Awaiting ECB And Any Indication On TLTROs

Notes/Observations

• Focus on ECB rate decision. No change in rates but market eyeing by what is or isn’t said on TLTRO (Note: any policy announcement would be viewed as a positive surprise) – Brexit talks appear to be heading nowhere very fast

Asia:

• Australia Jan Trade Balance: A$4.5B v A$2.8Be for its 13th straight surplus and 2nd largest on record with both exports and imports improve
• Australia Jan Retail Sales missed expectations (M/M: 0.1% v 0.3%e)
• China Fin Min Liu Kun: Tax cuts are top fiscal policy in 2019, especially small companies and manufacturers; Pressure to balance fiscal Rev and spending is very pronounced this year

Europe:

• EU officials said to be pessimistic about possibility of a Brexit breakthrough being within reach. Increasing concern on the European side that any concessions the bloc would be prepared to give wouldn’t be sufficient to win a majority in the House of Commons
• House of Lords supported amendment to remain in EU customs union by 207-141 vote (Note: another defeat for PM May)
• UK Cabinet said to expect Brexit deal defeat next week by 100 votes after talks in Brussels collapsed without progress
• UK Govt said to plan to establish advisory groups to examine alternative arrangements related to the Ireland border
• BoE’s Saunders (hawk): BOE has room to wait to see how Brexit unfolds; reiterates BOE response to Brexit is not automatic

Americas:

• Fed Beige Book noted that the economy continued to grow in late Jan and Feb with 10 of 12 districts reporting slight to moderate pace of expansion
• Fed’s Williams (moderate, voter): Fed could afford to be flexible and wait for data; labor markets were strong with no signs of inflationary pressures. Did not need to tighten policy as much as previously thought – President Trump: trade talks with China continue to move along well; there will be a good deal or no deal
• Huawei to sue US for barring their equipment from certain networks

Macro

• (UK) United Kingdom: Reportedly this week’s high level talks in Brussels didn’t go well and were in fact some of the worst-tempered of the two year process. The UK sent Attorney General Geoffrey Cox for the first time to join the negotiations. The pro-Brexit lawyer tried once again to change the Irish border backstop, but with the EU sticking to its refusal to re-open the withdrawal agreement, officials were apparently not impressed by his rhetoric. The renewed souring of the talks could also spill over into the apparently inevitable talks about a delay of the Brexit date.
• (EU) Eurozone: The main focus of today’s ECB meeting is the guidance and indication that they will introduce on a new round of TLTROs. The updated staff projections should bring downward revisions to growth and inflation projections, and while ECB’s Lane said recently that that these may not be very large, earlier reports suggested they would be sufficient to justify a new round of funding. Draghi will probably deliver his usual caveated performance where the initial statement sounds less dovish then markets expect, but the press conference compensates for that with the assurance that the ECB is still willing to do whatever it takes.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.42% at 373.90, FTSE -0.52% at 7,158.87, DAX -0.53% at 11,526.43, CAC-40 -0.39% at 5,268.38, IBEX-35 +0.09% at 9,305.49, FTSE MIB -0.17% at 20,816.50, SMI -0.52% at 9,348.50, S&P 500 Futures -0.23%]
• Market Focal Points/Key Themes: European Indices trade mostly lower across the board following a mixed session in Asia and lower US Index futures ahead of today ECB rate meeting. On another busy morning for corporate earnings, German Tyre manufacturer Continental trades lower after reporting final results and affirmed outlook; Bokskalis falls 8% after reporting a loss for the full year, while fashion name Hugo Boss trades lower after slightly better earnings. Elsewhere Countrywide, Axel Springer, NMC Health and Schroders among some of the other names declining on Earnings. Meanwhile French advertising name JCDecaux trades higher after growth in profits in Revenue, with Informa, Inmarsat, Premier Oil and Melrose Industries among other names higher on earnings. Elsewhere Dialog Semi trades lower following the acquisition of Mobile Communications. Looking ahead notable earners include Tech Data, Kroger and Care.com among others.

Equities

• Consumer discretionary: Hugo Boss [BOSS.DE] -2% (final earnings), JC Decaux [DEC.FR] +4% (earnings), Greggs [GRG.UK] n/c (earnings)
• Consumer staples: Elis [ELIS.FR] -6.5% (earnings)
• Financials: Aviva [AV.UK] -3% (earnings), Alfa Financial Software [ALFA.UK] +24% (earnings)
• Industrials: Continental [CON.DE] -1% (final earnings), Melrose [MRO.UK] +3.5% (earnings)
• Technology: Axel Springer [SPR.DE] -7% (earnings), Dialog Semiconductor [DLG.DE] -3% (acquisition), Ultra Electronics [ULE.UK] +7.5% (analyst action)

Speakers

• BOE’s Tenreyro: Smooth Brexit alone is not enough for rate hikes. Wanted to see stronger domestic pressure before raising rates. Needed only a small amount of tightening over the coming three years after a smooth Brexit
• Sweden Central Bank (Riksbank) Gov Ingves stated that needed to watch inflation pressure closely. Repo Rate path was not a promise. Board considering going from 6 to 5 policy meetings per year
• Italy Govt did not agree on TAV railway on Wed (Mar 6th). Needed to review TAV funding with EU and France
• EU’s Hogan reiterated that ball was in UK’s court on Brexit; talks were at a sensitive stage
• Thailand Constitutional Court ordered the dissolution of Thai Raksa Chart Party (opposition) over princess PM nomination
• US State Dept official: Talks are ongoing with all eight countries that received waivers on Iran oil back in November (**Reminder: in Nov US issued waivers to eight countries (China, India, Italy, South Korea, Turkey, Taiwan, Greece, and Japan) which will allow them to continue importing Iranian crude oil)

Currencies/Fixed Income

• FX markets were again quiet during the European session with the focus on the upcoming ECB meeting. – EUR/USD was steady holding above the 1.13 level ahead of the ECB rate decision. No change in rates was expected but market would be eyeing by what would or not stated in regards to the TLTRO operation. Given the recent prolonged economic slowdown in the region there was some expectations that the ECB would be eventually forced to provide further stimulus and shift its rate guidance. Market expectations for the ?rst potential rate hike was seen in early Q4 2020 compared to the ECB forward guidance of key rates to remain at present level at least through the summer of 2019.
• Brexit talks appear to be heading nowhere very fast but the GBP/USD was steady at 1.3155

Economic Data

• (NL) Netherlands Feb CPI M/M: 0.9% v 0.1% prior; Y/Y: 2.6% v 2.2% prior
• (NL) Netherlands Feb CPI EU Harmonized CPI M/M: 1.3 v 0.2% prior; Y/Y: 2.6% v 2.3%e
• (ZA) South Africa Feb Gross Reserves: $50.8B v $50.8B prior; Net Reserves: $43.7B v $43.5Be
• (CH) Swiss Feb Unemployment Rate: 2.7% v 2.7%e; Unemployment Rate (Seasonally Adj): 2.4% v 2.4%e
• (DK) Denmark Jan Industrial Production M/M: -9.5% v +11.9% prior
• (RO) Romania Q4 Preliminary GDP (2nd reading) Q/Q: 0.7%e v 0.7% advance; Y/Y: 4.1%e v 4.1% advance
• (NO) Norway Jan Industrial Production M/M: -2.2% v -0.8% prior; Y/Y: -3.4% v 1.3% prior
• (NO) Norway Jan Manufacturing Production M/M: -0.2% v +0.4%e; Y/Y: 4.0% v 2.5% prior
• (MY) Malaysia end Feb Foreign Reserves: $102.4B v $102.3B mid-month
• (CH) Swiss Feb Foreign Currency Reserves (CHF): 738.8B v 742.4B prior
• (AT) Austria Feb Wholesale Price Index M/M: +0.7% v -0.6% prior; Y/Y: 2.3% v 0.8% prior
• (HU) Hungary Jan Industrial Production M/M: 0.6% v 2.6% prior; Y/Y: 5.0% v 3.2%e
• (RU) Russia Narrow Money Supply w/e Mar 1st (RUB): 10.17T v 10.24T prior
• (BR) Brazil Feb FIPE CPI (Sao Paulo) M/M: 0.5% v 0.5%e
• (CN) China Feb Foreign Reserves: $3.090T v $3.087Te
• (UK) Feb Halifax House Prices M/M: 5.9% v 0.1%e; 3M/Y: 2.8% v 1.0%e
• (SE) Sweden Feb Average House Prices (SEK): 2.984M v 3.212M prior
• (SE) Sweden Feb Budget Balance (SEK): 41.1B v 8.7B prior
• (IT) Italy Jan Retail Sales M/M: +0.5% v -0.6% prior; Y/Y: +1.3% v -0.8% prior
• (ZA) South Africa Q4 Current Account Balance (ZAR): -110B v -163Be; Current Account to GDP Ratio: -2.2% v -3.2%e
• (CZ) Czech Feb International Reserves: $143.1B v $144.0B prior
• (SG) Singapore Feb Foreign Reserves: $292.5B v $293.9B prior
• UN FAO World Food Price Index: 167.5 v 164.8 prior; M/M: 1.7% v 1.8% prior
• (EU) Euro Zone Q4 Final GDP Q/Q: 0.2% v 0.2%e; Y/Y: 1.1% v 1.2%e
• (EU) Euro Zone Q4 Household Consumption Q/Q: 0.2% v 0.2%e; Govt Expenditures Q/Q: 0.7% v 0.4%e; Gross Fixed Capital Q/Q: 0.6% v 0.3%e
• (EU) Euro Zone Q4 Final Employment Q/Q: 0.3% v 0.3% prelim; Y/Y: 1.3% v 1.2% prelim
• (GR) Greece Q4 Final GDP Q/Q: -0.1% v +0.2%e; Y/Y: 1.6% v 2.2% prelim; GDP NSA (unadj) Y/Y: 1.6% v 2.4% prelim
• (GR) Greece Dec Unemployment Rate: 18.0% v 18.3% prior

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €3.256B vs. €2.5-3.5B indicated range in 2023, 2029 and 2048 bonds
• Sold €1.02B in 0.35% July 2023 SPGB; Avg yield: 0.142% v 0.164% prior; Bid-to-cover: 2.13x v 2.44x prior (Feb 21st 2019
• Sold €1.63B in 1.45% Apr 2029 SPGB; Avg Yield: 1.222% v 1.285% prior, bid-to-cover: 1.19x v 1.23x prior (Feb 21st 2019)
• Sold €606M in 2.7% Oct 2048 SPGB; Avg Yield: 2.362% v 2.583% prior; Bid-to-cover: 1.50x v 1.58x prior (Sept 6th 2018)
• (ES) Spain Debt Agency (Tesoro) sold €745M vs. €0.5-1.0B indicated range in inflation-linked 1.0% Nov 2030 bonds (SPGBei); Real Yield: 0.111% v 0.252% prior; Bid-to-cover: 1.70x v 2.10x prior
• (FR) France Debt Agency (AFT) sold total €9.493B vs. €8.5-9.5B indicated range in 2029, 2034 and 2045 bonds
• Sold €6.494B in new 0.50% May 2029 Oat; Avg Yield: 0.57% v 0.57% prior; Bid-to-cover: 1.88x v 2.1x priot (Feb 7th 2019)
• Sold €2.299B in 1.25% May 2034 Oat; Avg Yield: 0.99% v 1.11% prior; Bid-to-cover: 1.94x v 1.72x prior (Jan 10th 2019)
• Sold €700M in 3.25% May 2045 Oat Avg Yield: 1.42%; Bid-to-cover: 2.66x (syndicated on May 16th 2017)
• (SE) Sweden sold SEK500M vs. SEK500M indicated in 0.125% Dec 2027 inflation-linked bonds; Avg Yield: -1.4880% v -1.4053% prior; Bid-to-cover: 5.52x v 3.02x prior

Looking Ahead

• (IL) Israel Feb Foreign Currency Balance: No est v $118.2B prior
• (UR) Ukraine Feb CPI M/M: 0.6%e v 1.0% prior; Y/Y: 9.0%e v 9.2% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills
• 06:00 (IE) Ireland Feb Live Register Monthly Change: No est v -3.2K prior; Live Register Leve: No est v 200.3K prior
• 06:00 (ZA) South Africa Jan Electricity Production Y/Y: No est v -1.8% prior; Electricity Consumption Y/Y: No est v 0.0% prior
• 06:30 (CL) Chile Feb Trade Balance: $0.8Be v $1.0B prior; Total Exports: $5.9Be v $6.7B prior; Total Imports: $5.1Be v $5.6B prior; Copper Exports: No est v $2.5B prior
• 06:30 (CL) Chile Feb International Reserves: No est v $38.9B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (CL) Chile Jan Nominal Wage M/M: No est v 0.5% prior; Y/Y: No est v 3.8% prior
• 07:30 (US) Feb Challenger Job Cuts: No est v 50.3K prior; Y/Y: No est v 18.7% prior
• 07:45 (EU) ECB Interest Rate Decision: Expected to leave key rates unchanged; Expected to leave Main 7-Day Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.40%
• 08:00 (PL) Poland Feb Official Reserves: No est v $113.7B prior
• 08:00 (RU) Russia Gold and Forex Reserve w/e Mar 1st: No est v $480.5B prior
• 08:00 (RU) Russia Feb Official Reserve Assets: $476.0Be v $475.9B prior
• 08:00 (BR) Brazil Feb PMI Services: No est v 52.0 prior; PMI Composite: No est v 52.3 prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:30 (US) Initial Jobless Claims: 225Ke v 225K prior; Continuing Claims: 1.77Me v 1.805M prior
• 08:30 (US) Q4 Final Nonfarm Productivity: 1.5%e v 2.2% prior (revised from 2.3%); Unit Labor Costs: 1.7%e v 0.9% prior
• 08:30 (CA) Canada Jan Building Permits M/M: -5.0%e v +6.0% prior
• 08:30 (US) Weekly USDA Net Export Sales
• 08:30 (EU) ECB’s Draghi holds post rate decision press conference
• 08:30 (EU) ECB updates its Staff Projections
• 09:00 (MX) Mexico Feb CPI M/M: 0.0%e v 0.1% prior; Y/Y: 4.0%e v 4.4% prior; CPI Core M/M: 0.4%e v 0.2% prior
• 09:30 (TR) Turkey Feb Cash Budget Balance (TRY): No est v 2.5B prior
• 10:00 (PT) Portugal PM Costa in Parliament
• 10:00 (BR) Brazil to sell Sept 2025 LFT
• 10:30 (US) Weekly EIA Natural Gas Storage Inventories
• 11:00 (US) Treasury announcement on upcoming 3-year, 10-year and 30-year bonds
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
• 12:00 (US) Q4 Household Change in Net Worth: No est v $2.070T prior
• 12:15 (US) Fed’s Brainard (dove, voter)
• 12:30 (BE) ECB’s Praet (Belgium, chief economist)
• 12:45 (CA) Bank of Canada (BOC) Patterson
• 15:00 (US) Jan Consumer Credit: $17.0Be v $16.6B prior
• 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: expected to leave Reference Rate unchanged at 2.75%