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Dentalfloss · Dec 20, 2019

Dentalfloss · Dec 20, 2019

Good Morning: The Long & the Short of it and The Bigger Picture - 20 December 2019 - ADM ISI

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Ostwald, Marc

08:57 (7 minutes ago)

to Marc

** PLEASE NOTE THIS IS THE FINAL EDITION FOR 2019, UPDATES WILL GRADUALLY RESUME WEEK BEGINNING 6 JANUARY **

- Digesting German and UK surveys, awaiting UK and US final Q3 GDP,
UK PSNB, US Personal Income and PCE, Canada Retail Sales and Brazil
IPCA-15 inflation; UK parliament to debate and vote on Brexit WAB bill

- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-20-december-2019/

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** EVENTS PREVIEW **
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A busy schedule of data and events awaits markets that are in seasonal wind down, with 'quadruple witching' (equity derivatives expiry) thrown in for good measure. For all that the overnight Japan CPI and UK surveys 'warm the plate' for UK PSNB, Q3 Current Account and final Q3 GDP, the latter also bing due in the US along with monthly Personal Income/PCE for November are indeed important data points, they will probably prove to be statistical roadkill, even if lesser data points, with minimal misses relative to forecasts over the next fortnight, could prompt some quite sharp moves, due to poor liquidity, perhaps above all in FX. In terms of that overnight data run, the following items are not 'news': weak Japan inflation, weak but improving UK, and solid German Consumer Confidence, regardless of whether they 'beat' or 'missed' forecasts (which is irrelevant for the average consumer in any case). Less than 3 months ago today's UK parliament vote on the Johnson EU Withdrawal Agreement Bill would have been front page news and the source of incessant visual media coverage, and while the latter may be plentiful amid the seasonal news drought, the parliamentary votes are a country mile away from being anything other than a foregone conclusion, the rest will be nothing more than noise. The key for the UK is now a) the Budget, and b) trade negotiations with the EU.

In terms of the rest of the schedule, final readings for UK and US Q3 GDP are not expected to see any revisions, with the UK Current Account deficit is expected to narrow quite sharply to £-15.5 Bln from £-25.2 Bln, predicated on the strong contribution to Q3 GDP from Net Exports. In the US Personal Income and PCE are expected to echo Average Hourly Earnings and to a certain extent Retail Sales, posting gains of 0.3% and 0.4% m/m, with the PCE Deflators seen at 1.4% y/y headline and 1.5% y/y core, which will have many Fed speakers underlining that while rates are at an 'appropriate' level above all given a tight labour market, the risks remain to the downside, above all given the distinct lack of inflation pressures. By contrast today's Brazilian IPCA-15 inflation is seen posting a rise 0.95% m/m to push the y/y rate sharply higher to 3.8% from 2.7%, and thus confirm that there is no further scope in the near term for the BCB to cut rates.

We wish all our readers a very happy festive season and the very best for a happy, healthy and prosperous 2020.