E Markets: Mourning

  • Eurozone October retail sales rise 0.3% m/m, 1.7% y/y after revised -0.5% m/m, +0.3% y/y – weaker than 0.2% q/q, 2.1% y/y expected. Auto fuels rose 1%, food up 0.6% while non-food products -0.1% m/m. Best gains in Eurozone sales were in Portugal up 2.3% m/, Austria up 1.6% while weakest was Finland -2% m/m. In EU28, Denmark and Sweden both saw -1.2% m/m sales. 

  • UK November Services PMI 50.4 from 52.2 – weaker than 52.5 expected – worst since July 2016. Both business activity and incoming new work fell to 2 ½ year lows. Firms noted Brexit uncertainty delaying business decisions. Optimism for 12M forward moderated again to lowest since July 2016 as well. The IHS economist Williamson noted this implies 0.1% q/q growth in 4Q with risks tilted to the downside. The UK composite index also fell to 51 from 52.2 – the worst since July 2016. 

Market Recap:

Equities: The US S&P500 futures are off 0.5% after losing 3.24% yesterday. The Stoxx Europe 600 is off 0.8% - worst drop in 2 weeks. The MSCI Asia Pacific fell 1.1% - worst drop in 2 weeks. The MSCI EM fell 1.2% - also the worst drop in 2 weeks. 

  • Japan Nikkei off 0.53% to 21,919.33
  • Korea Kospi off 0.62% to 2,101.31
  • Hong Kong Hang Seng off 1.62% to 26,819.68
  • China Shanghai Composite off 0.61% to 2,649.81
  • Australia ASX off 0.83% to 5,749.10
  • India NSE50 off 0.80% to 10,782.90
  • UK FTSE so far off 1.15% to 6,943
  • German DAX so far off 0.80% to 11,243
  • French CAC40 so far off 0.9% to 4,968
  • Italian FTSE so far flat at 19,353

Fixed Income: UK Gilts again the focus with Brexit moods driving – 10Y yields are up 5bps to 1.325%, while periphery rallies with Italy budget hopes – Italy off 8.5bps to 3.065%, Spain off 3bps to 1.45%, Portugal off 1.7bps to 1.7% and Greece off 7bps to 4.125%. The core EU bonds are higher on spreads – German Bunds up 0.5bps to 0.265%, French OATs up 0.5bps to 0.67%. 

  • Spain sold E1.146bn of 10Y 1.4% 2028 bonds at 1.456% with 1.93 cover – the previous sale was E1.305bn with 1.607% yield and 1.57 cover.  Spain sold E1.274bn of 5Y 0.35% 2023 bonds at 0.412% with 1.65 cover – previously 0.565% with 1.95 cover. Spain also sold 3Y 0.05% 2021 bonds at 0.021% with 3.65 cover – previously 0.102% with 2.17 cover. 
  • US Bonds closed for holiday
  • Japan JGBs rally as risk off mood extends, curve steeper– 2Y off 0.8bps to -0.146%, 5Y off 0.7bps to -0.124%, 10Y off 0.5bps to 0.056% and 30Y flat at 0.78%.
  • Australian bonds rally with weaker 3Q GDP, risk-mood shift– 3Y off 2bps to 1.96%, 10Y off 3bps to 2.50%. 
  • China PBOC skips open market operations for 29th day. Bonds continue to rally with PBOC RRR easing expectations – 2Y off 12bps to 2.63%, 5Y off 8bps to 3.035%, 10Y off 11bps to 3.24%. 
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