Notes/Observations
Asia:
- Australia Q4 GDP missed expectations and registered its weakest quarterly reading since 2016 . (Q/Q: 0.2% v 0.3%e; Y/Y: 2.3% v 2.6%e); Calls for RBA to cut rates
Europe:
- EU and UK Brexit negotiators ended talks in Brussels on Tuesday with no agreement (as expected); talks to continue tomorrow (Wed, Mar 6th). EU official said the talks did not go well
- EU27 ambassadors said to have been called in for unexpected meeting on Wed, Mar 6th. Some speculation it might have to do with recent talks between EU’s Barnier and UK AG Cox and Brexit Sec Barclay
- Italy said to be planning to join China Belt and Road initiative, planned to sign MOU related to the initiative by the end of March
Americas:
- Fed said to consider more strict rules related to foreign bank branches. Could seek to tighten a loophole which has enabled foreign banks to block assets from certain US bank rules related to holding companies
Energy:
- Weekly API Oil Inventories: Crude: +7.3M v -4.2M
Macro
- (AU) Australia: Q4 GDP slowed 0.2% from 0.4% in Q3. The report came in under expectations and left the slowest rate of increase since the matching 0.2% clip in Q2 of 2015. On annual basis GDP slowed to a 2.3% from 2.7%. Much of Australia’s economic weakness has been driven by soft consumption, amid concerns that falling house prices are having a negative wealth effect that is discouraging people from spending on discretionary items. The RBA has long flagged consumption as a key source of uncertainty and the GDP data indicated consumers remain reluctant to spend. RBA Governor Lowe said today the housing market adjustment is manageable, GDP takeaways noted signs the negative wealth effect is continuing to play out. Industry data also provides anecdotal evidence of this with new car sales down sharply -9.3% y/y in February according to FCAI.
- (JP) Japan: In a speech to business leaders, BOJ board member Yutaka Harada discussed expectations for inflation dynamics ahead of the consumption tax hike scheduled for October. Harada estimated that the tax hike will raise FY19/20 core CPI by 0.5 percentage point, while free education will be a drag of 0.3 ppt in FY19 and 0.4pt in FY20, and mobile phone-related discounts may pose an additional drag of 0.5-1.0 ppt. This is effectively an acknowledgement that achieving the 2% inflation target inevitably will be delayed further.
- (UK) United Kingdom: UK press report that a delay to Brexit is looking increasingly “inevitable”. Even if the government’s Withdrawal Agreement is passed by next Tuesday there would not be sufficient time to pass necessary preparatory legislation in parliament. This should have been clear for some time now. Talks between the UK’s Brexit secretary and the UK’s Attorney General ended in Brussels yesterday without an agreement, or indeed any sign of a breakthrough. It continues to look unlikely that the EU will concede beyond making non-legally binding assurances about the future relationship, given the logic that the Irish backstop would simply not be a backstop if it was time-limited.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.11% at 375.22, FTSE +0.05% at 7,186.72, DAX -0.29% at 11,586.49, CAC-40 -0.25% at 5,284.30, IBEX-35 +0.13% at 9,270.00, FTSE MIB +0.22% at 20,761.50, SMI -0.37% at 9,381.50, S&P 500 Futures -0.20%]
- Market Focal Points/Key Themes: European Indices trade mixed in lackluster trade following on from a mixed session in Asia over night and flat to lower futures in the US. In Macro news no progress has been seen on the Brexit front as talks are still at a stalemate. On the corporate front shares of German listed Dialog Semiconductor trades over 6% higher after good Q4 results and outlook; Brenntag trades higher on higher Revenue and profits and upbeat outlook while PageGroup is another notable rise after earnings. Leclanche, Latecoere and Bossard Group are among other notable risers on earnings. Meanwhile Legal & General shares tank almost 5% despite a rise in profits; Schaeffler falls sharply after earnings and withdrawing its 2020 targets given challenging market environment. Elsewhere Autoneum, Prysmian and Costain also decline on earnings. In other news, Logitech shares rise in Switzerland after affirming its outlook; TomTom gains on a multi year deal extension with Volkswagen, while DS Smith trades higher after divesting its Plastics unit for $585M and and an up beat trading update. Looking ahead notable earners include retailers Dollar Tree, NJ’s Wholesale club, Abercrombie and Fitch and Chico Fas among others
Equities
- Consumer discretionary: DS Smith [SMDS.UK] +4.5% (divestment; trading update), International Workplace Group [IWG.UK] -2% (earnings; raises dividend), Just Eat [JE.UK] -3% (earnings), Paddy Power [PPB.UK] +1% (earnings), PageGroup [PAGE.UK] +2% (earnings)
- Energy: Ophir Energy [OPHR.UK] -0.5% (Soco confirms no offer will be made)
- Financials: Deutsche Bank [DBK.DE] -0.5% (said to have considered closing Equities trading operations)
- Industrials: Schaeffler [SHA.DE] -9% (earnings; cost cut program; cautious guidance), Brenntag [BNR.DE] +4% (earnings)
- Technology: Dialog Semiconductor [DLG.DE] +6.5% (final earnings; outlook), Logitech [LOGN.CH] +1.5% (affirms outlook), TomTom [TOM2.NL] +4% (awarded extension to contract)
Speakers
- OECD updates its economic outlook which cut both 2019 and 2020 global growth forecasts citing policy uncertainty, trade tensions and weaker confidence. Cut 2019 Global GDP growth forecast from 3.5% to 3.3% and 2020 from 3.5% to 3.4%. Called for ECB to signal low rates for longer
- UK Attorney General (AG) Cox: Both sides have expressed strong views but remain in robust talks on an exit deal
- France Fin Min Le Maire: GAFA tax supported by 23 countries as is a strong measure of fiscal justice (**Note: GAFA tax stands for Google, Apple, Facebook and Amazon)
- Italy Stats Agency (Istat) Monthly Economic Note: Leading indicator showed further decline, confirmed was in a difficult economic trend
- Italy Dep PM Di Maio (5-Stary party) reiterated that Italy would meet the 2019 GDP growth target (currently at 1.0%); reiterated that current govt coalition will not fall apart over the Italian-French rail link
- Italy Transportation Min Toninelli refuted reports that he had threaten to quit the govt over TAV rail
- Russia Econ Min Oreshkin: Inflation has been better than expected – Turkey Fin Min Albayrak: end-2019 inflation to be well below govt forecasts (**Note: currently seen at 15.9%)
- India govt official: To meet FY18/19 deficit target of 3.4% of GDP (**Note: Earlier reports circulated that India’s fiscal deficit might to 3.5% as direct tax target could miss by up to INR600B)
- US Ambassador to the UK: Any trade deal between the two countries has to include farming
Currencies/Fixed Income
- FX market in Europe was little changed with little in terms of economic releases.
- GBP/USD was lower by 0.2% at 1.3150 area as UK-EU officials meet again to find a solution on the Irish backstop issue. Negotiators on Tuesday again failed to find an agreement on the issue (as expected).
- EUR/USD was holding steady around the 1.13 area ahead of Thursday’s ECB meeting. No changes in policy expected but the updated Staff Projections are likely to revise the growth outlook lower and could have the ECB reconsider its planned path of normalization.
- The AUD was pummeled during the Asian session after Australia Q4 GDP missed expectations and registered its weakest quarterly reading since 2016. Many analyst now see up to 50bps in rate cuts this year by the RBA
Economic Data
- (NO) Norway Q4 Current Account Balance (NOK): 46.8B v 91.4B prior
- (TW) Taiwan Feb Foreign Reserves: $463.9B v $463.0B prior
- (DE) Germany Feb Construction PMI: 54.7 v 50.7 prior
- (SE) Sweden Q4 Current Account Balance (SEK): 39.6B v 36.3B prior
- (IS) Iceland Feb Preliminary Trade Balance (ISK): -15.3B v +7.0B prior
- (ZA) South Africa Feb Business Confidence: 93.4 v 95.1 prior
Fixed Income Issuance
- (IN) India sold total INR100B vs. INR100B indicated in 3-month, 6-month and 12-month bills
- (DK) Denmark sold total DKK2.40B in 2023 and 2029 Bonds
- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 6-month Bills; Avg Yield: -0.4739% v -0.6075% prior; bid-to-cover: 1.95x v 1.35x prior
- (QA) Qatar said to have received over $25B in order for its 5-year, 10-year and 30-year bonds issuance
Looking Ahead
- 05:30 (UK) DMO to sell £3.0B in 1.0% Apr 2024 Gilts – 05:30 (GR) Greece Debt Agency (PDMA) to sell 13-week bills
- 06:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: expected to leave One-Week Repo Rate unchanged at 24.00% 06:00 (PL) Poland Central Bank (NBP) Interest Rate decision: expected to leave Base Rate unchanged at 1.50%
- 06:00 (CZ) Czech Republic to sell 2033 and 2057 Bonds
- 06:00 (RU) Russia OFZ Bond auction results
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Mar 1st: No est v +5.4% prior
- 07:00 (UK) Weekly PM May question time in House of Commons:
- 07:15 (UK) BOE’s Cunliffe in London
- 08:00 (UK) Baltic Dry Bulk Index
- 08:15 (US) Feb ADP Employment Change: +190Ke v +213K prior
- 08:30 (US) Dec Trade Balance: -$57.9Be v -$49.3B prior
- 08:30 (CA) Canada Dec Int’l Merchandise Trade (CAD): -2.1Be v -2.1B prior
- 08:30 (CA) Canada Q4 Labor Productivity Q/Q: -0.3%e v +0.3% prior
- 09:00 (MX) Mexico Feb Vehicle Production: No est v 333.7K prior; Vehicle Exports: no est v 242.3K prior
- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.75%
- 10:00 (CA) Canada Feb Ivey Purchasing Managers Index (Seasonally Adj): No est v 54.7 prior; PMI (unadj): No est v 49.5 prior
- 10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
- 10:30 (BR) Brazil Central Bank Weekly Economists Survey
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 12:00 (US) Fed’s Williams (moderate, voter) at Economic Club of New York
- 12:00 (US) Fed’s Mester (hawk, non-voter)
- 12:30 (UK) BOE’s Saunders
- 13:00 (UK) BOE’s Haldane (leaning hawk, chief economist)
- 14:00 (US) Fed Beige Book
- 14:00 (AR) Argentina Jan Industrial Production Y/Y: -12.0%e v -14.7% prior; Construction Activity Y/Y: No est v -20.5% prior
