WHAT HAPPENED OVERNIGHT IN THE US:

·         S&P -3.2%, took fright at yield curve inversion alongside China deal questions to lift volatility back towards Nov highs.

·         China confusion followed backtrack from Trump adviser Kudlow, conceding on Fox News; “[An autos deal] hasn’t been signed and sealed…yet”.

·         GM -5% and Ford -4.4%, led broad sell-off alongside other trade sensitives eg Caterpillar -6.9%. Techs gave back 2 days gains, led by chipmakers.

·         Yield inversion continued to throttle 3-5yr curve – and 2’s & 10yr flattened to less than 12bps (a rock solid indicator of US recession since 1945).

·         That meant more bad news for financials. Goldmans -3.8%, another 2yr low – on track for its second-worst year since the financial crisis.

·         Oil one of few consolations, back below $61.50 – off $2 from intraday high – despite looming threat of production cut announcement at Thurs OPEC.

SOUTH AFRICAN NEWS:

·         Expect AllShare -1.5%. From SA close yday, gold -$6 ($1234), plat -$9 ($793), copper -1.4% ($2.76/lb), oil -2.4% ($60.90), USDZAR +1.1% (13.84), S&P -2.7%.

·         Today’s XDs: CTA 2.25c/CTK 18c/CML 18c/DLT 39.4c/DIA 53.13c/DIB 55.60c/EFG 7.4c/GRP 49.66c/ILU 49.19c/INL 206c/INP 206c/IVT 50c/MEI 59.17c/PIK 39.1c/SPP 459c/SSS 51.3c/TCP 29c/TSH 132c. 

·         SA path out of recession had some breadth, even if mining & construction remained weak and fixed capital formation down 5.1% remained a an ongoing structural concern. But a positive print was never really in doubt given the severity & transitional factors in Q2, and this set of data offered little practical benefit for markets beyond some (fleeting) relief for the currency. Macro headwinds have since picked up again in Q4 with Eskom power shedding, no signs of meaningful recovery in the leading indicator, PMIs still in contraction territory, as well as weak vehicle sales and private credit. 

·         Eskom to ask government to absorb R100bn of its debt, reports Business Day, putting numbers to what was mentioned in yday’s interim results and a package of turnaround proposals known as “Strategy 2035”. Eskom can likely navigate its way through to the end of the current financial year with significant liquidity but we remain concerned about FY’20 and expect that government would need to step in. But taking on the size of debt mentioned in Business Day would add 2% to SA’s debt-to-GDP and would likely be viewed as negative by credit agencies

TODAYS KEY DATA POINTS:

·         9.15am: SA Nov PMI (47)

·         10.55am: Germany Nov Markit PMI Services final read (53.3)

·         11am: Eurozone Nov Markit PMI Services final read (53.1)

·         11.30am: UK Nov Markit PMI Services (52.5)

·         9pm: Fed Beige Book