car Registrations Y/Y: -1.3% v -6.7% prior
  • UN FAO World Food Price Index: 177.2 v 172.7 prior
  • (ZA) South Africa Nov Sacci Business Confidence: 92.7 v 91.7 prior
  • (EU) Euro Zone Q3 Final GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.2% v 1.2%e
  • (EU) Euro Zone Q3 Household Consumption Q/Q: 0.5% v 0.3%e; Govt Expenditures Q/Q: 0.4% v 0.4%e; Gross Fixed Capital Q/Q: 0.3% v 0.3%e
  • (EU) Euro Zone Q3 Final Employment Q/Q: 0.1% v 0.1% prelim; Y/Y: 0.9% v 1.0% prelim
  • (EU) Euro Zone Oct Retail Sales M/M: -0.6% v -0.5%e; Y/Y: 1.5% v 2.2%e
  • (GR) Greece Q3 Final GDP Q/Q: 0.6% v 0.7%e; Y/Y: 2.3% v 2.8% prelim; GDP NSA (unadj) Y/Y: 2.7% v 2.9% prior
  • (CY) Cyprus Nov CPI M/M: 0.3% v 0.4% prior; Y/Y: -0.5% v -1.0% prior

Fixed Income Issuance

  • (ES) Spain Debt Agency (Tesoro) sold total €3.448B vs. €3.0-4.0B indicated in 2024, 2029 and 2048 Bonds
  • Sold €1.622B in 0.25% July 2024 SPGB bond; Avg yield: % v -0.106% prior; Bid-to-cover: 1.49x v 4.81x prior (Nov 21st 2019)
  • Sold €1.316B in 0.60% Oct 2029 SPGB; Avg Yield: % v 0.409% prior, bid-to-cover: 1.48x v 1.56x prior (Nov 21st 2019
  • Sold €510M in 2.7% Oct 2048 SPGB; Avg Yield: % v 1.003% prior; Bid-to-cover: 1.63x v 1.73x prior (Oct 3rd 2019)
  • (FR) France Debt Agency (AFT) sold total €4.99B vs. €4.0-5.0B indicated range in 2028, 2029 and 2060 Bonds
  • Sold €2.072B in 0.75% Nov 2028 Oat; Avg Yield: -0.12% v +0.57% prior; Bid-to-cover: 2.40x v 2.15x prior (Feb 7th 2019)
  • Sold €2.036B in 5.5% Apr 2029 Oat; Avg Yield: -0.08% v +0.74 prior; Bid-to-cover: 1.99x v 1.98x prior (Aug 2nd 2018)
  • Sold €891M in Apr 4.00% 2060 Oat; Avg yield: 0.88% v 1.84% prior; Bid-to-cover: 2.34x v 2.13x prior

Looking Ahead

  • (IL) Israel Nov Foreign Currency Balance: No est v $121.4B prior
  • OPEC semi-annual meeting in Vienna
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
  • 05:30 (UK) DMO to sell £2.0B in 1.75% Jan 2049 Gilts
  • 06:00 (IE) Ireland Nov Live Registry Monthly Change: No est v 0.0K prior; Live Registry Level: No est v 188.7K prior
  • 06:00 (ZA) South Africa Oct Electricity Production Y/Y: No est v -0.5% prior; Electricity Consumption Y/Y: No est v -1.3% prior
  • 07:00 (CL) Chile Oct Nominal Wage M/M: No est v 0.2% prior; Y/Y: No est v 4.4% prior
  • 07:00 (MX) Mexico Nov Consumer Confidence: 43.2e v 43.9 prior
  • 07:30 (US) Nov Challenger Job Cuts: No est v 71.5K prior; Y/Y: No est v -33.5% prior
  • 07:45 (CA) Bank of Canada (BOC) Lane gives Economic Progress Report
  • 08:00 (RU) Russia Gold and Forex Reserve w/e Nov 29th: No est v $542.7B prior
  • 08:00 (BR) Brazil Nov Vehicle Production: No est v 288.5K prior; Vehicle Sales: No est v 253.4K prior; Vehicle Exports: No est v 30.0K prior
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:30 (US) Initial Jobless Claims: 215Ke v 213K prior; Continuing Claims: 1.66Me v 1.640M prior
  • 08:30 (US) Oct Trade Balance: -$48.6Be v -$52.5B prior
  • 08:30 (CA) Canada Oct Int’l Merchandise Trade (CAD): -1.4Be v -1.0B prior
  • 08:30 (US) Weekly USDA Net Export Sales
  • 10:00 (US) Oct Factory Orders: +0.3%e v -0.6% prior; Factory Orders (ex-transportation): No est v -0.1% prior
  • 10:00 (US) Oct Final Durable Goods Orders: 0.6%e v 0.6% prelim; Durables Ex-Transportation: 0.6%e v 0.6% prelim; Capital Goods Orders (Non-defense/ex-aircraft):No est v 1.2% prelim; Capital Goods Shipments (Non-defense/ex-aircraft): No est v 0.8% prelim
  • 10:00 (CA) Canada Nov Ivey Purchasing Managers Index (Seasonally Adj): No est v 48.2 prior; PMI (unadj): No est v 51.8 prior
  • 10:00 (US) Fed’s Vice Chairman Quarles
  • 10:30 (US) Weekly EIA Natural Gas Inventories
  • 11:00 (US) Treasury announcement on upcoming 3-year, 10-year and 30-year issuance
  • 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
  • 14:00 (AR) Argentina Oct Industrial Production Y/Y: No est v -5.1% prior; Construction Activity Y/Y: No est v -8.5% prior
  • 15:00 (MX) Citibanamex Survey of Economists
  • 16:30 (AU) Australia Nov Performance of Construction Index: No est v 43.9 prior
  • 18:30 (JP) Japan Oct Labor Cash Earnings Y/Y: 0.2%e v 0.5% prior (revised from 0.8%); Real Cash Earnings Y/Y: -0.2%e v +0.2% prior (revised from 0.6%)
  • 18:30 (JP) Japan Oct Household Spending Y/Y: -3.2%e v 9.5% prior
  • 19:00 (CO) Colombia Nov CPI M/M: 0.2%e v 0.2% prior; Y/Y: 3.9%e v 3.9% prior
  • 19:00 (CO) Colombia Nov CPI Core M/M: No est v 0.1% prior; Y/Y: No est v 3.3% prior
  • 22:00 (ID) Indonesia Nov Foreign Reserves: No est v $126.7B prior; Net Foreign Assets (IDR): No est v 1.737T prior
  • 22:30 (TH) Thailand Nov Consumer Confidence: No est v 70.7 prior; Economic Confidence: no est v 57.9 prior
  • 22:30 (JP) Japan to sell 3-Month Bills