Wed, Nov 30, 2022 @ 13:21 GMT
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European Market Update: Markets Lacked Strong Conviction Ahead Of US Holiday

Markets lacked strong conviction ahead of US holiday

Notes/Observations

Quiet session ahead of US President Day holiday on Monday. Upcoming elections in Europe and uncertainty over Trump’s policies providing some decreased risk appetite

UK Jan retail sales data misses expectations

Overnight:

Asia:

Japan Fin Min Aso: Planning to start economic dialogue with Trump administration in April; have not decided on specific contents

US, South Korea and Japan foreign Ministers condemn in strongest terms the recent North Korea’s ballistic missile test

Europe:

ECB’s Coeure (France): Exit option for countries from Euro Zone would create permanent impairment of ECB’s monetary policy transmission mechanism

EU’s Juncker: Not confident that agreement can be reached about Brexit conditions in 2 years. At least 20,000 laws had to be changed in Britain before it could leave the bloc

Americas:

(US) President Trump intends to rescind travel order in near future and replace with ‘substantially revised’ order; US Appeals Court puts proceedings over current Trump travel ban on hold, pending further developments on new executive order

(US) President Trump’s choice as replacement for National Security Adviser, Robert Harward, has turned down the offer; nominates Alexander Acosta as Labor Secretary

Economic data

(SE) Sweden Jan CPI M/M: -0.7% v -0.7%e; Y/Y: 1.4% v 1.5%e

(SE) Sweden Jan CPI CPIF M/M: -0.7% v -0.7%e; Y/Y: 1.6% v 1.7%e

(EU) Euro Zone Dec Current Account (Seasonally Adj): €31.0B v €36.4B prior; Current Account NSA (unadj): €47.0B v €40.8B prior

(ES) Bank of Spain (BOS): Dec Bad loans at 9.1% v 9.2% prior

(UK) Jan Retail Sales (Ex-Auto Fuel) M/M: -0.2% v +0.7%e; Y/Y: 2.6% v 3.9%e

(UK) Jan Retail Sales (including Auto/Fuel) M/M: -0.3% v +1.0%e; Y/Y: 1.5% v3.4%e

Fixed Income Issuance:

(ZA) South Africa sold total ZAR80M vs. ZAR650M indicated in I/L 2025, 2029 and 2033 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.6% at 3289, FTSE -0.2% at 7266, DAX -0.5% at 11702, CAC-40 -0.9% at 4855, IBEX-35 -0.7% at 9484, FTSE MIB -1.0% at 18896, SMI -0.3% at 8444, S&P 500 Futures -0.3%]

Equities

Materials: [Essentra ESNT.UK +2.0% (Earnings)]

Industrials: [Heijmans HEIJ.NL +6.5% (Analysts upgrade)]

Financials: [Allianz ALV.DE +2.7% (Earnings, Buyback)]

Healthcare: [Astrazeneca AZN.UK +1.5% (Lynparza meets primary endpoint) ]

Energy: [Vopak VPK.NL -9% (Earnings)]

Speakers

ECB’s Lane (Ireland): No need to give up forward policy guidance and saw n o reason seen to turn off policy accommodation. Monetary policy to target inflation but did not expect to cut Deposit Rate again

Turkey Dep PM Simsek:Jan indicators pointed towards moderate economic growth. Domestic demand seen growing moderately but must create 700-800K jobs to reduce the unemployment rate (**Note: Nov Unemployment Rate: 12.1%)

Iceland Stats Agency saw 2017 GDP growth seen at 4.3%

Japan PM Abe reiterated that US and Japan agreed that G20 and G7 finance ministers should discuss FX; did not discuss topic with Trump at all at recent meeting

China Securities Regulatory Commission (CSRC) adjusted rules for refinancing which would now cap private share sales amount at 20% of total shares outstanding under the new rule

Philippines Central Bank’s Guinigundo: Monitoring CPI pressure from weak PHP currency (Peso)

Fitch affirmed New Zealand sovereign rating at AA; outlook stable

Currencies

FX majors were mainly stuck in narrow ranges in the absence of meaningful data with USD index stuck near 1-week lows. US yields brushed off upbeat data which capped the USD uptrend. Dealers noted that upcoming elections in Europe will drive currency volatility in coming weeks and uncertainty over Trump’s policies seen capping the USD for the time being

The GBP currency was softer after Jan UK retail sales missed expectations coupled with lower back-month revisions. GBP/USD fell by 0.5% to test 1.2420.

Fixed Income:

Bund futures trade at 164.23 up 39 ticks back above 164 as the curve flattens on risk off trade with French election developments weighing on sentiment. A continued move higher targets 164.94. Support moves to 163.62 then 163.13, 162.92 followed by 162.44.

Gilt futures trade at 126.22 up 32 ticks trading higher with the overall risk off tone as well as weaker Jan Retail sales numbers of out the UK. Resistance moves to 126.70 followed by 127.16. Support stands at 124.91 followed by 124.46. Short Sterling trade flat to up 3 bp with the curve flattening. Jun17Jun18 trades lower to 15/16bp.

Friday’s liquidity report showed Thursday’s excess liquidity fell to €1.300T down €28B from €1.328T prior. Use of the marginal lending facility falls to €52M from €137M prior.

Corporate issuance saw $800M come to market via 2 issuers in a quiet day, bringing weekly issuance to $23.1B. For the week ending Feb 15th Lipper fund flows reported IG fund net inflows of $3.05B bringing YTD inflows to $20.34B. High yield funds net inflows $157.70M bringing YTD inflows to $890.1M.

Looking Ahead

06:00 (PT) Portugal Jan PPI M/M: No est v 1.0% prior; Y/Y: No est v1.7% prior

06:00 (UK) DMO to sell combined £2.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.0B respectively)

06:30 (IN) India Weekly Forex Reserves

06:30 (IS) Iceland cancelled planned Bond auction

06:45 (US) Daily Libor Fixing

07:30 (BR) Brazil Jan Current Account: -$5.4Be v -$5.9B prior; Foreign Direct Investment (FDI): $9.3Be v $15.4B prior

08:00 (RU) Russia Jan Industrial Production Y/Y: 3.0%e v 3.2% prior

08:00 (PL) Poland Jan Sold Industrial Output M/M: -3.3%e v -4.3% prior; Y/Y: 8.1%e v 2.3% prior, Construction Output Y/Y: -1.7%e v -8.0% prior

08:00 (PL) Poland Jan PPI M/M: 0.3%e v 1.0% prior; Y/Y: 3.7%e v 3.0% prior

08:00 (PL) Poland Jan Retail Sales M/M: -24.4%e v 21.3% prior; Y/Y: 7.7%e v 6.4% prior, Real Retail Sales Y/Y: 7.2%e v 6.1% prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (CA) Canada Dec Int’l Securities Transactions (CAD): No est v 7.2B prior

09:00 (BE) Belgium Feb Consumer Confidence: No est v 0 prior

10:00 (US) Jan Leading Index: 0.5%e v 0.5% prior

10:00 (CO) Colombia Dec Trade Balance: -$0.7Be v -$1.3B prior; Imports: $4.0Be v $4.2B prior

11:00 Potential sovereign ratings (Moody’s on Spain and United States Sovereign Debtl Fitch on Finland Sovereign and Canadian rating agency DBRS on Netherlands Sovereign Debt

13:00 (US) Weekly Baker Hughes Rig Count

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