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European Market Update: Quiet Start To Trading Week

Quiet start to trading week




Japan Jan Trade Balance registers its first deficit in 5 months as imports rise for 1st time in over two years


ECB’s Lautenschlaeger (Germany) welcomed the recent rise in inflation but added it was too soon for any rate move. Hoped the ECB could scale down its bond-buying program before year-end but not raise interest rates.

German Chancellor Merkel reiterated view that ECB tailored its policies for all of Europe and not strictly to Germany

German Fin Min Schaeuble: Greece would not have any problems if it implemented the agreed-upon reforms

German DBB union says wages for 2M civil servants to rise 2% this year and by 2.35% in 2018

Matteo Renzi has resigned as leader of Italy’s ruling Democratic Party; in a bid to win a fresh, stronger mandate before parliamentary elections (**Note: move seen as setting up a leadership battle that could hoist him back into the nation’s highest office)

European Commission to warn Italy on Wed, Feb 22nd about disciplinary measures for not meeting public debt reduction targets unless deficit is reduced as promised

Canadian ratings agency DBRS affirmed Netherlands sovereign rating at AAA; stable trend

UK House of Lords begins two days of Brexit debate on article 50


Fed’s Mester (hawkish, non-voter): Would be comfortable raising rates at this point if economy keeps current pace of performance; Fed not behind the curve on rates

Economic data

(DE) Germany Jan PPI M/M: 0.7% v 0.3%e; Y/Y: 2.4% v 2.0%e

(FI) Finland Jan CPI M/M: -0.6% v +0.2% prior; Y/Y: 0.8% v 1.0% prior

(JP) Japan Jan Convenience Store Sales Y/Y: 0.1% v 0.5% prior

(TR) Turkey Feb Consumer Confidence: 66.7 v 68.0e

(TW) Taiwan Jan Export Orders Y/Y: 5.2% v 7.4%e

(HK) Hong Kong Jan Unemployment Rate: 3.3% v 3.3%e

Fixed Income Issuance:-

None seen


Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.4% at 3,315, FTSE flat at 7,301, DAX +0.6% at 11,826, CAC-40 +0.1% at 4,874, IBEX-35 +0.4% at 9,541, FTSE MIB +0.1% at 19,032, SMI +0.3% at 8,532, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European equity indices are trading generally higher in the morning session after an overall positive end to the Asian session overnight; shares of Deutsche Telekom leading the gains seen in the Eurostoxx after Softbank was reported to approach the company on merger of Sprint and TMUS; shares of Unilever however trading sharply lower, rebounding all of Friday’s gains after Kraft withdrew its $143B takeover offer over the weekend; Banking stocks trading generally higher across the board; shares of RBS the notable gainer in the FTSE 100 after the company issued an update on remaining State Aid obligation; Commodity and mining stocks trading generally higher in the index as oil and commodity prices trade higher intraday.

No upcoming scheduled US earnings today due to Presidents’ Day holiday.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Bovis Homes BVS.UK -9.7% (FY16 results), Telegraaf Media Groep TMG.NL +3.8% (increased conditional proposal from Mediahuis/VPE of €5.90/share), Unilever UNA.NL -6.3% (Kraft steps down from merger talks)]

Energy: [CGG CGG.FR -2.5% (extends consent solicitation deadline for 2017 bondholders)]

Financials: [RBS RBS.UK +5.7% (Confirms RBS’s remaining State Aid obligation; takes £750M provision for William & Glyn sale plan)]

Healthcare: [AstraZeneca AZN.UK -0.2% (Licenses Zoladex to TerSera)]

Industrials: [Boskalis BOKA.NL -5.2% (to report non-cash impairment of €840M in FY16 results), LifeWatch LIFE.CH -1.2% (Discloses terms of public takeover offer from Aevis at CHF12.40-13.60/shr), Vedanta VED.UK -0.1% (Q3 results)]

Materials: [Covestro 1COV.DE -3.7% (Q4 results), Pan African Resources PAF.UK -8.3% (mining accident, cuts gold production)]

Telecom: [Deutsche Telekom DTE.DE +3.3% (Softbank reportedly approached Deutsche Telecom on merger of Sprint with T Mobile US)]


EU Commission President Juncker could step down from position as soon as March. EU official later refuted the speculation as ‘fabrication’ (**Note: On Feb 16th reports circulated that EU’s Juncker would not seek 2nd term in 2019)

Singapore Finance Ministry presented its 2017 Budget which would address weakness in marine and construction sectors and bring forward S$700M in projects to start in FY17 and FY18

Saudi Arabia Dec oil production at 10.465M bpd, -255K bpd – JODI


FX markets were basically locked within recent ranges in quiet trade with overall global participation low alongside the US markets closed for the Presidents’ Day holiday. The USD retraced some of its recent strength as dealers debated the possibility of the next Fed rate hike being pushed back to May instead of March

EUR/USD was holding above the 1.06 level but faced headwinds as the pair struggled for traction after suffering significant losses at the end of last week on renewed concerns about the upcoming French elections

Fixed Income:

Bund futures trade at 164.40 down 3 ticks in quiet trade with the US cash markets shut in observance of Presidents day. Continuation of the recent uptrend targets Friday high at 164.64 followed by 164.94. Support moves to 164.05 then 163.62, 163.13, 162.92 followed by 162.44.

Gilt futures trade at 126.25 down 16 ticks drifting off 126.37 high in quiet trade tracking Bunds lower. Resistance remains at 126.70 followed by 127.16. Support moves to 162.05 followed by 125.63 then 125.30. Short Sterling trades virtually flat across the curve. Jun17Jun18 trades lower to 12/13bp.

Monday liquidity report showed Friday’s excess liquidity rose to €1.302T up €2B from €1.300T prior. Use of the marginal lending facility rose to €623M from €52M prior.

Corporate issuance saw last week ended at $23B via 31 tranches, with February volume at $47.9B order. For the week ahead, analysts expect between $15-20B to come to market. In Euro denominated issuance, just shy of €20B came to market last week with three part offerings Mckesson and Pemex some of the notable issuers last week.

Looking Ahead

(GR) Eurogroup on Greece – (UK) House of Lords begins debate on Article 50 Bill

(IL) Israel Feb 12-month CPI Forecast: No est v 0.7% prior

(BR) Brazil Jan Total Federal Debt (BRL): No est v 3.113T prior

05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

05:30 (PL) Poland to sell Bills

06:00 (UK) Feb CBI Industrial Trends Total Orders: 4e v 5 prior, Selling Prices: No est v 28 prior

06:00 (IL) Israel Dec Manufacturing Production M/M: No est v 3.3% prior

06:00 (IL) Israel to sell Bonds

06:25 (BR) Brazil Central Bank Weekly Economists Survey – 06:45 (US) Daily Libor Fixing

07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

07:00 (DE) German Fin Min Schaeuble at Belgium business lobby

08:00 (RU) Russia Jan Unemployment Rate: 5.4%e v 5.3% prior, Real Disposable Income: -2.9%e v -6.1% prior, Real Wages Y/Y: 1.9%e v 2.4% prior

08:00 (RU) Russia Jan Real Retail Sales M/M: -27.0%e v +18.3% prior; Y/Y: -5.1%e v -5.9% prior

08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week

08:15 (UK) Baltic Dry Bulk Index

08:30 (CA) Canada Dec Wholesale Trade Sales M/M: 0.4%e v 0.2% prior

08:50 (FR) France Debt Agency (AFT) to sell €5.3-6.5B in 3-month, 6-month and 12-month Bills

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

09:50 (UK) Bank of England Bond Buying Operation (APF Gilt purchase operation between 3-7 years)

10:00 (EU) Euro Zone Feb Advance Consumer Confidence: -4.8e v -4.7 prior

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