Notes/Observations
- European economic data remains weak (Germany Dec Industrial Production misses expectations)
- EU Commission Winter forecasts slashed 2019 growth outlook for the region as well for Germany and Italy
- India Central Bank (RBI) cuts Repurchase Rate by 25bps to 6.00% (not expected) for its 1st hike since Oct 2016; changes policy stance to neutral from calibrated tightening
- Central banks have adopted a move dovish stance lately (Fed, ECB, RBA, RBI)…BOE next????)
Asia:
- New Zealand Q4 Unemployment Rate: 4.3% v 4.1%e
Europe:
- PM May said to be planning the second Brexit vote for the week of Feb 25th; ministers believed this means extending Article 50 was now inevitable
- Labour’s Corbyn sent letter to PM May with 5 Brexit demands in order for Labour to support a Brexit deal
Americas:
- Fed’s Quarles: We have better tools on monetary policy to address financial stability concerns. Labor market extremely solid, inflation remains muted; China was a downdraft as contemplating any possible spillover for the US -Fed’s Powell noted that the US economy was in a good place but lagging labor force participation was a concern
- Brazil Central Bank (BCB) left the Selic Target Rate unchanged at 6.50% (as expected) fir its 7th straight pause in the current easing cycle
Macro
- (UK) United kingdom: Halifax’s measure of house prices fell sharply by -2.9% m/m in January, according to the Halifax measure for January. Inventory levels of property to sell remained low but new buyer inquiries fell for a fifth month. In the three months to December, prices fell -0.6%, while prices rose 0.8% in the annual comparison.
- (DE) Germany: Industrial production fell -0.4% m/m in December against expectations of a 0.9% rebound, thus marking the fourth consecutive month of decline for overall production. The breakdown also showed the production ex-construction actually ticked up 0.2% m/m, the first improvement since august. Production fell -1.5% q/q in Q4, this was actually already a slight improvement versus the -1.7% q/q print in Q3. Brexit risks and rising global protectionism still weighs then on the German manufacturing sector.
- (UK) United kingdom: No changes to the base rate and QE are expected from the BOE today, and by unanimous votes at the nine-member committee, with Brexit uncertainty keeping the MPC on the sidelines. The BoE will also publish its latest quarterly Inflation Report, which will provide updates on its growth and inflation outlooks. GDP and CPI projections should be trimmed relative to those given in the last Inflation Report in November.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.17% at 364.90, FTSE +0.10% at 7,179.93, DAX -0.50% at 11,268.51, CAC-40 -0.28% at 5,064.98, IBEX-35 -0.56% at 9,050.00, FTSE MIB -0.46% at 19,904.50, SMI +0.14% at 9,155.50, S&P 500 Futures -0.22%]
- Market Focal Points/Key Themes: Equities European Indices trade lower across the board with the Dax and Ibex under performing, as US Index futures trade slightly lower following a lower close yesterday. On the Macro front PM May is due to travel to Brussels to try renegotiate the backstop, while the EU Commission cut GDP growth forecasts across Europe. On a heavy day for corporate earnings shares of Publicis trade sharply lower, falling over 12% marking the worst day in 27 years as Q4 organic revenue growth fell far short of estimates. Elsewhere ArcelorMittal trades lower after missing revenues, while Norsk Hydro also declines sharply following a top and bottom line miss. Other notable decliners include TUI Group, GEA Group, Voestalpine and Swisscom among others. Meanwhile Thomas Cook trades higher on upbeat guidance, with Sanofi edges higher following inline results; FTSE component Compass group also trades higher after strong organic sales numbers. Other notable gainers include Smith & Nephew, Unicredit, Pernod Ricard and ICA Gruppen among others. Looking ahead notable earners include Tyson Foods, Kellogg, T-Mobile, Tapestry and Philip Morris among others.
- Consumer discretionary: Thomas Cook [TCG.UK] +17% (earnings; strategic review), Publicis [PUB.FR] -12%, WPP [WPP.UK] -6% (Publicis earnings), Pernod-Ricard [RI.FR] +2% (earnings), TUI [TUI.UK] -17% (profit warning), Superdry [SDRY.UK] -1% (trading update), Norwegian Air [NAS.NO] -5% (earnings; denies acquisition talks)
- Consumer staples: Tate & Lyle [TATE.UK] +1% (trading update), Cranswick [CWK.UK] -20% (trading update), ICA Gruppen [ICA.DE] +6% (earnings)
- Energy: Total [FP.FR] -1% (earnings), Norsk Hydro [NHY.NO] -9% (earnings)
- Financials: Societe Generale [GLE.FR] -1% (earnings), Unicredit [UCG.IT] +4% (earnings)
- Healthcare: Sanofi-Aventis [SAN.FR] +1% (earnings)
- Industrials: Interserve [IRB.UK] -5% (shareholder against restructuring), GEA Group [G1A.DE] -13% (prelim earnings)
- Technology: accesso Technology Group [ACSO.UK] -31% (trading update)
- Materials: Voestalpine [VOE.AT] -5% (earnings)
- Telecom: Swisscom [SCMN.CH] -2% (earnings)
Speakers
- ECB Economic Bulletin noted incoming information had surprise to the downside; economic indicators signaled a moderation in global growth momentum (in-line with Draghi press conference). Economic downside risks had been increasing. Private consumption was expected to regain momentum. Rising labor costs pressures did not translate into further increase in overall domestic price pressures
- EUCommission Winter Economic Forecasts cut EU-19 GDP growth forecasts for both 2019 and 2020. Cut EU-19 GDP from 1.9% to 1.3% and 2020 from 1.7% to 1.6%. EU also cut Germany GDP from 1.8% to 1.1% but maintained the 2020 growth at 1.7%. As speculated EU slashed Italy’s 2019 GDP from 1.2% to 0.2%
- EU’s Moscovici: Economic deceleration set to continue in 2019 with the slowdown to be more pronounced than expected
- UK Govt official Lidington (de facto Dep PM): No plans yet to meet Labour on Corbyn proposal in order to accept any Brexit plan; could hold talks in an attempt to find a compromise. UK could not be trapped in an indefinite backstop; PM May is open to options
- EU’s Katainen: Brexit negotiations were as messy as they appear
- Italy PM Conte confirmed that 2019 GDP growth maintained at 1.0%
- France Survey of Industrial Investment: Companies raised their plan to increase investment by 10% from 4% prior (would be the highest level since 2011)
- German Association of Chambers of Trade and Industry (DIHK) cuts Germany’s 2019 GDP growth forecast from 1.7% to 0.9%
- India Central Bank (RBI) Policy Statement noted that the decision to cut rates was not unanimous (4-2) with dissenters looking for a hold). Shift policy stance from calibrated tightening to neutral to provide flexibility to address challenges to sustain growth in coming months Decision to cut rates in consonance with objective of achieving medium term CPI inflation target while supporting economic growth. Inflation projected to remain soft in the near-term but warrants careful monitoring
- India Central Bank (RBI) GoV Das post rate decision press conference noted that it had room to act if CPI inflation remained below 4.0%; any decision to be data driven
- Philippines Central Bank (BSP) Policy Statement noted that it was prepared to take further policy action as appropriate. Risks to inflation outlook were tilted to the downside and saw inflation expectations declining further. BSP now saw CPI below the upper end of the target level of 4.0% by March. Inflation seen settling within the 2.0-4.0% target range for both 2019 and 2020. Domestic demand was strong
Currencies/Fixed Income
- Central banks have adopted a move dovish stance lately (Fed, ECB, RBA, RBI)…BOE next????). USD higher for the 6th straight session.
- EU Commission’s winter forecasts slashed its forecasts and this could affect the European Central Bank’s policy as it would be scrutinized for more insight into the EU’s economic outlook this year. German industrial output data contributes fresh evidence of an economic slowdown in Germany. EUR/USD holding above the 1.13 level just ahead of the US morning.
- Going into today’s BOE meeting analysts see a 50-50 change that MPC would also drop their tightening bias altogether and move to neutral. GBP/USD at 2-week lows. GBP/USD hovering around 1.29 in the session.
Economic Data
- (ZA) South Africa Jan Gross Reserves: $50.8B v $51.6B prior; Net Reserves: $43.6B v $43.1B prior
- (IN) India Central Bank (RBI) cuts Repurchase Rate by 25bps to 6.00% (not expected) for its 1st hike since Oct 2016; changes policy stance to neutral from calibrated tightening
- (DE) Germany Dec Industrial Production M/M: -0.4% v +0.8%e; Y/Y: -3.9% v -3.4%e
- (NO) Norway Dec Industrial Production M/M: -1.0% v -1.5% prior; Y/Y: 1.2% v 2.6% prior
- (NO) Norway Dec Manufacturing Production M/M: 0.5% v 0.3%e; Y/Y: 2.5% v 2.8% prior
- (FI) Finland Dec Preliminary Trade Balance: -€0.4B v -€0.0B prior
- (DK) Denmark Dec Industrial Production M/M: 12.6% v 0.6% prior
- (CH) Swiss Q4 UBS Real Estate Bubble Index: 0.87 v 0.87 prior
- (FR) France Dec Trade Balance: -€4.7B v -€4.6Be
- (FR) France Dec Current Account Balance: -€1.1B v -€2.8B prior
- (AT) Austria Jan Wholesale Price Index M/M: -0.6% v -2.2% prior; Y/Y: 0.8% v 2.2% prior
- (ES) Spain Dec Industrial Output NSA Y/Y: -4.2% v -3.2% prior; Industrial Output SA Y/Y: -6.2% v -2.2%e; Industrial Production M/M: +2.5% v 0.4%e
- (CH) Swiss Jan Foreign Currency Reserves (CHF): 741.5B v 731.3Be
- (HU) Hungary Dec Industrial Production M/M: +2.5% v -1.1% prior; Y/Y: 5.7% v 3.0%e
- (PH) Philippines Central Bank (BSP) left the Overnight Borrowing Rate unchanged at 4.75% (as expected) for its 2nd straight pause in the current tightening cycle
- (UK) Jan Halifax House Prices M/M: -2.9% v -0.7%e; 3M/Y: 0.8% v 1.5%e
- (SE) Sweden Jan Average House Prices (SEK): 3.111M v 2.975M prior
- (SE) Sweden Jan Budget Balance (SEK): +8.7B v -78.3B prior
- (IT) Italy Dec Retail Sales M/M: -0.7% v -0.2%e; Y/Y: -0.6% v +0.8%e
- (IS) Iceland Q4 Unemployment Rate: 2.4% v 2.2% prior
- (CZ) Czech Jan International Reserves: $143.3B v $142.5B prior
- (SG) Singapore Jan Foreign Reserves: $293.9B v $287.7B prior
- FAO World Food Price Index: 164.8 v 161.8 prior; M/M: 0.2% v 0.0% prior
- (BR) Brazil Jan FGV Inflation IGP-DI M/M: 0.1% v 0.2%e; Y/Y: 6.6% v 6.7%e
- (GR) Greece Nov Unemployment Rate: 18.5% v 18.6% prior
- (RO) Romania Central Bank (NBR) leaves Interest Rates unchanged at 2.50%; as expected
Fixed Income Issuance
- (ES) Spain Debt Agency (Tesoro) sold total €3.73B vs. €3.0-4.0B indicated range in 2021, 2026 and 2033 bonds
- Sold €1.20B in 0.05% Oct 2021 SPGB; Avg yield: -0.086% v -0.047% prior, Bid-to-cover: 3.86x v 2.13x prior
- Sold €1.07B in 5.90% July 2026 SPGB; Avg Yield: 0.862% v 0.953% prior; Bid-to-cover: 1.85x v 1.40x prior
- Sold €1.46B in 2.35% July 2033 SPGB; Avg Yield: 1.776% v 2.116% prior; Bid-to-cover: 1.45x v 1.45x prior
- (ES) Spain Debt Agency (Tesoro) sold €B vs. €0.5-1.0B indicated range in 1.0% Nov 2030 Inflation-linked Bonds; Real Yield: 0.252% v 0.239% prior; Bid-to-cover: 2.10x v 2.15x prior
- (FR) France Debt Agency (AFT) sold total €8.998B vs. €8.0-9.0B indicated in 2028, 2030 and 2039 bonds
- Sold €4.450B in 0.75% Nov 2028 Oat; Avg Yield: 0.57% v 0.68% prior; Bid-to-cover: 2.15 v 1.71x prior
- Sold €2.884B in 2.50% May 2030 Oat; Avg Yield: 0.70% v 0.92% prior; Bid-to-cover: 1.92x v 2.05x prior
- Sold €1.664B in 1.75% Jun 2039 green Oat; Avg Yield: 1.25% v 1.34% prior; Bid-to-cover: 2.09x v 1.76x prior
- (SE) Sweden sold SEK500M vs. SEK500M indicated in 0.125% 2026 Inflation-Linked bonds; Avg Yield: -1.6130% v -1.5813% prior; Bid-to-cover: 6.03x v 2.15x prior
Looking Ahead
- (IT) Bank of Italy (BOI) on Balance-Sheet Aggregates
- (IL) Israel Jan Foreign Currency Balance: No est v $115.3B prior
- (EU) EU’s Juncker meets with UK PM May on Brexit
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills
- 05:30 (PL) Poland to sell PLN3-5B in 2021, 2024, and 2028 Bonds
- 06:00 (IE) Ireland Jan Live Register Monthly Change: No est v -3.0K prior; Live Register Level: No est v 204.0K prior
- 06:00 (ZA) South Africa Electricity Production Y/Y: No est v -0.2% prior; Electricity Consumption Y/Y: No est v 0.9% prior
- 06:30 (CL) Chile Jan Trade Balance: $1.0Be v $0.6B prior; Total Exports: $6.7Be v $6.5B prior; Total Imports: $5.7Be v $5.9B prior
- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.75%
- 07:00 (UK) Bank of England (BOE) Feb Minutes
- 07:00 (UK) Bank of England (BOE) Quarterly Inflation Report (QIR)
- 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 1.75%
- 07:00 (CL) Chile Dec Nominal Wage M/M: No est v 0.6% prior; Y/Y: No est v 4.1% prior
- 07:00 (RO) Romania Central Bank gov Isarescu to hold post rate decision press conference
- 07:15 (LX) ECB’s Mersch (Luxembourg) in Brussels
- 08:00 (PL) Poland Jan Official Reserves: No est v $117.0B prior
- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 1st: No est v $469.8B prior
- 08:00 (RU) Russia Jan Official Reserve Assets: $470.9Be v $468.5B prior
- 08:00 (UK) Baltic Dry Bulk Index
- 08:15 (CZ) Central Bank Gov Rusnok to hold post Rate Decision press conference
- 08:30 (US) Initial Jobless Claims: 221Ke v 253K prior; Continuing Claims: 1.73Me v 1.782M prior
- 08:30 (US) Weekly USDA Net Export data
- 09:00 (MX) Mexico Jan CPI M/M: 0.2%e v 0.7% prior; Y/Y: 4.5%e v 4.8% prior; CPI Core M/M: 0.2%e v 0.5% prior
- 09:15 (US5) Fed’s Kaplan in Dallas
- 09:30 (US) Fed’s Clarida on Global Factor in Neutral Rate
- 09:30 (TR) Turkey Jan Cash Budget Balance (TRY): No est v -23.7B prior
- 10:30 (US) Weekly EIA Natural Gas Storage Inventories
- 11:30 (US) Treasury to sell 4-Week and 8-week Bills
- 12:00 (CA) Canada to sell CAD3.0B in 2% 2021 Bonds
- 13:00 (US) Treasury to sell $19B in 30-Year Bonds
- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 8.25%
- 14:00 (CO) Colombia Central Bank Monetary Policy Minutes
- 15:00 (US) Dec Consumer Credit: $17.0Be v $22.2B prior
- 18:00 (PE) Peru Central Bank (BRCP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 2.75%
