Notes/Observations
- Hopes of a softer Brexit; PM May said to consider plan to postpone Brexit
- Spain 15-year syndicate receiving strong demand; yields at 2-year lows
- Fed Chair Powell’s semi-annual testimony to Congress to be in focus
Asia:
- India said to have struck a terrorist camp in Pakistan side of Kashmir via its aircraft
- Pakistan Foreign Minister: India ‘violated line of control’. Emergency meeting had been called by the PM to discuss Indian strikes. Pakistan reserved the right to reply
- China Banking and Insurance Regulatory Commission (CBIRC): Large state owned lenders loans to small and micro firms (for amounts CNY10M or less) to rise 30% y/y or more in 2019 v +21% in 2018
- BOJ Gov Kuroda: China economy had been slowing down, and very significantly since second half of 2018. Expected China growth to pick up in later half of 2019 as authorities take both fiscal and monetary simulative steps
- Japan PM Abe: Hopeful that Trump/Kim summit would lead to resolution of problems
Europe:
- PM May said to be considering plan to win over Remain MPs; she would offer vote on no-deal if she failed to get deal by March 12th; after that, there would be vote on Article 50 extension
- PM May said to consider plan to postpone Brexit. PM expected to allow her Cabinet to discuss extending the deadline beyond March 29th at a critical meeting on Tuesday, Feb 26th
- Labour Party spokesperson confirmed that if Parliament rejected Labour’s Brexit plan, party would support a public vote on Brexit
Americas:
- Fed’s Vice Chair Clarida (moderate, voter): Now was a good time to review Fed policy framework; Fed could afford to be patient with inflation remaining muted
Macro
- (US) United States: SF Fed Letter estimates a 0.10% increase in consumer price inflation so far due to tariffs on Chinese goods, and 0.4% for prices inflation of business investment goods. The study looked only at short-term, direct effects and did not consider supply adjustments, mark ups, or the responses of importers, domestic producers, and consumers. The Letter noted that an across-the-board 25% tariff on all Chinese imports would boost inflation by an additional 0.3%, and investment prices another 1.0%.
- (EU) Eurozone: The ECB’s De Cos said slowing growth is posing a challenge for banks. The ECB then continues to appear to setting the stage for another round of TLTRO loans. De Cos added that reinvestments will continue to help the corporate bond market. Banks have been struggling with the negative interest rate environment for a while and as rate hikes are being pushed back, this will continue for longer than previously expected, which clearly also means ongoing pressure on profit margins.
- (UK) United Kingdom: PM Ma will reportedly now offer members of parliament the chance to delay the Brexit process beyond the March 29 deadline. The BBC reported that about a dozen Europhile ministers have threatened to resign unless this happens. Reports also suggest the Labour Party would back calls for a second referendum on EU membership if parliament rejects its alternative Brexit plan. There doesn’t appear to be sufficient support in Parliament for a new referendum, though nothing can be ruled out at this juncture.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 % at #, FTSE -1.00% at 7,112.25, DAX -0.24% at 11,478.33, CAC-40 -0.27% at 5,217.61, IBEX-35 -0.32% at 9,174.72, FTSE MIB -0.05% at 20,426.50, SMI 0.00% at 9,402.70, S&P 500 Futures -0.23%]
Market Focal Points/Key Themes:
- European Indices trades lower across the board following weaker Asian Indices and weaker US Equity futures. The FTSE underperforms trading over 1% lower as Cable continues to strength approaching the 1.32 handle.
- On the corporate front German chemical giant BASF trades over 3% higher as Op profit and Revenue handily beat forecasts and estimates slightly higher sales and EPS growth for 2019. French Car manufacturer trades over 3% lower on earnings and the announcement its to launch its Peugeot brand in the US and Canada. Elsewhere Fincantieri, James Fisher, Devro trades higher on earnings with UK home builders Travis Perkins and Persimmon also higher on earnings. Meanwhile Fresnillo, Implenia, Babcock, Drax Group, Aixtron and Thales are among the names trading lower on earnings.
- In other news Santhera continues to rise up another 45% after yesterday’s Syros study update, Implenia trades lower on earnings and the announcement of a new CEO.
Looking ahead notable earners include retailers Home Depot, Macy’s Autozone as well as Thomson Reuters and Canadian Banking names Bank of Nova Scotia and Bank of Montreal among others.
Equities
- Consumer discretionary: Travis Perkins [TPK.UK] +2% (earnings), Brown (N) Group [BWNG.UK] -0.5% (CEO appointed), Persimmon [PSN.UK] +2% (earnings; appoints Global Chief Executive)
- Financials: Swiss Life [SLHN.CH] n/c (earnings), Standard Chartered [STAN.UK] -1% (earnings)
- Industrials: PSA [UG.FR] -5% (earnings; raises dividend and targets; to expand brand to Northern America), Babcock [BAB.UK] -5% (trading update), Thales [HO.FR] -2% (earnings), Implenia [IMPN.CH] -7% (earnings), Aixtron [AIXA.DE] -8% (earnings), James Fisher & Sons [FSJ.UK] +2.5% (earnings), Meggitt [MGGT.UK] -2.5% (earnings)
- Materials: Fresnillo [FRES.UK] -8% (earnings)
Speakers
- ECB’s Lane (Ireland) stated that data-dependent strategy to provide flexibility. Remained confident that underlying mechanism to raise inflation was still active. He only saw small adjustments to ECB Staff forecasts
- EU High Court overruled Latvia suspension of central bank gov Rimsevics as part of a bribery probe
- BOE to perform 6-month GBP-enhanced liquidity repo operation (ILTR) on a weekly basis from March 12th (move to step up Brexit liquidity operation for banking sector)
- BOE Gov Carney with members Ramsden, Vlieghe and Haskel testified to Treasury Select Committee. Gov Carney stated that was not seeing any liquidity stresses in market and the announced extra liquidity plans were cautionary. Fundamentals of the domestic economy was strong and reiterated its forward guidance that gradual rate hikes would be needed if economy developed as forecast
- BOE Member Ramsden: Comfortable with BOE guidance on interest rates
- BOE Member Vlieghe: Direction of rate move in a no-deal Brexit to be a trade-off between supporting the economy and stopping temporary inflation overshoot
- BOE Member Haskel: Agree with collective view that policy could move in either direction in a no-deal Brexit scenario. Would need to distinguish between temporary and longer-term disruption in a no-deal outcome
- UK Govt official Lidington (de facto Dep PM): In the national interest for Cabinet to get behind PM May’s Brexit deal
- Italy Dep PM Salvini (League) reiterated stance that Govt to last 5 years and saw no need for any budget adjustment
- Spain Fin Min Calvino: Domestic economy doing well; upcoming elections will not affect performance
- Hungary Central Bank (MNB) Gov Matolcsy stated in parliament that it had achieved financial and price stability as macro data was showing substantial improvement
- Poland Central Bank Zyzynski stated that he fully backed a steady policy until 2022. He cautioned that the govt fiscal stimulus might spur rate hike talk as it could boost domestic growth
- German BDI Industry Association: Contingency measures taken by politicians and companies can help to water down the worst effects of a disorderly Brexit but situation would still have an impact. Hard Brexit could shave off 0.5% to German GDP
- China Foreign Ministry Spokesman Lu Kang: to prepare for potential Xi-Trump meeting
Currencies/ Fixed Income
- USD was hovering near 1-month lows but well contained within recent quarterly ranges for the major pairs. Fed Chair Powell’s semi-annual testimony to Congress to be in focus given the recent dovish tone of the central bank.
- British pound (GBP) was firmer to test 1-month highs just under the 1.32 area on speculation PM May would propose to formally rule out a ‘no-deal’ Brexit. PM May seen opening the way for a short Brexit delay. If the meaningful vote by, likely on March 12th, failed, Parliament would be given a second vote on leaving with no deal or delaying Brexit which would almost certainly result in delay and this now appeared the most likely path forward. EUR/GBP cross at 21-month lows as it tested 0.8615 area.
- Indian Rupee (INR) weighed down by geopolitical concerns related to Pakistan. USD/INR at 71.05 (Rupee softer by 0.2%)
Economic Data
- (N)) Norway Q1 Consumer Confidence Index: 12.7 v 14.2 prior
- (DE) Germany Mar GfK Consumer Confidence: 10.8 v 10.8e
- (NL) Netherlands Jan House Price Index M/M: +1.8% v -0.6% prior; Y/Y: 8.7% v 8.4% prior
- (FI) Finland Jan Unemployment Rate: 6.8% v 5.4% prior
- (FI) Finland Jan Preliminary Retail Sales Volume Y/Y: -1.3% v -0.1% prior
- (ZA) South Africa Dec Leading Indicator: 105.2 v 105.7 prior
- (FR) France Feb Consumer Confidence: 95 v 92e
- (TW) Taiwan Jan Industrial Production Y/Y: -1.9% v -1.7%e
- (TW) Taiwan Jan Unemployment Rate: 3.7% v 3.7%e
- (TW) Taiwan Jan M2 Money Supply Y/Y: 3.1% v 3.1% prior; M1 Money Supply Y/Y: 6.6% v 5.7% prior
- (HK) Hong Kong Jan Trade Balance (HKD): -10.3B v -30.1Be; Exports Y/Y: -0.4% v -2.8%e; Imports Y/Y: -6.0% v -2.2%e
- (AT) Austria Feb Manufacturing PMI: 51.8 v 52.7 prior (37th month of expansion)
- (UK) Jan BBA Loans for Housing (unadj): 29.2K v 26.2K prior
Fixed Income Issuance
- (ES) Spain Debt Agency (Tesoro) opened its book to sell €5.0B in July 2035 SPGB bond via syndicate; guidance seen +85bps to mid-swaps
- (ZA) South Africa sold total ZAR2.85B vs. ZAR2.85B indicated in 2023, 2030 and 2048 bonds
- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month bills; Avg Yield: -0.007% v -0.025% prior; Bid-to-cover: 1.65x v 1.82x prior
- (CH) Switzerland sold CHF504.1M in 3-month Bills; Avg Yield: -0.781% v -0.774% prior
Looking Ahead
- (PT) Portugal Year-to-Date Budget Report
- (ID) Indonesia to sell IDR15.0T in 3-month, 6-month Islamic Bills, 5-year, 10-year, 15-year and 20-year bonds
- 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
- 05:30 (DE) Germany to sell €5.0B in new 0% Mar 2021 Schatz
- 05:30 (UK) DMO to sell £1.1B in 0.125% Index-linked 2028 Gilt
- 06:00 (FI) Finland to sell 3-month and 6-month Bills
- 06:45 (US) Daily Libor Fixing
- 07:30 (UK) PM May to update Parliament on Cabinet meeting
- 07:45 (US) Weekly Chain Store Sales data
- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: expected to leave Base Rate unchanged at 0.90% and leave Overnight Deposit Rate unchanged at -0.15%
- 08:00 (BR) Brazil Jan Total Federal Debt (BRL): No est v 3.877T prior
- 08:00 (UK) Baltic Dry Bulk Index
- 08:00 (RU) Russia announces upcoming OFZ Bond issuance
- 08:30 (US) Dec Housing Starts: 1.256Me v 1.256M prior; Building Permits: 1.290Me v 1.322M prior (revised from 1.328M)
- 08:30 (BR) Brazil Jan Total Outstanding Loans (BRL): No est v 3.260T prior; M/M: No est v 1.8% prior
- 08:55 (US) Weekly Redbook Retail Sales data
- 09:00 (US) Dec S&P Case-Shiller House 20-City M/M: 0.30%e v 0.30% prior; Y/Y: 4.50%e v 4.68% prior; House Price Index (HPI): No est v 213.66 prior
- 09:00 (US) Dec S&P Case-Shiller (overall) YoY: No est v 5.19% prior; Overall HPI Index: No est v 205.85 prior
- 09:00 (US) Dec FHFA House Price Index M/M: 0.4%e v 0.4% prior; Q/Q: No est v 1.3% prior
- 09:00 (MX) Mexico Dec Retail Sales M/M: -1.0%e v +0.4% prior; Y/Y: 2.7%e v 3.4% prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (HU) Hungary Central Bank (MNB) Gov Matolcsy to hold his post rate decision statement
- 09:30 (LX) ECB’s Mersch (Luxembourg)
- 10:00 (US) Feb Richmond Fed Manufacturing Index: +5e v -2 prior
- 10:00 (US) Feb Consumer Confidence: 124.9e v 120.2 prior
- 10:00 (US) Fed Chair Powell testifies before Senate Banking Committee (Semi-annual testimony)
- 10:00 (MX) Mexico weekly International Reserves
- 11:30 (US) Treasury to sell 52-week Bills
- 13:00 (US) Treasury to sell 7-year notes
- 14:00(US) Fed Discount rate minutes
