European Outlook: Stock markets recovered in Asia overnight, with Japan leading the way as the yen weakened. Tech stocks rebounded, after sell off in U.S. stocks halted. The Nikkei managed a 1.45% gain, outpacing moves higher in Hang Seng and ASX 200. The CSI 300 underperformed and headed south, with commercial banks under pressure on the mainland and in Hong Kong after regulators said it is planning the introduction of quantitative indicators in the management of commercial banks’ liquidity and the IMF suggested banks to increase capital buffers against a sudden downturn. U.K. and U.S. stock futures are moving higher, confirming that risk appetite is returning, which could see Bund and Gilt yields recover some of yesterday’s losses. Today’s calendar has U.K. house price inflation from Halifax and the detailed reading of Eurozone Q3 GDP. Brexit talks remain in focus and in Germany the SPD is set to make a formal decision on whether to enter coalition talks with Merkel’s CDU/CSU a party convention today.
German industrial production unexpectedly dropped -1.4% m/m in October and while September was revised up to -0.9% m/m from -1.6% m/m reported initially, it still leaves production down for a second consecutive month. The numbers look at odds with strong orders numbers and survey data, but indicated a build up in the backlog of orders that also squares with PMI reports. This would suggest that the weaker than expected production numbers are not a sign of weakening growth momentum, but at least partly a reflection of the fact that companies seem to be running into capacity constraints, and while the annual rate fell back to 2.7% y/y from 4.1% y/y, the growth rates remain robust so far.
Main Macro Events Today
- EU GDP (Q3) – Expectations – unchanged at 0.6% q/q and at 2.5% y/y.
- ECB Pres. Draghi Speech at 16:00 GMT in Frankfurt
- US Unemployment Claims – Expectations – up by 2k to 240k for the December 2 week.
- Canadian Building Permits and Ivey PMI- Expectations – Building permits expected to fall 1.0% in October after the 3.8% gain in September, while Ivey PMI expected to slip by 1.1 to 62.7 for November.
Charts of the Day
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