HomeContributorsFundamental AnalysisTrade Issues Remain In Focus, German Feb ZEW Survey Mixed

Trade Issues Remain In Focus, German Feb ZEW Survey Mixed

Notes/Observations

  • Trade concerns remain on the front burner
  • China-US delegation continues talks in Washington on (lower level officials on Tuesday). Focus on top level officials from Thursday/Friday with China Vice Premier Lui He attending meetings with Lighthizer and Mnuchin
  • Awaiting results of the S232 report (if made public) on the investigation of the national security risk posed by imported cars.
  • Sweden CPI data below expectations and dents expectations of the next potential Riksbank rate hike
  • German Feb ZEW survey was mixed but slight improvement in expectations survey suggests that negative factors like the rejection of the Brexit deal by the UK Parliament and weak growth from China had already been anticipated

Asia:

  • BOJ Gov Kuroda stated that might consider easing if JPY currency (Yen) movement impacted the economy and prices. Crucial to guide monetary policy with eye on economy and market moves including FX. Currency manipulation was not a target for BOJ as central banks did not link policy to FX moves
  • Japan PM Abe and US President Trump to hold phone conversation on Wed, Feb 20thahead of the North Korea summit (Reminder:2nd US/North Korea summit expected to be held in Vietnam between Feb 27-28th)
  • Japan Economy Min Motegi reiterated that was seeing some risks in outlook due to China slowdown but noted that capex overall was on an expansion trend

Europe:

  • ECB’s Praet (Belgium, Chief Economist): ECB could adapt rate guidance if economy slows sharply. General Council to reassess the outlook for bank lending in March, expected ECB Staff forecasts to be cut again in March (particularly for the near-term)
  • UK Brexit Sec Barclay: Had positive meeting with EU’s Barnier on Monday. Discussed the proposed Malthouse Compromise. Believed that UK could reach its goals on Brexit backstop without reopening withdrawal agreement. To meet again mid-week
  • EU’s Juncker: Brexit delay beyond EU election is possible. Any decision to ask for more time lies with the UK. If such a request were to be made, no one in Europe would oppose it
  • EU official: Greece is at risk of not getting some €750M in April from debt relief agreement because it had not completed agreed reforms
  • Italy said to have started discussions with the EU over the renewal of a state guarantee scheme designed to help banks and shed bad loans (NPLs)

Americas:

  • White House Press Sec Sanders: US trade meetings with China in Washington D.C to start on Tuesday, Feb 19th, US side to be led by USTR Lighthizer in the higher level talks (Note: China Vice Premier Liu He to visit the US for trade talks between Feb 21-22 (Thursday-Friday))

Macro

  • (EU) Eurozone: The current account surplus narrowed in FY18 to 3% of GDP from 3.2% of GDP in 2017. The narrowing won’t be enough to assuage critics of the Eurozone’s surplus and will do little to lessen the risk of US tariffs on auto imports from the EU. The ECB also reported that purchases of euro area portfolio investment by non-residents fell to just €38B from €374B.
  • (DE) Germany: President Trump has received the findings of a probe that examined whether imported vehicles pose a national security threat, which has sparked fresh fears that European automakers will face tariffs. Chancellor Merkel stressed over the weekend that BMW’s biggest plant is actually in South Carolina, rather than Bavaria, saying that “these cars are built in the United States of America, which are no less a threat than those built in Bavaria are suddenly a national security threat to the U.S., then that is a shock to us”. Estimates suggest that if the US imposed permanent tariffs of 25%, German car exports to the US could fall by almost 50% or about €17B.
  • (JP) Japan: BoJ Governor Kuroda said that if the yen were to strengthen and was “having an impact on the economy and prices,” and if it was considered necessary to achieve the price target, “we’ll consider easing policy.” He said that this could be by cutting short- and long-term interest rates, and/or expanding asset buying.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -0.5% at 368.1, FTSE -0.6% at 7178, DAX -0.2% at 11280, CAC-40 -0.4% at 5146, IBEX-35 -0.4% at 9118, FTSE MIB -0.8% at 20159, SMI -0.1% at 9258, S&P 500 Futures -0.2%]
  • Market Focal Points/Key Themes: Equities European Indices trade slightly lower across the board following a mixed session in Asia and slightly weaker US futures after US markets were shut for President’day on Monday. Worse then expected earnings from banking giant HSBC has set the negative tone as bank stocks trade under pressure. HSBC trades around 4% lower as profits missed estimates, elsewhere Swiss traded Danone trades lower after a slight profit miss. HeidelbergCement, Greggs, Future, dotDigital, Straumann Holding trades higher on earnings while Bakkafrost, BW Offshore, William Demant and Basilea are some of the names trading lower on earnings. In other news TomTailor trades over 10% higher after Fosun International makes €2.26/shr bid to acquire the company; Bourbon trades higher on reports creditors could make offer for the company. Looking ahead notable earners include Walmart, Cooper Tire, Medtronic and Ecolabs among others.
  • Consumer discretionary: Greggs PLC [GRG.UK] +7% (trading update), Tom Tailor [TTI.DE] +15% (to be acquired), Cobham PLC [COB.UK] +1.5% (agreement) , Air France-KLM [AF.FR} +2.5% (analyst action)
  • Consumer staples: Danone Group [BN.FR] -0.5% (earnings) , Bakkafrost [BAKKO.NO] -11% (earnings)
  • Materials: HeidelbergCement AG [HEI.DE] +5% (earnings), DSM [DSM.NL] -2% (analyst action)
  • Financials: HSBC [HSBA.UK] -3.5% (earnings), BHP Billiton [BLT.UK] -1% (earnings)
  • Healthcare: MDxHealth [MDXH.DE] +9% (appoints CEO)
  • Technology: Blancco Technology Group [BLTG.UK] +17% (earnings), Future PLC [FUTR.UK] +18% (trading update)

Speakers

  • Germany Econ Min Altmaier: US trade policy was slowing the global economic environment; EU and US should aim for ‘zero’ tariffs on cars

Currencies/Fixed Income

  • EUR/USD was slightly firmer and holding above the 1.13 level despite mixed German ZEW data for Feb. German Feb ZEW survey was mixed but slight improvement in expectations survey suggests that negative factors like the rejection of the Brexit deal by the UK Parliament and weak growth from China had already been anticipated
  • GBP/USD holding around the 1.29 level as UK-EU officials continued to meet to find a fix to the Irish backstop issue. Dealers noted that markets could get nervous” if next week’s vote delivered another defeat for PM May”s Brexit strategy
  • Weaker Swedish CPI data for Jan put some headwinds into further Riksbank rate hikes. EUR/SEK surged higher by 1% to test above 10.57 level for 8-month highs in the cross after headline CPI moved below the central bank target for the 1st time since last May.
  • Italian government bond prices initially traded firmer, propelled by growing expectations of new targeted long-term refinancing operations by the ECB. Howver, the price action did a U-turn with no specific catalyst cited. The 10-year Italian BTP yield higher by 5bps at 2.82%

Economic Data

  • (CH) Swiss Jan Trade Balance (CHF): 3.0B v 2.0B prior; Real Exports M/M: +0.6 v -4.3% prior; Real Imports M/M: +4.8% v +3.9% prior; Watch Exports Y/Y: +0.2% v -2.8% prior
  • (FI) Finland Jan CPI M/M: -0.4% v -0.1% prior; Y/Y: 1.1% v 1.2% prior
  • (SE) Sweden Jan CPI M/M: -1.0% v -0.7%e; Y/Y: 1.9% v 2.2%e (1st time since May 2018 annual inflation below target level)
  • (SE) Sweden Jan CPIF M/M: -1.0% v -0.7%e; Y/Y: 2.0% v 2.3%e; CPI Level: 328.56 v 329.70e
  • (EU) Euro Zone Dec Current Account (Seasonally Adj): €16.2B v €22.6B prior
  • (IT) Italy Dec Industrial Sales M/M: -3.5% v -0.1% prior; Y/Y: -7.3% v +0.5% prior
  • (IT) Italy Dec Industrial Orders M/M: -1.8% v -0.4% prior; Y/Y: -5.3% v -2.2% prior
  • (PL) Poland Jan Employment M/M: 2.2% v 1.0%e; Y/Y: 2.9% v 1.8%e
  • (PL) Poland Jan Average Gross Wages M/M: -6.5% v -7.0%e; Y/Y: 7.5% v 6.9%e
  • (IT) Italy Dec Current Account Balance: €4.2B v €4.6B prior
  • (GR) Greece Dec Current Account Balance: -€1.5B v -€1.4B prior
  • (UK) Jan Jobless Claims Change: +14.2K v +20.2K prior; Claimant Count Rate: 2.8% v 2.8% prior
  • (UK) Dec Average Weekly Earnings 3M/Y: 3.4% v 3.5%e; Weekly Earnings (ex Bonus) 3M/Y: 3.4% v 3.4%e
  • (UK) Dec ILO Unemployment Rate: 4.0% v 4.0% prior; Employment Change 3M/3M: +167K v +141K prior
  • (DE) Germany Feb ZEW Survey Current Situation: 15.0 v 20.0e; Expectations Survey: -13.4 v -13.6e
  • (EU) Euro Zone Feb ZEW Expectations Survey: -16.6 v -20.9 prior
  • (EU) Euro Zone Dec Construction Output M/M: -0.4% v +0.3% prior; Y/Y: 0.7% v 1.1% prior

Fixed Income Issuance

  • (CY) Cyprus opened its book to sell EUR-denominated 15-year bonds; guidance seen +200bps to mid-swaps
  • (FR) France Debt Agency (AFT) opened book to sell EUR-denominated May 2050 Oat via syndicate; guidance seen +10bps to May 2048 Oat with order book over €11B
  • (ID) Indonesia sold total IDR8.12T vs. IDR8.0T target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
  • (ZA) South Africa sold total ZAR vs. ZAR2.85B indicated in 2026, 2032 and 2048 bonds
  • (ES) Spain Debt Agency (Tesoro) sold total €1.33B vs. €0.5-1.5B indicated range in 3-month and 9-month Bills
  • (CH) Switzerland sold CHF532.0M in 3-month Bills; Avg Yield: -0.774% v -0.770% prior

Looking Ahead

  • (IT) Italy Debt Agency (Tesoro) announcement on upcoming CTZ and BTPei issuance for Friday, Feb 22nd
  • (IL) Israel Feb 12-month CPI Forecast: No est v 1.2% prior
  • (PE) Peru Q4 GDP Y/Y: No est v 2.3% prior
  • (CO) Colombia Jan Consumer Confidence Index: -3.6e v -8.3 prior
  • 05:30 (UK) Weekly John Lewis LFL Sales data
  • 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
  • 06:00 (BR) Brazil Feb IGP-M Inflation (2nd Preview): 0.5%e v 0.0% prior
  • 06:00 (PT) Portugal Jan PPI M/M: No est v -1.0% prior; Y/Y: No est v 2.7% prior
  • 06:00 (TR) Turkey to sell Bonds (2 tranches)
  • 06:30 (SE) Sweden Central Bank (Riksbank) Gov Ingves
  • 06:30 (EU) ESM sells €B vs. €2.0B indicated in 6-month bills; Avg Yield: % v -0.519% prior; Bid-to-cover: x v 2.7x prior (Jan 22nd 2019)
  • 06:45 (US) Daily Libor Fixing
  • 08:00 (RU) Russia Jan Unemployment Rate: 4.9%e v 4.8% prior; Real Wages Y/Y: 1.0%e v 2.5% prior; Real Disposable Income: -0.9%e v +0.1% prior
  • 08:00 (RU) Russia Jan Real Retail Sales Y/Y: 1.0%e v 2.3% prior
  • 08:00 (UK) Baltic Dry Bulk Index
  • 08:00 (RU) Russia announces upcoming OFZ Bond issuance
  • 08:50 (US) Fed’s Mester (hawk, non-voter)
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:30 (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: No est v +6.7% prior
  • 09:30 (PT) ECB’s Costa (Portugal) at event
  • 10:00 (US) Feb NAHB Housing Market Index: 59e v 58 prior
  • 10:00 (MX) Mexico weekly International Reserves
  • 10:00 (BE) ECB’s Praet (Belgium, chief economist) in Frankfurt
  • 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
  • 11:15 (EU) ECB’s Enria (SSM chief)
Trade The News
Trade The Newshttp://www.tradethenews.com/
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Featured Analysis

Learn Forex Trading