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European Outlook: Asian stock markets are mostly higher, with Japan and South Korea underperforming as Japan decides to strengthen its missile system to defend against North Korea. RBA meanwhile showed increased confidence in the economic outlook, which weighed on bonds, but underpinned gains on stock markets. Technology shares underpinned gains in Hang Seng and CSI 300. U.S. and U.K. stock futures are also higher and the risk on theme continues as U.S. tax reform hopes underpins sentiment. European peripheral bond markets outperformed yesterday underpinned by Portugal’s ratings upgrade, but with Spain outperforming on both bond and stock markets. Today’s data round includes German Ifo confidence for December, which is expected to fall back slightly. Eurozone construction output and wage data are also due.

FX Update:Narrow ranges have been prevailing, and more of the same looks likely, though there could be some chop around data releases and news developments, with moves prone to be exaggerated by thin market conditions. All the dollar pairings we track are showing less than a 0.2% range so far today. USDJPY’s range has been centring around 112.50, while EURUSD has managed to drift up from around 1.1775-80 toward the 1.1800 level. Cable is also moderately higher, though, like EURUSD, remains comfortably below its high from yesterday. Focus remains on the U.S. tax overhaul bill, with the House expected to vote on it today and the Senate tomorrow, with indications suggesting that a successful passage is on. The December German Ifo business climate survey is also due later.

Main Macro Events Today

  • German Ifo Business Climate – Expectations – nudge higher to 107.5 after the surprise uptick in December PMIs and ongoing positive trends in manufacturing orders.
  • EU Labour cost- Expectations – 2.0% from 0.8% in Q2.
  • US Housing Starts – Expectations –  1.250 mln after the 13.7% October jump to 1.290 mln.
  • FOMC Member Kashkari Speaks

Charts of the Day


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Andria Pichidi

Market Analyst


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