German IFO survey improves despite lockdown measures; Crunch time for any Brexit trade deal as time is running out

Notes/Observations

- Crunch time for Brexit as hurdles remains for trade deal

- Germany Dec IFO survey beats expectations and improves from month-ago level despite intensification of lockdown measures

Asia:

- Japan Nov National CPI registered its largest decline since 2010 (Y/Y: -0.9% v -0.8%e v -0.4% prior; CPI Ex-fresh food (Core) Y/Y:-0.9% v -0.9%e

- BOJ left Interest Rate on Excess Reserves (IOER) unchanged at -0.10%

Coronaviurs:

- Total global cases 74.9M (+1.0% d/d); total deaths: 166M (+0.8% d/d)

- FDA endorsed Moderna’s vaccine for emergency use for adults aged 18+; To authorize the use on Friday (Dec 18th)

Europe:

- EU Commission Von Der Leyen: big differences remain in Brexit talks, especially on fisheries, and it will be very challenging to bridge them

- UK Govt spokesperson noted that PM Johnson underlined that the negotiations were now in a serious situation; UK stressed that EU's position in fishing was simply not reasonable and it must shift significantly for there to be a deal

Americas:

- Bipartisan group urge the US House and Senate to keep pushing on a coronavirus aid deal

- Senate Minority Leader Schumer: Very close to relief bill agreement

- President Trump said to have wanted at least $1200 and up to $2K in direct payments. President was stopped by aides from issuing a statement calling for the payments as it could have upset current talks over the relief package

- Trump Administration would add ~80 companies (including SMIC) to US Commerce Dept Entity List on Dec 18th

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.17% at 397.96, FTSE +0.70% at 6,597.05, DAX +0.33% at 13,712.95, CAC-40 +0.15% at 5,557.70, IBEX-35 -0.26% at 8,132.00, FTSE MIB +0.36% at 22,090.50, SMI +0.31% at 10,573.16, S&P 500 Futures +0.11%]

Market Focal Points/Key Themes: European indices open lower across the board but turned around to trade mixed later in the session; among better performing sectors are materials and health care; underperforming sectors include financials and energy; PPG to buy Tikkurila; reportedly Iberia reaches deal to acquire AirEuropa; Tencent acquires further stake in Universal; Philips buys BioTeleetry; earnings expected during upcoming US session include Nike, Darden and Winnebago

Equities

- Consumer discretionary: Restaurant Group [RTN.UK] -4.5% (update)

- Financials: Morses Group [MCL.UK] -2% (earnings)

- Healthcare: Koninklijke Philips [PHIA.NL] +3% (acquires BioTelemetry), Synairgen [SNG.UK] +23% (trial update)

- Materials: Tikkurila [TIL1V.FI] +65% (offer)

Speakers

- EU chief negotiator Barnier stated in EU Parliament that the moment of truth for Brexit was here; possibility of a deal remained but time was short and obstacles for an agreement remained large. Had to be prepared for all scenarios

- Ireland PM Martin: Hopeful on Brexit deal this weekend; fisheries remained a key hurdle

- Hungary PM Orban said to announce new stimulus measures to combat pandemic on Sat, Dec 19th

- BOJ Gov Kuroda post rate decision press conference reiterated stance that downward pressure on prices will last for a while; no plan to change 2% inflation target and did not see risk of economy falling back into deflation again. Reiterated view that CPI to remain below 0% for time being. Aimed for more effective and sustainable policy to hit inflation target of 2%. To examine Yield Control (YCC) and asset purchases at March policy meeting but would assess various steps assess various steps such as asset purchases and YCC. Not planning to review negative rates or plan to change overshooting commitment . Planned assessment does not mean seeking exit from stimulus

- BOJ Gov Kuroda stated that saw no need for strong concern over JPY currency (Yen) at this time; FX moves due to various factors. No need to believe that JPY currency (Yen) appreciation was having a serious effect on economy. Both USD and JPY were weakening against most currencies

- Japan PM Suga stated that the domestic economy was seen returning to pre-covid growth level in FY21/22 with real GDP growth forecast of 4.0%

- China said that EU investment deal making progress and in final stage

Currencies/Fixed Income

- Brexit trade deal negotiations have stalled with a no-deal outcome being "very likely” if no flexibility is shown by either side. FX traders bracing for high volatility as Sunday (Dec 20th) seen as the latest a deal needed to be secured in order to have the respective Parliament approve the deal. GBP/USD tested its pivotal resistance of 1.36 on Thursday and was drifting lower as hurdles remained on the key issue of fisheries.

- EUR/USD still finding strength as the German IFO defied expectations and showed improvement in its December reading - despite intensification of lockdown measures

Economic Data

- (UK) Nov Retail Sales (ex-auto/fuel) M/M:-2.6% v -4.0%e; Y/Y: 5.6% v 4.1%e

- (UK) Nov Retail Sales (including auto/fuel) M/M: -3.8% v -4.2%e; Y/Y: 2.4% v 2.4%e

- (DE) Germany Nov PPI M/M: 0.2% v 0.1%e; Y/Y: -0.5% v -0.6%e

- (CN) Weekly Shanghai copper inventories (SHFE): 74.2K v 83.0K tons prior

- (RU) Russia Narrow Money Supply w/e Dec 11th: (RUB): 13.47 v 13.38 T prior

- (EU) Euro Zone Oct Current Account Balance: €26.6B v €25.2B prior

- (DE) Germany Dec IFO Business Climate Survey: 92.1 v 90.0e; Current Assessment Survey: 91.3 v 89.0e; Expectations Survey: 92.8 v 92.5e

- (ES) Spain Oct Trade Balance: -€0.7B v -€1.5B prior

- (NO) Norway Dec Unemployment Rate: 3.8% v 3.8%e

- (PL) Poland Nov Sold Industrial Output M/M: -1.6% v -3.6%e; Y/Y: 5.4% v 2.9%e

- (PL) Poland Nov PPI M/M: 0.0% v 0.0%e; Y/Y: -0.2% v -0.2%e

- (IT) Italy Oct Current Account Balance: €8.2B v €7.6B prior

- (GR) Greece Oct Current Account Balance: -€-0.8B v -€0.5B prior

- (IT) Italy Nov PPI M/M: -0.2% v +0.9% prior; Y/Y: -2.8% v -2.9% prior

Fixed income Issuance

- (IN) India sold total INR220B vs. INR220B indicated in 2023, 2033, 2035 and 2050 bonds

- (ZA) South Africa sold total ZAR1.77B vs. ZAR2.0B indicated in 2025, 2038 and 2050 I/L Bonds

Looking Ahead

- 05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 1-Week Auction Rate unchanged at 4.25%

- 06:00 (UK) Dec CBI Industrial Trends Total Orders: -40e v -40 prior; Selling Prices: No est v -8 prior

- 06:00 (UK) DMO to sell £5.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £2.5B respectively)

- 06:30 (IS) Iceland cancelled planned bond auction

- 06:45 (US) Daily Libor Fixing

- 06:30 (TR) Turkey Central Bank Dec TCMB Survey of Expectations: Next 12 Months: No est v 10.8% prior

- 06:30 (IN) India Weekly Forex Reserve w/e Dec 11th: No est v $579.3B prior

- 06:30 (IN) India Central Bank (RBI) Dec Minutes

- 07:00 (MX) Mexico Q3 Aggregate Supply and Demand: -10.2%e v -21.6% prior

- 07:00 (IN) India announces upcoming bill issuance (held on Wed)

- 07:30 (BR) Brazil Nov Current Account Balance: $1.0Be v $1.5B prior; Foreign Direct Investment (FDI): $1.2Be v $1.8B prior

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

- 08:30 (US) Q3 Current Account Balance: -$187.0Be v -$170.5B prior

- 08:30 (CA) Canada Oct Retail Sales M/M: 0.0%e v 1.1% prior; Retail Sales (ex-auto) M/M: 0.1%e v 1.0% prior

- 09:00 (BE) Belgium Dec Business Confidence: -13.0e v -12.1 prior

- 10:00 (US) Nov Leading Index: 0.5%e v 0.7% prior

- 10:00 (CO) Colombia Oct Trade Balance: -$0.8Be v -$0.8B prior; Total Imports: $3.6Be v $3.5B prior

- 11:00 (RU) Russia Nov Real Retail Sales Y/Y: -3.3%e v -2.4% prior

- 11:00 (RU) Russia Nov Unemployment Rate: 6.3%e v 6.3% prior

- 11:00 (RU) Russia Oct Real Wages Y/Y: 1.1%e v 2.2% prior

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

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

- (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 1.75%