Notes/Observations
- ECB’s Chief Economist Praet noted that General Council to discuss TLTRO in March but was not clear about any decision being made at that time
- South Africa annual inflation moved back below the mid-point of the target range for the 1st time in 7 months
- UK PM May to meet EU’s Juncker later today in Brussels – Headline risks from trade talks and Brexit remain
- Fed minutes to be released despite Washington offices closed today due to the weather
Asia:
- Japan Jan Trade Balance registers a larger deficit as exports decline by largest amount in two years (Trade: -¥1.42T v -¥1.030Te; Exports Y/Y: -8.4% v -5.7%e; Imports Y/Y: -0.6% v -3.2%e; speculation that BOJ could add more stimulus
Europe:
- PM May said to be considering plans to bring forward the meaningful vote on her Brexit deal to next week in bid to see off threat of ministerial resignations. Govt now concentrating efforts on agreeing a new legal text stating that the backstop, which would tie Britain to a Customs Union with the EU, cannot be “indefinite’
- UK Chancellor of the Exchequer Hammond (Fin Min): ‘Malthouse’ initiative a valuable effort to allay backstop concerns in the future. No-deal Brexit would be ‘mutual calamity’. EU would not consider replacing the backstop with an alternative now.
Americas:
- President Trump; China trade talks were going well; March 1st was NOT a magical date. China was trying to move fast to avoid having tariffs go up
- US officials said to be seeking a stable yuan pledge as part of the China trade deal talks. US would plan to employ tariffs if China violates yuan pledge.
- Fed’s Williams (moderate, voter): monetary policy was where it ought to be with rates around neutral; The new patient-minded Fed stance did not mean not hiking rates or that policy was set for all time
Macro
- (UK) United Kingdom: A spokesman of UK prime minister said that today’s meeting between May and the president of the European Commission, Juncker, will be “significant.” He confirmed that May will be looking for a legally binding concession on the Irish backstop. A vote is due to take place in parliament next Wednesday 27th February. Assuming May is unsuccessful today, we think there would realistically be only two ways forward: either a cross-party compromise, which likely cause an irrevocable split in May’s Tory party, or a new referendum. A delay in Brexit is starting to look inevitable.
- (EU) Eurozone: The ECB’s Chief Economist Praet said they will discuss TLTROs in March, but there is no decision yet. He highlighted that business climate in the Euro area “seems to be changing in a more fundamental way”, adding that “we are not in a viscous circle, but we are close to that”. Considering that that the he is responsible for compiling the initial presentation of the overall outlook it is pretty clear in which direction he is leaning and what the recommendation will likely be.
- (JP) Japan: January exports fell -8.4% in January following the -3.9% y/y fall in December. Imports also fell -0.6% y/y in January following a 1.9% gain in December. The trade deficit thus widened to a 5 year high. The data then is consistent with escalating concern that exports will be impacted this year by global trade frictions and the slowing in China’s economy.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.09% at 369.32, FTSE +0.05% at 7,182.75, DAX +0.24% at 11,336.73, CAC-40 -0.01% at 5,160.23, IBEX-35 +0.26% at 9,160.19, FTSE MIB -0.25% at 20,178.50, SMI +0.50% at 9,305.50, S&P 500 Futures -0.12%]
Market Focal Points/Key Themes:
Equities
- European Indices trade higher across the board following a mostly higher session in Asia overnight and slightly lower US futures. On the corporate front shares of French Airliner Air France trades higher after initially trading down 5% after a fall in profits; Iberdrola also trades higher on an earnings beat. Other notable risers include SimCorp, VolkerWessels, Fresenius SE, Lloyds, and Wolters Kluwer after earnings. To the downside McBride sheds over 30%, with Gooch & Housego dropping 20% after profit warnings. Senvio, Intu Properties, Nexity and Telefonica Deutscheland are among other names trading lower on earnings and outlook. In other news Sainbury’s shares trade sharply lower after the UK CMA said it could block the merger with Asda if its concern’s can’t be addressed. Low cost airliner Flybe trades almost 100% higher after receiving an online contingency proposal from an investor group. Looking ahead notable earners include CVS Health, Sonic Automotive, Targa Resources, Intelsat, Garmin and HollyFrontier among others.
- Consumer discretionary: Sainsbury PLC [SBRY.UK] -13%, WM Morrison Supermarkets [MRW.UK] -4%, Tesco [TSCO.UK] +0.5% (UK CMA provisional findings on Sainsbury’s merger), Air France-KLM [AF.FR] -2% (earnings), Wolters Kluwer [WKL.NL] +2% (earnings), McBride Plc [MCB.UK] -32% (profit warning), Flybe [FLYB.UK] +99% (capital injection), Norwegian Air [NAS.NO] -38% (HBK to sell 10.4M subscription rights at NOK 15.01/shr)
- Energy: Senvion [SEN.DE] -16% (profit warning)
- Financials: Lloyds Banking Group [LLOY.UK] +3% (earnings; share buyback), Swedbank [SWEDA.SE] -7% (response to Danske claim)
- Healthcare: Fresenius SE [FRE.DE] +5% (earnings), Fresenius Medical Care [FME.DE] +5.5% (earnings)
- Industrials: Iberdrola [IBE.ES] +2.5% (earnings), MTU Aero Engines Holding [MTX.DE] -1.5% (earnings)
- Technology: SimCorp [SIM.DK] +10% (earnings; share buyback), Gooch & Housego [GHH.UK] -20% (profit warning)
- Materials: Glencore [GLEN.UK] +1% (earnings; share buyback)
Speakers
- ECB’s Praet (Belgium, chief economist): Key assessment for March and beyond would be whether the medium term outlook had changed. Appeared that the economic climate had changed for the negative with the change being more fundamental rather than transitory. Normalization of ECB instruments was not policy tightening. ECB looks very much at bank’s balance sheets added that its TLTRO program was very generous. Bank lending appeared to be fine for the time being; might not make a TLTRO decision at the March meeting
- Italy Dep PM Salvini reiterated that view to rule out any budget adjustment for 2019
- UK Foreign Min Hunt: if we solve backstop we could pass the Brexit deal in Parliament. Must do all we can to avoid a no-deal Brexit. The March 29th deadline was important; open question whether Brexit extension solved the problem
- IMF’s Lagarde: IMF was likely to lower its growth outlook for Germany (**Note: currently sees 2019 growth at 1.35)
- Sweden National Debt Office (Riksgälden): central government finances to weaken in the coming years as the economy slowed down
- Russia President Putin annual State of the Nation address stressed the need to ensure high pace of economic growth; GDP should exceed 3.0% by 2021. FX reserves now covered external debt for the 1st time
- China Foreign Ministry Spokesperson Geng reiterated govt view that China did not engage in competitive devaluation of its yuan currency (CNY), hoped the US did not politicize the currency issue
Currencies/Fixed Income
- EUR/USD was slightly higher and back within its recent 6-month trading range between 1.13-15 area. Germany Jan PPI data showed a improvement month-over-month
- GBP/USD was slightly softer by 0.2% at 1.3035 area to move off recent 2-week highs. The focus was on the upcoming talks between UK Pm May and EU Commission President Juncker
- The USD/CNY was at a multi-week low as US-China trade talks continued. Trump has expressed flexibility with a March 1 trade-deal deadline but the US sought a stable yuan to be part of any agreement
Economic Data
- (NL) Netherlands Feb Consumer Confidence Index : -2 v +1 prior
- (NL) Netherlands Dec Consumer Spending Y/Y: 2.3% v 2.3% prior
- (DE) Germany Jan PPI M/M: +0.4% v -0.1%e; Y/Y: 2.6% v 2.2%e
- (DK) Denmark Feb Consumer Confidence Indicator: 3.3 v 4.1e
- (TR) Turkey Feb Consumer Confidence Index: 57.8 v 58.5 prior
- (JP) Japan Jan Convenience Store Sales Y/Y: 0.8% v 1.2% prior
- (ZA) South Africa Jan CPI M/M: -0.2% v +0.1%e; Y/Y: 4.0% v 4.3%e
- (ZA) South Africa Jan CPI Core M/M: 0.2% v 0.3%e; Y/Y: 4.4% v 4.5%e
- (SE) Sweden Q4 Industry Capacity: 90.4% v 91.0% prior
- (PL) Poland Jan Sold Industrial Output M/M: 7.4% v 5.0%e; Y/Y: 6.1% v 3.7%e
- (PL) Poland Jan PPI M/M: 0.2% v 0.1%e; Y/Y: 2.2% v 2.1%e
Fixed Income Issuance
- (IN) India sold total INR100B vs. INR100B in 3-month, 6-month and 12-month bills
- (DK) Denmark sold total DKK2.60B in 2023 and 2029 DGB bonds
Looking Ahead
- 05:30 (DE) Germany to sell €4.0B in 0% Apr 2024 BOBL
- 05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 3-month and 12-month Bills
- 06:00 (UK) Feb CBI Industrial Trends Total Orders: -5e v -1 prior; Selling Prices: 16e v 18 prior
- 06:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden
- 06:00 (CZ) Czech Republic to sell €100M in 0% Feb 2022 bonds
- 06:00 (RU) Russia OFZ Bond auction results (3 tranches)
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Feb 15th: No est v -3.7% prior
- 07:00 (ZA) South Africa Fin Min budget speech (clarity on plans to rescue ESKOM)
- 07:45 (US) Weekly Chain Store Sales data
- 08:00 (UK) Baltic Dry Bulk Index
- 08:55 (US) Weekly Redbook Retail Sales data
- 09:00 (BE) Belgium Feb Consumer Confidence Index: No est v -6 prior
- 09:00 (IT) Italy Fin Min Tria in lower House
- 10:00 (EU) Euro Zone Feb Advance Consumer Confidence: -7.7e v -7.9 prior
- 11:30 (US Treasury to sell 2-Year Floating Rate Notes Reopening
- 13:10 (US) Fed’s Kaplan (dove, non-voter)
- 14:00 (US) FOMC Jan Minutes
- 14:30 (UK) PM May to meet with EU’s Juncker
- 16:30 (US) Weekly API Oil Inventory data
- (AR) Argentina Jan Budget Balance (ARS): No est v -135.3T prior
- (MX) Citibanamex Survey of Economists
