Notes/Observations
- India-Pakistan tensions escalate after Pakistan shoots down Indian fighter jet
- Various Euro region data mixed (Italy, Sweden, Euro Zone)
Asia:
- BOJ Board Member Kataoka (dissenter) reiterated his view and disagreed that BOJ should persistently continue with easing to reach price goal. Prolonging easy policy would heighten uncertainty over prospects for hitting price goal. Should address side effects by hitting price goal early to prevent easy policy from being prolonged
- BOJ Dep Gov Amamiya: BoJ had no intention of issuing digital currencies now
Europe:
- UK Cabinet members said to have warned PM May that Brexit could be delayed by up to two years
- Tory parliament member Rees-Mogg (Euro-sceptic) said not yo insist on getting rid of the Ireland backstop in Brexit and could live with the backstop if there was a clear exit date
- UK Govt No Deal impact analysis: despite mitigating steps taken, there were areas where impact on trade, businesses and individuals would be significant. Impact from no deal expected to be more severe in Northern Ireland than in Great Britain
- UK Feb BRC Shop Price Index Y/Y: 0.7% v 0.3%e (highest since March 2013)
- ECB’s Coeure (France): shadow production of ECB overnight rate was working well
Americas:
- Fed Chair Powell Semi-annual testimony: Fed was now in position to evaluate the appropriate time and approach for end of balance sheet runoff. Reasonable starting point for estimate of required reserves was around $1T plus a buffer
Energy:
- Weekly API Oil Inventories: Crude: -4.2M v +1.3M prior
- Russia Energy Min Novak stated that the country had cut oil output between 140-150K bpd from Dec and now fully in compliance with the OPEC+ deal
Macro
- (EU) Eurozone: January M3 money supply growth was much weaker than expected, with the annual rate falling to just 3.8% y/y from 4.1% y/y in December. The counterparts showed that the growth rate of loans to non-financial corporations fell to 2.2% y/y from 2.8% y/y, which will give Praet something to argue with at the next council meeting, as it backs up his warning that banks are stretched, which continue to struggle with negative interest rates could worsen the slowdown by curtailing access to credit.
- (UK) United Kingdom: The pound has continued to rally after the prime minister late yesterday put in an option for parliament to vote on a three-month delay in Brexit, which will happen on March 14 in the event that: the government’s withdrawal deal fails to win sufficient support in the House of Commons (which looks all but inevitable); and secondly a subsequent vote on leaving the EU without a deal, which has been set for March 13, also fails.
- (US) United States: Fed Chairman Powell’s testimony was summed up by “we’re in no rush to make a judgement on policy” and we will “allow the data to come in.” We’ll wait and allow the crosscurrents time to clarify. He reiterated that the baseline outlook is a “good one, favorable one,” but “foreign risks are particularly relevant,” citing the slowing in advanced economies, and particularly in Europe. The economy is in good shape, unemployment is low, confidence still at positive levels. Thus nothing specific on balance sheet normalization but reserve balances will be higher than pre-crisis levels, at about $1T plus a buffer confirming the dovish tone set at the January FOMC.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.59% at 371.42, FTSE -0.79% at 7,095.39, DAX -0.74% at 11,456.89, CAC-40 -0.35% at 5,220.46, IBEX-35 -0.62% at 9,170.09, FTSE MIB -0.04% at 20,450.50, SMI -0.64% at 9,395.50, S&P 500 Futures -0.32%]
- Market Focal Points/Key Themes: Equities European Indices trades lower across the board following a mixed session in Asia and lower US futures. On the political front the UK Government put out its no deal impact analysis, warning the impact on Northern Ireland would be more than the rest of the UK. Reports suggest Brexiteers are considering voting for PM May’s deal only if this is followed by a resignation. As a results further momentum has been seen in Sterling reaching a 6 month high. On another busy day for corporate earnings shares of Bayer rise over 4% as EBITDA and Rev beat consensus, the company also announced its facing over 11k Glyphosate lawsuits in the US. Rio Tinto gains following earnings and a declaration of a special dividend, with BioMerieux, Sydbank, Suez among other names trading higher. Meanwhile MetroBank in the UK shed almost 20% after announcing a £350M equity raise as well as earnings; Ahold Delhaize falls on earnings with Ted Baker, Beiersdorf, Kuehne & Nagel and Solvay among other notable decliners on earnings. In other news Marks and Spencers fall 9% after announcing a rights issue to fund its JV with Ocado, Ocado rises over 4% on top of sharp gains yesterday on rumors of the deal. Air France falls over 10% as the Dutch Government disclosed over 12% stake, while Playtech gains on a long term agreement with GVC. Looking ahead notable earners include Bestbuy, TJX, Campbell’s Soup, AES and Office Depot among others.
- Consumer discretionary: Air France-KLM [AF.FR] -12% (Dutch govt acquires stake), Ahold Delhaize [AD.NL] -2% (earnings), ITV [ITV.UK] -1.5% (earnings), Ocado [OCDO.UK] +1.5%, Marks & Spencer [MKS.UK] -8% (Marks & Spencer confirms to acquire 50% stake in Ocado’s UK retail operations), Ted Baker [TED.UK] -13% (profit warning), Beiersdorf [BEI.DE] -9% (earnings)
- Materials: Rio Tinto [RIO.UK] +1.5% (earnings; exploration update)
- Healthcare: Bayer [BAYN.DE] +4% (earnings),
- Industrials: SAS [SAS.SE] +0.5% (earnings), Taylor Wimpey [TW.UK] +1% (earnings), Georg Fischer [FIN.CH] +1% (earnings), Interserve [IRV.UK] +4% (earnings; placing)
- Utilities: Suez [SEV.FR] +2% (earnings; appoints Chairman)
Speakers
- EU’s Dombrovkis: EU conceptually open to an extension of Brexit. Fiscal uncertainty in Italy had hurt its growth outlook. EU report to find ‘excessive imbalances’ and stressed that Italy must put its debt on a clear downward path. Reiterated view that Germany needed to increase its domestic demand
- German Cabinet said to agree that Bundesbank President Weidmann can extend his term by another 8 years (as speculated)
- ECB’s Weidmann (Germany): German economic slowdown had extended into 2019 with growth to be well below the 1.5% potential. Saw no reason to be overly pessimistic about the Economic slowdown as domestic growth supported by rising employment and wages. ECB next steps to depend on inflation developments over the medium term
- Russia said not to be discussing any limits on grain exports
- Pakistan Foreign Ministry: Pakistan had ‘no intention for escalation’, jets fired across India border from its air space. Purpose of the strikes were to demonstrate the right and capability for self-defense.
- Saudi Energy Minister Khalid al-Falih stated that should see oil demand recovering from Q2; oil market was responding to output cuts; Saw the likelihood of output cuts extension in H2
- Venezuela Oil Min Quevedo: Oil production currently at 1.5M bpd and selling approx. 1.2M bpd
Currencies/Fixed Income
- USD on soft footing in the aftermath of Fed Chair Powell semi-annual testimony in Congress. The Fed chair reiterated that policy decisions would continue to be data dependent” and that in no rush to make a judgment about changes in policy.
- GBP near 5-month highs as PM May bought herself more time to secure a Brexit agreement
Economic Data
- (NL) Netherlands Feb Producer Confidence Index: 6.3 v 5.8 prior
- (NO) Norway Jan Retail Sales (with auto/fuel) M/M: 1.6% v 0.9%e
- (NO) Norway Dec AKU Unemployment Rate: 3.7% v 3.8%e
- (FI) Finland Feb Consumer Confidence Index: 15.5 v 17.2 prior; Business Confidence: -2 v +4 prior
- (TR) Turkey Feb Economic Confidence: 79.4 v 78.5 prior
- (ES) Spain Dec Total Mortgage Lending Y/Y: 23.1% v 12.8% prior; House Mortgage Approvals Y/Y: 0.9% v 14.2% prior
- (SE) Sweden Feb Consumer Confidence: 92.5 v 93.8e; Manufacturing Confidence: 114.3 v 110.0e; Economic Tendency Survey: 102.4 v 100.5e
- (HU) Hungary Jan Unemployment Rate: 3.7% v 3.7%e
- (SE) Sweden Jan Household Lending Y/Y: 5.4% v 5.5% prior
- (SE) Sweden Jan Trade Balance (SEK): +1.2B v -4.7B prior
- (EU) Euro Zone Jan M3 Money Supply Y/Y: 3.8% v 4.0%e
- (IT) Italy Feb Consumer Confidence Index: 112.4 v 113.4e; Manufacturing Confidence: 101.7 v 101.5e; Economic Sentiment: 98.3 v 99.2 prior – (CH) Swiss Feb Credit Suisse Expectations Survey: -16.6 v -44.0 prior
- (IS) Iceland Feb CPI M/M: +0.2% v -0.4% prior; Y/Y: 3.0% v 3.4% prior
- (PT) Portugal Feb Consumer Confidence Index: -8.3 v -7.2 prior; Economic Climate Indicator: 2.1 v 2.1 prior
- (EU) Euro Zone Feb Business Climate Indicator: 0.69 v 0.66e; Consumer Confidence (final): -7.4 v -7.4e; Economic Confidence: 106.1 v 106.0e; Industrial Confidence: -0.4 v +0.1e; Services Confidence: 12.1 v 10.9e
Fixed Income Issuance
- (IN) India sold total INR100B vs. INR100B in 3-month, 6-month and 12-month bills
- (DK) Denmark sold total DKK5.58B in 3-month and 6-month bills
- (IT) Italy Debt Agency (Tesoro) sold total €6.0B vs. €4.75-6.0B indicated range in 5-year and 10-year BTP bonds
- Sold €2.0B vs. €1.5-2.0B indicated range in 2.45% Oct 2023 BTP bonds; Avg Yield: 1.59% v 1.49% prior; Bid-to-cover: 1.46x v 1.33x prior
- Sold €4.0 vs. €3.25-4.0B indicated range in new 3.00% Aug 2029 BTP; Avg Yield: 2.81% v 2.60% prior; Bid-to-cover: 1.31x v 1.36x prior
- (IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €0.75-1.25B indicated range in Jan 2025 CCTeu (Floating rate Note); Avg Yield: 1.83% v 1.65% prior; Bid-to-cover: 1.62x v 1.29x priorr
Looking Ahead
- (BR) Brazil Jan Central Govt Budget Balance (BRL): No est v -31.8B prior
- (CO) Colombia Jan Industrial Confidence: No est v -1.1 prior; Retail Confidence: No est v 29.3 prior
- 05:30 (EU) ECB allotment in 3-month LTRO tender
- 05:30 (DE) Germany to sell €3.0 B in 0.25% Feb 2029 Bunds
- 05:30 (GR) Greece Debt Agency (PDMA) to sell €875M in 26-week bills
- 06:00 (BR) Brazil Feb FGV Inflation IGPM M/M: 0.7%e v 0.0% prior; Y/Y: 7.4%e v 6.7% prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Feb 22nd: No est v +3.6% prior
- 07:00 (BR) Brazil Jan National Unemployment Rate: 11.9%e v 11.6% prior
- 07:00 (BR) Brazil Jan PPI Manufacturing M/M: No est v -1.1% prior; Y/Y: No est v 9.1% prior
- 07:00 (UK) Weekly PM May question time in House of Commons
- 08:00 (UK) Baltic Dry Bulk Index
- 08:00 (IT) Italy Fin Min Tria in Parliament
- 08:30 (US) Dec Final Wholesale Inventories M/M: 0.4%e v 1.1% prelim; Retail Inventories M/M: 0.2%e v -0.6% prior
- 08:30 (US) Dec Advance Goods Trade Balance: -$73.9Be v -$70.5B prior
- 08:30 (CA) Canada Jan CPI M/M: +0.2%e v -0.1% prior; Y/Y: 1.4%e v 2.0% prior; CPI Core- Common Y/Y: 1.9%e v 1.9% prior; CPI Core- Median Y/Y: 1.8%e v 1.8% prior; CPI Core- Trim Y/Y: 1.9%e v 1.9% prior; Consumer Price Index: 133.6e v 133.4 prior
- 08:30 (BR) Brazil Jan Total Outstanding Loans (BRL): No est v 3.260T prior; M/M: No est v 1.8% prior
- 09:00 (MX) Mexico Jan Trade Balance: -$3.9Be v $1.8B prior
- 09:00 (MX) Mexico Jan Unemployment Rate (Seasonally Adj): 3.6%e v 3.6% prior; Unemployment Rate: 3.6%e v 3.4% prior
- 10:00 (US) Jan Pending Home Sales M/M: +1.0%e v -2.2% prior; Y/Y: -4.6%e v -9.5% prior
- 10:00 (US) Dec Factory Orders: +0.6%e v -0.6% prior; Factory Orders (Ex-transportation): No est v -1.3% prior
- 10:00 (US) Dec Final Durable Goods Orders: No est v 1.2% prelim; Durables Ex Transportation: No est v 0.1% prelim; Capital Goods Orders (Non-defense/ex-aircraft): No est v -0.7% prelim; Capital Goods Shipments (Non-defense/ex-aircraft): No est v 0.5% prelim
- 10:00 (US) Fed Chair Powell testifies before House Banking Committee (Semi-annual testimony)
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 12:00 (CA) Canada to sell 2-year notes
- 13:00 (MX) Mexico Central Bank (Banxico) Quarterly Inflation Report (QIR)
- 14:00 (AR) Argentina Dec Economic Activity Index (Monthly GDP) M/M: No est v -2.3% prior; Y/Y: -5.2%e v -7.5% prior
