By Mike Dolan
LONDON, Dec 10 (Reuters) - The new record just won’t give. The packed week of key events for world markets has kept MSCI’s all-country world index just shy of record peaks once again, with the index retreating overnight after coming within 0.3% of January 2018’s all-time peak. Trepidation ahead of the next Sunday’s deadline for more U.S. tariff rises on Chinese imports is keeping a lid on stock markets, with the latest reports from Washington indicating the U.S. side has not yet seen enough from Beijing to defer, let alone cancel, the tariff moves. Wall St stocks ended in the red overnight after U.S. Agriculture Secretary Sonny Perdue said; “"I don't think the president wants to implement these new tariffs, but there has got to be some movement on their part to encourage him not to do that." The only positive signal over the past 24 hours were reports Chinese soy importers bought five bulk cargo shipments of U.S. soybeans. Otherwise, the official commentary on the critical talks was sparse. Away from the U.S.-China talks, senior U.S. and Canadian officials are set to fly to Mexico City on Tuesday to work on the final changes to a languishing North American trade pact, the U.S.-Mexico Canada Agreement. But the seeming stasis in Washington-Beijing talks meant Wall St’s retreat kept Asia trading subdued earlier too – with Shanghai, Hong Kong and Tokyo benchmarks ending little changed and South Korea’s Kospi outperforming slightly to end almost 0.5% higher. U.S. and European futures were flat.
It’s also a week for inflation watchers, with China’s November prices report a mixed bag of an ongoing pork-exaggerated consumer price surge offset by another annual contraction in factory gate prices. China’s offshore yuan was little changed after the data. With the Federal Reserve’s final policy decision of the year due tomorrow night, U.S. November consumer prices are due out on Wednesday too. No change in Fed rates is expected this week, although markets still nervous about tight yearend money markets following this year’s repo shock will watch out for any announcement of additional Fed action to keep short term funding smooth over the turn of the year. The dollar’s DXY index was a touch easier on Tuesday as the two-day Fed meeting gets underway later. Ten-year U.S. Treasury yields held steady just above 1.81%.
Sterling remained in focus ahead of Thursday’s UK election, with the pound retaining the bulk of Monday’s latest surge to 2-1/2 year highs against the euro as betting markets now ascribe an 80% chance PM Boris Johnson’s Conservatives will secure an overall majority on Thursday. Testing that theory later on Tuesday will be the latest modelled seat-by-seat projection from pollster YouGov, the so-call MRP model that was closest to the eventual outcome of the 2017 election. The last MRP indicated a Conservative majority of some 68 seats. Any narrowing of that projection may unnerve the pound at these lofty levels, with options markets already showing considerable hedging of the spot market surge and the skew in favour of 1-month sterling puts – options to sell the pound over that horizon - widened on Monday to its most since April. UK industrial, trade and GDP numbers are due out later too. Elsewhere, Turkey's lira continued this week's slide. Turkish president Tayyip Erdogan late Monday said Turkey will attain single-digit interest rates and inflation in 2020 as the market braces for another mega interest rate cut by the Turkish central bank this Thursday.
On the European corporate news front, Deutsche Bank shares rose 0.9% in early trade after the German lender reaffirmed its cost targets and said it would report a CET 1 ratio above 13% for end 2019. Still in Germany, shares in Deutsche Boerse were seen falling 1% after the Sueddeutsche Zeitung reported late on Monday that the finance minister has drawn up a draft law that envisages introducing a financial transaction tax in 10 European Union countries. Eyes also on French car parts maker Valeo which said it planned to double its free cash flow generation from 2020 to 2022 to reach between 1.3-1.5 billion euros.
There were bigger moves afoot among small and mid caps. Ted Baker is seen falling 20-25% after its CEO and chairman stepped down and the UK fashion retailer cut its full-year outlook again and suspended its dividend. Computacenter instead could get a 5-10% lift after the company said trading result will be ahead of market expectations. * Europe corp events: Ashtead, Industria de Diseno Textil, Metro
* France, Italy Oct industrial output
* UK Oct industrial output, trade balance, construction, GDP estimate
* Germany Dec ZEW investor sentiment
* Germany sells 2-year government bonds
* Bank of England financial stability report
* Norway Nov inflation
* Sweden Oct household consumption
* SAfrica Oct manufacturing production
* US Q3 labour costs
* US Treasury sells 10-year notes
* UK pollster YouGov due to publish final MRP parliamentary seat projection at around 2200 GMT (by Mike Dolan, @reutersMikeD, editing by Ed Osmond)