Euro Zone Jan Core CPI Registers A Slight Improvement, Focus On Upcoming US Jobs Report

Notes/Observations

• European Manufacturing PMI data mixed in session (Beats: Spain, Norway, Poland, Hungary; Misses: Germany Italy, UK, Netherlands; South Africa, Russia; in-line: Euro Zone, France, Sweden)
• Euro Zone Core CPI comes in above expectations while headline inflation remained below the ECB target level for the 2nd straight month
• Positive sound bites stemming from recent US-China trade talks helping risk appetite
• Focus on upcoming US jobs report for Dec (Note: furloughed govt workers in period will not be counted as unemployed since they will receive back pay)
• Chinese markets to be closed from Feb 4-8th for Lunar New Year holiday

Asia:

• China: US trade talks make important progress; China to expand imports of US services. To buy ‘substantially’ more agricultural and energy goods from the US. To improve cooperation on intellectual property rights (IPR) protection. Trump told China Vice Premier Liu He a US trade delegation led by USTR Lighthizer, Treasury Sec Mnuchin will visit China in mid-Feb for trade talks
• China Jan Caixin PMI Manufacturing registered its 2nd straight contraction and weakest reading in ~3-years (48.3 v 49.6e)
• Japan Jan Final Manufacturing PMI revised higher but still hitting a 29-month low (50.3 v 50.0 prelim)
• Japan Dec Jobless Rate better than expected and registered its 1st improvement in 3 months (2.4% v 2.5%e)
• South Korea Jan CPI hits a 1-year low (M/M: -0.1% v +0.4%e; Y/Y: 0.8% v 1.3%e)

Europe:

• UK Cabinet ministers said to be increasingly expecting a Brexit delay; about a third of the Cabinet expect an Article 50 extension
• Greece said to be lagging behind commitments to implement a series of prior actions needed for a post bail out tranche of €1.0B

Americas:

• President Trump: I think ‘something will happen’ on China trade deal; seeking a ‘very big deal’ with China; we’ll either get a big deal with China or we’ll postpone it for a little while. Believed could get China deal done by March 1st but ‘might not be completely written down’ by then; might need to extend past deadline to finalize details
• US Trade Rep Lighthizer: Believes progress had been made in China trade talks following had two intense days of discussions. To stayed focused on structural issues and enforcement

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.1% at 359.2, FTSE +0.7% at 7017, DAX 0.0% at 11178, CAC-40 +0.1% at 4997, IBEX-35 -0.4% at 9018, FTSE MIB +0.1% at 19753, SMI +0.1% at 8979, S&P 500 Futures flat]
• Market Focal Points/Key Themes: European Indices trade mixed amid a busy week for corporate earnings and positive comments from China Vice Premier Liu and US Trade Rep Lighthizer, commenting that they are hopeful of a trade deal. On the corporate front Deustche Bank trades lower after reporting a Q4 loss and Revenue which fell short of consensus. Novo Nordisk, Danske, DWS, JC Decaux rise on positive earnings; Electrolux is another notable riser on earnings and planned separation of group and spinoff. Meanwhile Signify trades lower after Revenues missed forecasts, Deutsche Wohnen also falls following a stake sale by Vonovia. In the US, Amazon shares weigh on the Nasdaq after the company guided light for the next quarter citing unfavorable currency headwinds. Looking ahead notable earners include Honeywell, Cigna, Merck, Exxon and Chevron among others.

Equities

• Energy: Fortum [FUM1V.FI] +2% (earnings)
• Healthcare: Novo Nordinsk [NOVOB.DK] +2% (earnings)
• Utilities: SSE [SSE.UK] +1.5% (divestment)
• Financials: Deutsche Bank [DBK.DE] -1.5% (earnings; CEO comments), Danske Bank [DANSKE.DK] +1% (earnings), DWS [DWS.DE] +0.5% (earnings), BBVA [BBVA.ES] +1% (earnings), Banco Sabadell [SAB.ES] +1.5% (earnings), CaixaBank [CABK.ES] -6% (earnings)
• Telecom: TalkTalk [TALK.UK] -7.5% (trading update)
• Industrials: Signify [LIGHT.NL] -4.5% (earnings), Electrolux [ELUXB.SE] +9.5% (earnings), Daimler [DAI.DE] +2.5% (analyst action)
• Technology: Sophos [SOPH.UK] -1.5% (Symantec earnings)
• Materials: Glencore [GLEN.UK] -0.5% (trading update)

Speakers

• German Justice Min Barley reiterated EU stance that did not see any other proposition for Irish border other than the backstop
• Ireland Mcentee reiterated stance that both the Ireland Govt and EU were clear that Brexit deal could not be reopened; technology was not the answer to the backstop issue. Extension of Article 50 would require asking what the delay would achieve but saw no point in asking for an extension if ended up in the same place 3 month later
• EU-27 member States said to give Britain visa-free travel even after a no-deal Brexit outcome
• Romania Central Bank’s Daianu: Large rate hikes would harm the domestic economy
• India Acting Fin Min Goyal Budget Speech noted that it aimed to double farmers income by 2022. Forecasted FY19/20 budget deficit to GDP at 3.4%

Currencies/Fixed Income

• The USD was mixed against the major pairs but held to relatively tight ranges ahead of the US jobs report for January.
• The EUR/USD was fractionally higher at 1.1470 aided a bit in sentiment after Euro Zone Jan Core CPI came in above consensus. The headline inflation for the region remained below the ECB target level for the 2nd straight month.
• GBP/USD was softer by 0.2% and back below the 1.31 level as EU awaited clarify from the UK on what is desired by Britain to move towards conclusion of the Brexit process – USD/JPY was little changed as the yen did not sell off as sentiment on the recent US-China trade seemed positive
• The Italian 10-year BTP yield was higher by over 10bps with some chatter making the rounds that Italy govt would need to make added budget adjustments given the recent soft batch in data

Economic Data

• (IE) Ireland Jan Manufacturing PMI: 52.6 v 54.5 prior (68th month of expansion but lowest since Oct 2016)
• (RU) Russia PMI Manufacturing: 50.9 v 51.4e (4th month of expansion)
• (CH) Swiss Jan SECO Consumer Confidence: -4 v -5
• (TR) Turkey Jan PMI Manufacturing: 44.2 v 44.2 prior
• (SE) Sweden Jan PMI Manufacturing: 51.5 v 51.5e
• (CH) Swiss Dec Real Retail Sales Y/Y: -0.3% v 0.0%e
• (TH) Thailand Jan Business Sentiment Index: 50.0 v 49.5 prior
• (CN) Weekly Shanghai copper inventories (SHFE): 142.7K v 119.7K tons prior
• (FR) France Dec YTD Budget Balance: -€76.1B v -€95.6B prior
• (NL) Netherlands Jan Manufacturing PMI : 55.1 v 56.8e (65th month of expansion)
• (NO) Norway Jan PMI Manufacturing: 58.3 v 55.5e (7th month of expansion) 5e
• (PL) Poland Jan Poland PMI Manufacturing: 48.2 v 48.0e (3rd straight contraction)
• (HU) Hungary Jan Manufacturing PMI: 54.0 v 52.5e (38th month of expansion)
• (HU) Hungary Nov Final Trade Balance: €0.5B v €0.5B prelim
• (RU) Russia Narrow Money Supply w/e Jan 18th (RUB): 10.24T v 10.38T prior
• (ES) Spain Jan Manufacturing PMI: 52.4 v 50.5e (63rd month of expansion)
• (CZ) Czech Republic Jan PMI Manufacturing: 49.0 v 49.5e (2nd straight contraction and lowest since Jan 2013
• (CH) Swiss Jan PMI Manufacturing: 54.3 v 56.4e
• (IT) Italy Jan Manufacturing PMI: 47.8 v 48.8e (4th straight contraction and lowest since May 2013)
• (FR) France Jan Final Manufacturing PMI: 51.2 v 51.2e (confirmed move back into expansion)
• (DE) Germany Jan Final Manufacturing PMI: 49.7 v 49.9e (confirmed 1st contraction in 49 months and lowest since Nov 2014)
• (EU) Euro Zone Jan Final Manufacturing PMI: 50.5 v 50.5e(confirmed 67th month of expansion but lowest since Nov 2014)
• (GR) Greece Manufacturing PMI: # v 53.8 prior (20th month of expansion)
• (NO) Norway Jan Unemployment Rate: 2.6% v 2.5%e
• (ZA) South Africa Jan Manufacturing PMI: 49.9 v 50.5e (moved back into contraction)
• (UK) Jan PMI Manufacturing : 52.8 v 53.5e (30th month of expansion)
• (EU) Euro Zone Jan Advance CPI Estimate Y/Y: 1.4% v 1.4%e; CPI Core Y/Y: 1.1% v 1.0%e
• (DK) Denmark Jan PMI Survey: 51.1 v 57.5 prior

Fixed Income Issuance

• (IN) India sold total INR120B vs. INR120B indicated in 2021, 2027, 2031, 2035 and 2044 bonds
• (ZA) South Africa sold ZAR650M vs. ZAR650M indicated in I/ L 2029, 2033 and 2050 bonds

Looking Ahead

• (RU) Russia Dec Sovereign Wealth Funds: Wellbeing Fund: $58.1B prior
• (IT) Italy Jan Budget Balance: No est v €12.2B prior
• (RO) Romania Jan International Reserves: No est v $36.8B prior
• (ZA) South Africa Jan Naamsa Vehicle Sales Y/Y: % v 0.1%e
• 05:30 (PL) Poland to sell Bonds
• 06:00 (BR) Brazil Dec Industrial Production M/M: -0.1%e v +0.1% prior; Y/Y: -3.9%e v -0.9% prior
• 06:00 (UK) DMO to sell €4.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £1.5B respectively)
• 06:30 (IN) India Weekly Forex Reserves w/e Jan 25th: No est v $396.7B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil Jan PMI Manufacturing: No est v 52.6 prior
• 08:00 (CZ) Czech Jan Budget Balance (CZK): No est v 2.9B prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (ES) Spain Debt Agency (Tesoro) announces of upcoming issuance
• 08:30 (US) Jan Change in Nonfarm Payrolls: +165Ke v +312K prior; Change in Private Payrolls: +175Ke v +301K prior; Change in Manufacturing Payrolls: +19Ke v +32K prior
• 08:30 (US) Jan Unemployment Rate: 3.9%e v 3.9% prior; Underemployment Rate: No est v 7.6% prior; Labor Force Participation Rate: 63.0%e v 63.1% prior
• 08:30 (US) Jan Average Hourly Earnings M/M: 0.3%e v 0.4% prior; Y/Y: 3.2%e v 3.2% prior; Average Weekly Hours: 34.5e v 34.5 prior
• 08:30 (CA) Canada Dec MLI Leading Indicator M/M: no est v -0.1% prior
• 09:30 (CA) Canada Jan Manufacturing PMI: No est v 53.6 prior
• 09:45 (US) Jan Final Markit Manufacturing PMI: 54.9e v 54.9 prelim
• 10:00 (US) Jan ISM Manufacturing: 54.0e v 54.1 prior; Prices Paid: 54.3e v 54.9 prior
• 10:00 (US) Nov Construction Spending M/M: +0.2%e v -0.1% prior
• 10:00 (US) Jan Final University of Michigan Confidence: 90.7e v 90.7 prelim
• 10:00 (MX) Mexico Dec Total Remittances: $3.0Be v $2.9B prior
• 10:00 (MX) Mexico Central Bank Economist Survey
• 10:30 (MX) Mexico Jan PMI Manufacturing: No est v 49.7 prior
• 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Finland; DBRS on Ireland)
• 12:00 (IT) Italy Jan New Car Registrations Y/Y: No est v 2.0% prior
• 12:00 (BR) Brazil Jan Tax Collections (BRL): No est v 141.5B prior
• 13:00 (MX) Mexico Jan IMEF Manufacturing Index: 49.5e v 49.3 prior; Non- Manufacturing Index: 49.5e v 49.4 prior
• 13:00 (US) Weekly Baker Hughes rig count data
• 14:00 (BR) Brazil Jan Monthly Trade Balance: No est v $6.6B prior; Total Exports: No est v $19.6B prior; Total Imports: No est $12.9B prior