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US EQUITIES – S&P500 -11 (-0.41%), Dow Jones -77, Nasdaq -19

Main themes

  • Stronger than expected retail sales data – up 0.8%.
  • ECB and BofE leave rates unchanged

EUROPEAN MARKETS – All lower after ECB left rates unchanged. STOXX -0.46%, UK FTSE -0.65%, German Dax -0.44% and French CAC -0.78%.


  • The US dollar closed higher, up 0.15% at 93.57.
  • The Aussie dollar continues to move higher, currently trading at US76.70c.

BONDS – US yield curve flattens – 2-yr: +1 bp to 1.80%, 5-yr: +2 bps to 2.13%, 10-yr: UNCH at 2.35%, 30-yr: -2 bps to 2.71%


  • WTI oil rose 0.8% or US44c to US$57.04, despite the International Energy Agency joining OPEC and the US gov’t in revising up forecasts for US output. The IEA said US crude output next year would climb by 870kbpd, up from its November forecast of 790kbpd. Prices are being supported by the outage on the Forties crude pipeline, which should last a few weeks.
  • Gold futures closed up 0.55% to US$1,255.50.
  • Iron ore up US40c to US$70.10.
  • LME metals mostly stronger – Copper +0.95%, nickel +0.54%, aluminium +2.04%.


  • ECB – left its interest rate corridor unchanged, as expected. President Mario Draghi struck a dovish tone during the press conference, reminding that the ECB is willing to increase asset purchases.. The comments were made even though he signalled increasing optimism on the economy. The ECB also reiterated that it will reduce its monthly asset purchases to €30bn (from €60bn) starting in January and continuing through September 2018, or beyond, if necessary – but had not begun formal discussions to cease purchases altogether
  • US economic dataRetail Sales 0.8% (consensus: 0.3%; previous: 0.5%), Retail Sales ex-auto 0.8% (consensus: 0.6%; previous: 0.4%), weekly Initial Claims 225K (consensus: 239K; previous: 236K), Continuing Claims 1886K (previous: 1913K), November Import Prices ex-oil 0.0% (previous: 0.1%), and November Export Prices ex-agriculture +0.6% (previous: -0.1%); October Business Inventories -0.1% (consensus: -0.1%; previous: 0.0%)
  • Retail sales takeaway – Prior month also revised up to 0.5% form 0.2%. Healthy spending in discretionary categories, consistent with confidence about income
  • US tax cuts – Senator Orrin Hatch said that the temporary individual tax cut may be made even more temporary, expiring at the end of 2024 instead of 2025; Senator Marco Rubio (R-FL) will vote ‘No’ on tax reform unless the final bill further expands the child tax credit for lower-income households. The GOP can only afford to lose two votes in the Senate, and it’s already assumed that Senator Bob Corker (R-TN) will vote against the piece of legislation. The GOP aims to release the full details of the bill on Friday, and Congress is expected to vote on the measure sometime next week.
  • European data – December Manufacturing PMI 60.6 (expected 59.8; last 60.1) and Services PMI 56.5 (expected 56.1; last 56.2)
  • Bank of England – unanimously voted to leave interest rates unchanged and keep asset purchases at £435bn, as expected. The BofE maintained its stance that rates will rise only gradually despite above-target inflation.
  • Brexit – British lawmakers will have the right to veto the final Brexit bill.
  • UK data – Retail Sales +1.1% (expected 0.4%; last 0.5%) and+1.6%yoy (consensus 0.3%: last -0.3%). core Retail Sales +1.2% (expected 0.5%; last 0.4%) and +1.5%yoy (consensus 0.4%; last -0.3%)


  • China – Good economic data, despite being a little below expectations. The POBC raised the reverse repo rate (used for open market operations) by 5 basis points for the 7 and 28 day tenors, and by 5bp for the 1 year medium lending facility. .

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  • Nothing of note domestically


  • US data – industrial production, capacity utilisation and the Empire State manufacturing index.


  • National Australia Bank (NAB) – AGM
  • BT Investment Group (BTT) – AGM. Outlook: Remarkable ten year track record of investment outperformance and shareholder returns. “We will continue executing our strategy by: Investing in talented people; Expanding our investment capabilities; Pursuing growth through diversification
  • Orica (ORI) – AGM. Positive update. Guidance for FY18 was global AN volumes to be around 3.65 million tonnes, plus or minus 5%. No at the upper end of that range. Also close to the end of the known headwinds that we have routinely faced over the last three years.
  • Genworth Mortgage (GMA) – Has finalised the annual review of its premium earnings pattern (earnings curve). The change to the premium earning pattern will negatively impact Net Earned Premium (NEP) by approximately $40 million, and as a result 2017 NEP is expected to be approximately 17-19% lower than 2016, instead of the previous guidance of a 10-15% reduction. Based on preliminary estimates, expects the full year loss ratio to remain between 35-40% as the NEP reduction is expected to be partially offset by the fourth quarter incurred loss expectations, and preliminary estimates of the Outstanding Claims Reserves as at 31 December 2017 which currently reflect more favourable recent incurred loss experience.
  • Navitas (NVT) – Renewed agreements with Curtin University for the Perth based Curtin College and the Curtin Singapore Campus. The agreement for Curtin College has been renewed for ten years until January 2028 with a further five year extension option while the agreement with Curtin University to manage its Singapore campus has been renewed for ten years until March 2028.
  • Transurban (TCL) – Trading halt lifted after the successful completion of the insto component of its $1.9bn 3 for 37 accelerated renounceable entitlement offer. The insto component raised $1.35bn at a final price of $12.50, was well received and attracted 94% of available entitlements. The retail offer will open on December 19.
  • Macquarie Atlas Roads (MQA) – Macquarie (MQG)) has completed the sale of its 11.3% principal holding in MQA overnight. Macquarie sold 76 million securities in MQA at $6.00 per security to a wide range of institutional investors via a bookbuild.
  • ARB Corp (ARB) – Market Update. Profit before tax for the half-year to 31 December 2017 is expected to grow by approximately 10% compared with the previous corresponding period. Also advised additional tax is likely to be paid relating a prior years due to an ATO review

MID MORNING MARKETS (as at 10:30am)

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