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European Fixed Income Outlook: Long yields headed south across Asia overnight, Bund futures moved sideways in after hour trade, as the global stock market rally continued in Asia overnight. The Hang Seng underperformed though and is currently down -0.04% afer climbing for 8 days, while Nikkei and ASX 200 are up 0.89% and 0.74% respectively and the CSI 300 is also moving higher, with the MSCI Asia Pacific Index heading for a strong weekly gain. Global growth hopes continues to underpin markets, and improved risk appetite is also underpinning eurozone peripheral bond markets, which lead Eurozone yields down yesterday. U.K. stock futures are slightly in the red, however, as the pound is up on the day, while U.S. futures are posting slight gains. Today’s local calendar meanwhile focuses on December inflation numbers out of the Eurozone, which are expected to show a dip in headline rates, largely due to base effects from energy and food prices, but backing the ECB’s cautious approach to the end of QE. Germany has retail sales numbers at the start of the session and the U.K. releases labour cost data. Released overnight the U.K. BRC shop price index dropped -0.6%.

German retail sales beat expectations. Sales rose 2.3% m/m in November, up from -1.0% m/m in October and leaving the annual rate at a strong 4.4% y/y. The November number left the three months trend rate at 0.5%, up from -0.2% in the three months to October. Part of the large swings over the October November period, seem to be changing sales patterns with Black Friday sales in November gaining more importance. Seasonal adjustment patterns will likely have to be adjusted but German retail sales numbers are in any case often subject to hefty revisions and cover only a part of overall consumption.

Charts of the Day


Main Macro Events Today        


  • Eurozone CPI –  Eurozone Dec HICP inflation is expected to show a decline in the headline rate to 1.4% y/y from 1.5% this is likely to have been largely due to energy and food price effects, which should leave core inflation steady or slightly higher.
  • Canadian Labor Data & Trade Balance –   The trade deficit is projected to narrow to -C$1.2 bln in November from -C$1.5 bln in October. Trade saw a welcome improvement in October, as exports jumped 2.7% after falling from June to September (on a monthly basis) Jobs expected to rise 1.8k in December after the stunning 79.5k surge in November. The unemployment rate is seen edging up to 6.0% from 5.9%. Broadly, the job market has posted gains since December of 2016 (November 2016 jobs fell 2k).
  • US Unemployment Rate – The unemployment rate is expected to hold steady from 4.1% in October.
  • US NFP – December Non-Farm Payrolls are expected to increase by 190k, with a 220k private payroll gain. Still low initial claims levels suggest upside risk, along with some lingering effects from disaster recovery, as well as strength in consume, producer, and business confidence. However, the holidays can present some seasonal adjustment challenges.
  • US ISM Non-Manufacturing PMI –  The December ISM is seen little changed at 57.6) after falling 2.7 points to 57.4 previously. The 60.1 print from October was the highest since 2005.

Support and Resistance Levels


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Andria Pichidi

Market Analyst

HotForex

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