EU equities attempt to bounce from recent weakness on pre-Christmas optimism

Notes/Observations

– FX market continued to digest recent BOJ’s policy tweak. Currently interpreted the decision as step towards an eventual pivot from the current ultra-dovish monetary policy.

– European indices bounce higher off recent weakness ahead of Christmas holiday and shortened week.

– German Jan GFK Consumer Confidence registered 14th straight negative reading as cost of living and recession fears grip.

– UK Govt borrowing nearly doubled in Nov. UK public sector strikes hit critical services as ambulance workers begin industrial today. Most sector disputes based on Govt pay proposals of 4-5% which Unions consider too low as UK inflation currently at 10.7%. Strikes to continue into New Year as House of Commons remains on recess until Jan 9th and with PM Sunak’s defiance stance on the matter.

– In the US, Ukraine Pres Zelenskiy to meet Biden and Pelosi later on US soil. Twitter CEO Musk confirmed to step down as CEO via a tweet as soon as a successor is found.

– Asia closed mixed with ASX200 higher by +1.3%. EU indices are higher by +0.5% to +1.0%. US futures are +0.6% to +0.8%. Gold -0.2%, DXY +0.1%; Commodity: Brent +1.2%, WTI +1.1%, UK Nat Gas -6.8%; Crypto: BTC +0.5%, ETH +0.6%.

Asia

– Japan Cabinet Office Dec Monthly Report: Maintains overall economic assessment, domestic economy was recovering moderately.

– Japan Econ Min Goto acknowledged that recent BOJ decision was not a tweak or exit from monetary easing.

– China President Xi stated that promised to work with Australia on sustainable relationship. Believed that a stable relation was in the interests of both countries (**Insight: latest sign of warming ties between the two major trade partners).

Ukraine conflict

– Ukraine President Zelenskiy flying to Washington to meet with President Biden and visit Congress on Wednesday (Dec 21st).

Europe

– UK Dec Lloyds Business Barometer: 17 v 10 prior.

– UK Ambulance workers begin mass industrial action today amid widespread public sector strike disruption.

Americas

– Senate Republicans said to have signaled they would not block the $1.66T spending bill.

Energy

– Weekly API Crude Oil Inventories: -3.1M v +7.8M prior.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 +0.83% at 427.70, FTSE +0.48% at 7,405.92, DAX +0.72% at 13,984.85, CAC-40 +0.94% at 6,510.92, IBEX-35 +0.59% at 8,233.71, FTSE MIB +0.75% at 23,897.00, SMI +0.75% at 10,739.60, S&P 500 Futures +0.63%].

– Asia closed mixed with ASX200 higher by +1.3%. EU indices are higher by +0.5% to +1.0%. US futures are +0.6% to +0.8%. Gold -0.2%, DXY +0.1%; Commodity: Brent +1.2%, WTI +1.1%, UK Nat Gas -6.8%; Crypto: BTC +0.5%, ETH +0.6%.

Market focal points/key themes

Equities

European indices opened slightly higher, but extended gains throughout the session with Retail and Travel&Leisure sectors leading the advance. European natural gas prices earlier extended their losses to levels last seen in June this year amid warmer weather and secured energy supplies.
On corporate front, Adidas and Puma shares trade sharply higher over 8% following Nike results after US markets close. Deutsche Post in Frankfurt trades little changed on Fedex earnings and outlook.
On M&A front, Austrian energy giant OMV resold ~25% stake to Adnoc for over $4B and trades slightly higher. In other news, Uniper shares up about 5% after European Commission confirmed approval of up to €34.5B German measure to recapitalize Uniper.
Earnings expected in the upcoming US premarket session include Rite Aid, Carnival and Micron after US markets close.

– Consumer discretionary: Adidas [ADS.DE] +9%, Puma [PUM.DE] +8% (related Nike reported positive Q2 results), Deutsche Post [DPW.DE] -1% (Fedex earnings), Bunzl [BNZL.UK] -1% (trading update), XXL ASA [XXL.NO] -9% (trading update; placement).

– Energy: Uniper [UN01.DE] +5% (European Commission confirms approval up to €34.5B German measure to recapitalize Uniper; EU gas futures trade lower), OMV [OMV.AT] +1% (stake sale).

– Healthcare: Morphosys [MOR.DE] -3% (CEO steps down), Bayer [BAYN.DE] —0.5% (receives FDA approval of new adeno-associated virus (AAV)).

– Industrials: Aurubis [TKA.DE] -4.5% (FY22 results, FY23 guidance).

– Telecom: Tremor International [TRMR.UK] +10% (reportedly considers sale).

– Materials: Anglo American [AAL.UK] +0.5% (reports diamond sales).

Speakers

– Russia President Putin’s address to Russia’s Federal Assembly has been postponed to 2023 as ‘the situation on the ground in Ukraine needs to be more understandable first’.

– Russian govt spokesperson Peskov stated that President Putin would make important speech at Defense Ministry later today (Wed, Dec 21st). Reiterated govt stance that no chance for peace talks as Western arms supplies to Ukraine continued.

– Turkey President Erdogan reiterated stance that inflation to decline substantially in coming months.

– Hungary PM Orban stated that managed to reach agreement with EU on funds; Hoped for signing of deal in coming days.

– Czech Industry Min Sikela stated that the EU gas price cap was a very good deal for EU.

– Japan govt confirmed to extend gasoline subsidy scheme beyond 2022; To reduce cap on gasoline subsidies by ¥2/litre per month between Jan-May 2023 to ¥25/litre in May 2023.

– China said to allow backdoor listing of qualified property developers.

Currencies/fixed income

– USD/JPY probing below the 132 level as 10-year JGB yield climbed toward BOJ’s new YCC ceiling. Speculation continued to deepen that the BOJ would push forward with policy normalization.

– EUR/USD steady at 1.0620 and GBP/USD at 1.2140.

Economic data

– (UK) Nov Public Finances (PSNCR): £20.3B v £10.0B prior; PSNB (Ex-Banking Groups): £22.0B v £14.8Be; Net Borrowing: £21.2B v £14.5Be; Central Government NCR: £25.5B v £8.6B prior.

– (DE) Germany Jan GFK Consumer Confidence: -37.8-v 38.0e.

– (CH) Swiss Nov M3 Money Supply Y/Y: +0.9% v -0.2% prior.

– (SE) Sweden Dec Consumer Confidence: 54.1 v 57.4 prior; Manufacturing Confidence: 104.1 v 104.5 prior; Economic Tendency Survey: 84.7 v 85.1prior.

– (HK) Hong Kong Q3 Current Account Balance: $115.8B v $30.0B prior; Balance of Payments (BOP): -$138.4B v -$159.8B prior.

– (IS) Iceland Nov Wage Index M/M: 0.4% v 0.3% prior; Y/Y: 8.0% v 7.9% prior.

– (PL) Poland Dec Consumer Confidence: -41.9 v -43.3e.

– (PL) Poland Nov Real Retail Sales M/M: -0.3% v -1.8%e; Y/Y: 1.6% v 0.3%e; Retail Sales (current prices) Y/Y: 18.4% v 16.1%e.

– (PL) Poland Nov Construction Output Y/Y: +4.0% v -1.2%e.

Fixed income issuance

– (IN) India sold total INR220B vs. INR220B indicated in 3-month, 6-month and 12-month bill.

– (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month Bills; Avg Yield: 1.8376% v 1.6910% prior; Bid-to-cover: 1.93x v 1.56x prior.

Looking ahead

– (IL) Israel Nov Leading “S” Indicator M/M: No est v 0.2% prior.

– (AR) Argentina Nov Budget Balance (ARS): No est v 27.5B prior.

– 05:25 (EU) Daily ECB Liquidity Stats.

– 06:00 (UK) Dec CBI Retailing Reported Sales: -24e v -19 prior; Total Distribution Reported Sales: No est v -24 prior.

– 06:00 (RU) Russia to sell OFZ Bonds (3 tranches).

– 06:45 (US) Daily Libor Fixing.

– 07:00 (US) MBA Mortgage Applications w/e Dec 16th: No est v +3.2% prior.

– 07:00 (MX) Mexico Q3 Aggregate Supply and Demand: 5.5%e v 4.8% prior.

– 07:30 (BR) Brazil Nov Current Account Balance: -$2.1Be v -$4.6B prior; Foreign Direct Investment (FDI): $7.3Be v $5.5B prior.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:30 (CA) Canada Nov CPI M/M: 0.0%e v 0.7% prior; Y/Y: 6.7%e v 6.9% prior; CPI Core- Median Y/Y: 4.9%e v 4.8% prior; CPI Core- Trim Y/Y: 5.3%e v 5.3% prior; Consumer Price Index: 153.9e v 153.8 prior.

– 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-week repurchase rate unchanged at 7.00%.

– 09:45(CZ) Czech Central Bank (CNB) post rate decision press conference.

– 10:00 (US) Nov Existing Home Sales: 4.20Me v 4.43M prior.

– 10:00 (US) Dec Consumer Confidence: 101.0e v 100.2 prior.

– 10:30 (US) Weekly DOE Oil Inventories.

– 11:00 (RU) Russia Nov PPI M/M: No est v -2.5% prior; Y/Y: No est v 0.8% prior.

– 11:00 (RU) Russia Q4 Consumer Confidence: No est v -22 prior.

– 11:30 (US) Treasury to sell 17-Week Bills.

– 13:00 (US) Treasury to sell 20-Year Bond Reopening.

– 14:00 (AR) Argentina Oct Economic Activity Index (Monthly GDP) M/M: No est v -0.3% prior; Y/Y: No est v 4.8% prior.

– 14:00 (AR) Argentina Q3 Unemployment Rate: No est v 6.9% prior.

– 16:00 (KR) South Korea Nov PPI Y/Y: No est v 7.3% prior.

– 18:00 (NL) Netherlands Nov House Price Index M/M: No est v -0.5% prior; Y/Y: No est v 7.8% prior.

– 20:00 (CN) China Nov Swift Global Payments (CNY): No est v 2.13% prior.

– 22:30 (TH) Thailand Nov Customs Trade Balance: -0.2Be v -$0.6B prior; Exports Y/Y: -6.1%e v -4.4% prior; Imports Y/Y: -1.5%e v -2.1% prior.