Notes/Observations
Protectionism concerns weigh on markets
BOJ Gov Kuroda mentions the possibility of policy exit for the 1st time in his tenure
Busy political weekend for Europe (result of the SPD vote on whether to enter a coalition with Merkel’s CDU and Italian election)
Federal Offices closed in Washington DC on Friday due to high winds
Asia:
Japan Jan Jobless Rate at lowest level since 1993 (2.4% v 2.8%e) while job availability highest since 1974
Japan Feb Tokyo CPI data registers its highest level since March 2015 with headline at 1.4% and core at 0.9%
BOJ Gov Kuroda stated during his reappointment hearing in Parliament that would be considering an exit in its loose monetary around Fiscal 2019/20 because of the chances of hitting inflation target at that time (**Note: 1st time ever BOJ has mention any potential timing of exit)
Europe:
ECB unlikely to signal any policy changes at March 8th meeting, but might discuss dropping easing bias language. General Council wants plenty of evidence that inflation will rise, fearing damage to its credibility if moved too early and had to reverse course.
Likelihood that ECB’s Weidmann would replace Draghi said to be increasing; His candidacy gaining support as Germany agreed to support Spain’s De Guindos as next ECB Vice President
PM May said to warn that warns the EU that relations will "break down" unless it respects the wishes of the British people. Will set out ‘five tests’ for a successful Brexit. Brexit result was a decision to "take back control of our borders, laws and money"
EU’s Juncker: EU will "react firmly" to Trump administration tariffs; will bring forward countermeasures. To put forward a proposal for WTO-compatible countermeasures against the United States in the next few days to rebalance the situation
Spanish regional official Puigdemont confirmed he had withdrawn his candidacy for leader of Catalonia; to support Sanchez as a Presidential candidate
Americas:
President Trump: US will institute tariffs during week of March 5th; will impose 25% tariffs on steel and 10% on aluminum imports; details to be released next week
White House Economic Advisor Cohn said to be again rumored to be on the brink of leaving the White House
PIMCO economist Rich Clarida likely front runner for Fed deputy role
Economic Data:
(DE) Germany Jan Retail Sales M/M: -0.7% v +0.7%e; Y/Y: 2.3% v 3.0%e
(DE) Germany Jan Import Price Index M/M: 0.5% v 0.4%e; Y/Y: 0.7% v 0.7%e
(DK) Denmark Jan Gross Unemployment Rate: 4.1% v 4.2%e, Unemployment Rate (seasonally adj): 3.3% v 3.3% prior
(CN) Weekly Shanghai copper inventories (SHFE): 260.3K v 218.5K tons prior
(TH) Thailand Feb Business Sentiment Index: 51.4 v 52.2 prior
(ES) Spain Feb Net Unemployment M/M: -6.3K v -6.0Ke
(CZ) Czech Q4 Preliminary GDP (2nd reading) Q/Q: 0.5% v 0.5%e; Y/Y: 5.2% v 5.1%e
(BR) Brazil Feb FIPE CPI (Sao Paulo) M/M: -0.4% v -0.2%e
(HK) Hong Kong Jan Retail Sales Value Y/Y: 4.1% v 5.2%e; Retail Sales Volume Y/Y: 2.2% v 4.1%e
(NO) Norway Feb Unemployment Rate: 2.5% v 2.5%e
(IT) Italy Q4 Final GDP Q/Q: 0.3% v 0.3%e; Y/Y: 1.6% v 1.6%e
(BR) Brazil Jan Total Formal Job Creation: +77.8K v +58.0Ke
(UK) Feb Construction PMI: 51.4 v 50.5e (5th month of expansion)
(EU) Euro Zone Jan PPI M/M: 0.4% v 0.4%e; Y/Y: 1.5% v 1.6%e
Fixed Income Issuance:
(ZA) South Africa sold total ZAR430M vs. ZAR900M indicated in I/L 2029, 2033 and 2046 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -1.3% at 370.0, FTSE -0.7% at 7124, DAX -2.0% at 11952, CAC-40 -1.6% at 5176 , IBEX-35 -1.2% at 9620, FTSE MIB -1.9% at 22026 , SMI -1.1% at 8698, S&P 500 Futures -0.3%]
Market Focal Points/Key Themes: European Indices continues to trade lower across the board with the Dax dropping below 12K as possible ramifications over proposed US Steel and Aluminium tariffs weigh on markets. Asian markets were hit with notable declines in Steel names, with ArcelorMittal, Thysenkrupp some of the European names under pressure. In the earnings space, LafargeHolcim, LSE, Beterbed trade lower, while Mondi, Promimus, Eleka trade higher. Technicolor trades sharply lower in France after divesting its patent licensing business, Plus500 falls after a share placement, while Verona Pharma trades sharply higher after favorable trial data. Looking ahead notable earners include Footlocker, JC Penney and JD.com.
Movers
Consumer Discretionary [Asos [ASC.UK] -1.2% (CFO to step down), Technicolor [TCH.FR] -12% (Divests unit)]
Materials [ArcelorMittal [MT.NL] -3.5% (JV bid for Essar Steel India, US Steel Tariffs), LafargeHolcim [LHN.CJ] -4.3% (Earnings)]
Industrials [ Thyssenkrupp [TKA.DE] -2.7% Salzgitter [SZG.DE] -4.3% (US Steel Tariffs), Mondi [MNDI.UK] +1.3% (Earnings)]
Financial [LSE [LSE.UK] -2.0% (Earnings), Plus500 [PLUS.UK] -5% (Placement) ]
Healthcare [Verona Pharma [VRP.UK] +19% (Positive trial update), Shire [SHP.UK] +2.7% (Takeover chat)]
Energy [Electromagnectic Geoservices [EMGS.NO] -29% (Earnings)]
Speakers
EU Commission: Greece has completed the measures for the 3rd bailout review, ESM-backed bailout program was on track and paved the way for the next disbursement
BOE Gov Carney: Need for better regulation of cryptocurrencies; isolating crypto assets might not be the best option
EU’s Dombrovskis: Momentum in the global economy remained strong
Germany BDI Industry Association: Trump risks protectionist spiral with steel tariffs; risks a global trade war
German Association of Chambers of Trade and Industry (DIHK): Risks that tariffs will cost businesses millions
Currencies
The USD lost some ground over the past 24 hours as protectionism concerns weigh on sentiment. Dealers noted that Steel tariffs introduced by the Bush administration in 2002 did coincide with broad USD weakness around the time of the announcement
USD/JPY fell below the 106 level during that latter part of the Asian session after BOJ Gov Kuroda stated during his reappointment hearing in Parliament that would be considering an exit from its loose monetary around Fiscal 2019/20 because of the chances of hitting inflation target at that time (**Note: 1st time ever BOJ has mention any potential timing of exit)
Busy political weekend for Europe with the looming result of the SPD party vote on whether to enter a coalition with Merkel’s CDU and Italian election. Dealers noted that if SPD rejected the coalition proposal the EUR/USD could bust below the current 1.21 support and probe a few big figures lower. On the Italian election front analysts believe the risk of a hung parliament outcome remained high but the centre-right coalition had been closing the gap. The risk of a second election should not be underestimated. get an outright majority. Pair steady in today’s session at 1.2275 area.
GBP/USD was steady at 1.3780 area ahead of PM May’s Bexit speech. Press reports noted that May would warns the EU that relations would "break down" unless it respected the wishes of the British people
Fixed Income
Bund Futures trades flat at 160.04 as political risks are set to dominate the weekend headlines. Upside targets 160.25, while a return lower targets the157.75 level.
Gilt futures trade at 122.85 up 30 ticks as Gilts continue to attempt to push higher. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.85 then 123.35.
Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.879T from €1.860T prior. Use of the marginal lending facility rose to €112M from €90M prior.
Corporate issuance saw equity fund inflows of $13.3B in w/e Feb 28th vs inflows of $1.1B in w/e Feb 21st
Looking Ahead
(MX) Mexico Jan YTD Budget Balance (MXN): No est v -238.5B prior
(UK) PM May to give Brexit speech on future relationship with EU
06:00 (PT) Portugal Jan Industrial Production M/M: No est v -0.4% prior; Y/Y: No est v 1.3% prior
06:00 (PT) Portugal Jan Retail Sales M/M: No est v 0.3% prior; Y/Y: No est v 5.7% prior
06:00 (UK) DMO to sell combined £6.0B in 1-month, 3-month and 6-month Bills (£2.0B, £2.0B and £2.0B respectively)
06:30 (IN) India Weekly Forex Reserves
06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil Jan PPI Manufacturing M/M: No est v 0.3% prior; Y/Y: No est v 3.9% prior
07:00 (CL) Chile Jan Retail Sales Y/Y: 5.0%e v 4.8% prior, Commercial Activity Y/Y: No est v 3.1% prior
08:00 (SG) Singapore Feb Purchasing Managers Index (PMI): 53.1e v 53.1 prior, Electronics Sector Index: No est v 52.9 prior
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada Dec GDP M/M: 0.1%e v 0.4% prior; Y/Y: 3.3%e v 3.5% prior, Quarterly GDP Annualized: 2.0%e v 1.7% prior
09:00 (MX) Mexico Jan Leading Indicators M/M: No est v 0.08 prior
10:00 (US) Feb Final University of Michigan Confidence: 99.5e v 99.9 prelim
10:00 (DK) Denmark Feb Foreign Reserves (DKK): No est v 463.9B prior
10:00 (CO) Colombia Jan Exports: $3.4Be v $3.95B prior
11:00 (IS) Iceland Q4 Current Account (ISK): No est v 68.0B prior
11:00 (EU) Potential Sovereign ratings after European close
(RO) Romania Sovereign Debt to be rated by S&P
(SE) Sweden Sovereign Debt to be rated by S&P
(RO) Romania Sovereign Debt to Be Rated by Moody’s
(SE) Sweden Sovereign Debt to Be Rated by Moody’s
13:00 (US) Weekly Baker Hughes Rig Count data
Weekend Sun
(CH) Switzerland votes on Popular Initiatives
(DE) German SPD announces result of member vote on Coalition Pact
(IT) Italy holds elections
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