By Mike Dolan
LONDON, Dec 10 (Reuters) - The new record just won’t give.
The packed week of key events for world markets has kept MSCI’s
all-country world index just shy of record peaks once again,
with the index retreating overnight after coming within 0.3% of
January 2018’s all-time peak. Trepidation ahead of the next
Sunday’s deadline for more U.S. tariff rises on Chinese imports
is keeping a lid on stock markets, with the latest reports from
Washington indicating the U.S. side has not yet seen enough from
Beijing to defer, let alone cancel, the tariff moves. Wall St
stocks ended in the red overnight after U.S. Agriculture
Secretary Sonny Perdue said; “"I don't think the president wants
to implement these new tariffs, but there has got to be some
movement on their part to encourage him not to do that." The
only positive signal over the past 24 hours were reports Chinese
soy importers bought five bulk cargo shipments of U.S. soybeans.
Otherwise, the official commentary on the critical talks was
sparse. Away from the U.S.-China talks, senior U.S. and Canadian
officials are set to fly to Mexico City on Tuesday to work on
the final changes to a languishing North American trade pact,
the U.S.-Mexico Canada Agreement. But the seeming stasis in
Washington-Beijing talks meant Wall St’s retreat kept Asia
trading subdued earlier too – with Shanghai, Hong Kong and Tokyo
benchmarks ending little changed and South Korea’s Kospi
outperforming slightly to end almost 0.5% higher. U.S. and
European futures were flat.
It’s also a week for inflation watchers, with China’s
November prices report a mixed bag of an ongoing
pork-exaggerated consumer price surge offset by another annual
contraction in factory gate prices. China’s offshore yuan was
little changed after the data. With the Federal Reserve’s final
policy decision of the year due tomorrow night, U.S. November
consumer prices are due out on Wednesday too. No change in Fed
rates is expected this week, although markets still nervous
about tight yearend money markets following this year’s repo
shock will watch out for any announcement of additional Fed
action to keep short term funding smooth over the turn of the
year. The dollar’s DXY index was a touch easier on Tuesday as
the two-day Fed meeting gets underway later. Ten-year U.S.
Treasury yields held steady just above 1.81%.
Sterling remained in focus ahead of Thursday’s UK election,
with the pound retaining the bulk of Monday’s latest surge to
2-1/2 year highs against the euro as betting markets now ascribe
an 80% chance PM Boris Johnson’s Conservatives will secure an
overall majority on Thursday. Testing that theory later on
Tuesday will be the latest modelled seat-by-seat projection from
pollster YouGov, the so-call MRP model that was closest to the
eventual outcome of the 2017 election. The last MRP indicated a
Conservative majority of some 68 seats. Any narrowing of that
projection may unnerve the pound at these lofty levels, with
options markets already showing considerable hedging of the spot
market surge and the skew in favour of 1-month sterling puts –
options to sell the pound over that horizon - widened on Monday
to its most since April. UK industrial, trade and GDP numbers
are due out later too. Elsewhere, Turkey's lira continued this
week's slide. Turkish president Tayyip Erdogan late Monday said
Turkey will attain single-digit interest rates and inflation in
2020 as the market braces for another mega interest rate cut by
the Turkish central bank this Thursday.
On the European corporate news front, Deutsche Bank shares
rose 0.9% in early trade after the German lender reaffirmed its
cost targets and said it would report a CET 1 ratio above 13%
for end 2019. Still in Germany, shares in Deutsche Boerse were
seen falling 1% after the Sueddeutsche Zeitung reported late on
Monday that the finance minister has drawn up a draft law that
envisages introducing a financial transaction tax in 10 European
Union countries. Eyes also on French car parts maker Valeo which
said it planned to double its free cash flow generation from
2020 to 2022 to reach between 1.3-1.5 billion euros.
There were bigger moves afoot among small and mid caps. Ted
Baker is seen falling 20-25% after its CEO and chairman stepped
down and the UK fashion retailer cut its full-year outlook again
and suspended its dividend. Computacenter instead could get a
5-10% lift after the company said trading result will be ahead
of market expectations.
* Europe corp events: Ashtead, Industria de Diseno Textil,
Metro
* France, Italy Oct industrial output
* UK Oct industrial output, trade balance, construction, GDP
estimate
* Germany Dec ZEW investor sentiment
* Germany sells 2-year government bonds
* Bank of England financial stability report
* Norway Nov inflation
* Sweden Oct household consumption
* SAfrica Oct manufacturing production
* US Q3 labour costs
* US Treasury sells 10-year notes
* UK pollster YouGov due to publish final MRP parliamentary
seat
projection at around 2200 GMT
(by Mike Dolan, @reutersMikeD, editing by Ed Osmond)
