ON DECK FOR MONDAY, DECEMBER 2
KEY POINTS:
- US Treasuries cheapen on holiday sales, tariff progress
- Robust US holiday sales heavily favoured online shopping
- Trudeau-Trump et al meeting signals progress
- France could slip into political turmoil today…
- …driving a further widening of French-German bond spreads
- US ISM-mfrg, construction spending on tap
- CLP softer despite decent data
- Global Week Ahead reminder here
A relatively light start to a new month and week is focused upon a pair of political developments with implications for markets, plus data out of the US. US Treasury yields are higher by about 4bps across most of the curve and underperforming other global benchmarks perhaps partly on signs that US holiday spending is off to a strong start and given moderated tariff fears. Canada’s curve is also underperforming other global benchmarks but outperforming the US with a milder rise in yields probably on the same drivers. French bond spreads continue to widen with the 10-year at about 85bps over 10-year bunds as decision day for a confidence motion arrives (chart 1). The dollar is broadly stronger, US equity futures are slightly lower while Canadian futures are a little higher and Europe is mixed; the CAC 40’s ½% drop is a standout.
A Decent Start for US Holiday Sales
Indicators of US holiday sales appear to be robust so far. Mastercard’s ‘Spendingpulse’ measure of retail sales ex-autos 3.4% y/y higher in nominal terms on Black Friday and captures in-store and online sales. Online sales were 14.6% higher while in-store was little changed (0.7%) and hence down in real terms. Adobe’s online measure reported that Black Friday nominal sales were up 10.2% y/y and Salesforce indicated that sales were up 7% y/y.
Potential Political Turmoil Awaits France
France is edging closer to Le Pen’s 3pm (10amET) deadline for PM Barnier to grant their budgetary demands. Barnier estimates that the National Rally’s expansionary demands would add €10 billion to budgetary pressures that he is trying to trim by €60 billion in order to reduce France’s large budgetary deficit that is forecast at over 6% next year (the US is higher). They include revoking planned tax hikes, indexing of pensions, immigration controls, a tougher stance on crime and to cancel a drug reimbursement plan. If demands are not met, then Le Pen has said she would use NR’s status as the next largest party to provoke a confidence vote later this week. If it succeeds, then this could bring down the government and jeopardize passage of a budget as the December 31st fiscal year-end approaches.
Canada-US Tariff Progress?
The Friday night dinner meeting between Trudeau, Trump and a mish mash of others was described by both sides as productive and excellent, but there were no assurances provided on next steps. Canada pledged to spend more on border security; hopefully the US did as well, given it’s their border too and given the Canadian concerns such as potential immigration flows from the US as Trump tightens policy and the illegal gun trade. As a side issue, there are questions of optics here. One concerns a hedge fund guy being at the table who isn’t confirmed by the Senate and hasn’t left his private firm, given the market implications of anything that was discussed. Another concerns the random assortment of other folks in the background at surrounding tables during the discussions at Trump’s resort.
US ISM-Manufacturing and Fed-Speak on Tap
On tap into the N.A. session will be a pair of macro releases with most of the attention placed on ISM-manufacturing. In my opinion, it can have more sway over markets than is justified relative to the much heavier weight on ISM-services that we get on Wednesday. A pair of top Fed officials will also speak including Governor Waller (3:15pmET) and after the close we’ll hear from NY Fed President Williams (4:30pmET).
Chile’s Economy Rebounds
CLP is softer after what I thought was solid Chilean data this morning as the economic activity index was up 0.4% m/m that doubled consensus with a mild upward revision (prior -0.7% m/m instead of –0.8%). The year-over-year figure missed (2.3%, consensus 2.5%) as the prior month’s y/y was revised up (0.3% instead of 0%).
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.