Concerns Reverberate Over Global Growth, Focus On US Payroll Data

Notes/Observations

• Concerns over weakening global growth continue; safe-haven plays benefiting
• Also concerns whether a US-China trade deal was imminent as no preparations for US-China Summit seemed underway
• Germany Jan Industrial Orders registered its steepest MoM decline since June 2018
• Focus on Feb US jobs report later today

Asia:

• China Feb Trade Balance registered its smallest surplus in a year as components worsened during the Lunar New Year holiday period but added to concerns over weakening global growth. (Trade Balance: $4.1B v $26.2Be; Exports Y/Y: -20.7% v -5.0%e; Imports Y/Y: -5.2% v -0.6%e)
• China PBoC official said to caution financial risks in 2019. Saw potential risks from local govt hidden debt. Bond defaults and property market might materialize in some regions and affect financial institutions
• Japan Q4 Final GDP revised higher and confirmed no recession (Q/Q: 0.5% v 0.4%e; Annualized GDP QoQ: 1.9% v 1.7%e (*Note: Q3 GDP showed a contraction)
• Japan top currency official Asakawa noted that downside risks in global economy persisted due to China-US Trade war; reiterated always monitoring FX market and stood ready to respond to excess volatility and disorderly moves

Europe:

• ECB said to have opted for more radical easing measures in March only after growth projections showed a bigger than feared economic slowdown. The hawkish ECB members did not put up a fight, conceding that delaying these decisions until April was pointless
• ECB said to lean toward TLTRO rate at premium over benchmark; Some ECB official said to have doubted that 2019 outlook was not cut enough. Draghi said to have pushed for ECB stimulus package
• EU said to have made a new offer to the UK on the Irish backstop and was awaiting response. Reports did indicated that the Brexit offer fell short of what UK demanded
• Labour Party (opposition) said to only back Final Say vote on PM May’s Brexit deal and could support softer Brexit without public being given a say. The party was not advocating a referendum in all circumstances

Americas:

• Fed’s Brainard (voter, dove): Navigating cautiously is the right course. Had revised down 2019 economic outlook on increase in risks; it was appropriate to wind down runoff later in year. Softening in recent spending and sentiment data might suggest slowing demand

Macro

• (DE) Germany: Factory orders fell -2.6% m/m in February, but January number was revised sharply higher to +0.9% m/m from -1.6% m/m reported initially. The annual rate also improved to -3.9% y/y from -4.5% y/y. The ECB would have already had the numbers yesterday and the additional confirmation that the German manufacturing sector is crashing under the weight of global trade tensions and rising protectionism will likely have contributed to the ECB’s significantly dovish tilt.
• (CN) China: Exports dropped -20.7% y/y in February, the biggest drop in three years and nowhere near consensus estimates for a fall of -4.8%. Even allowing for seasonal factors the data was being widely read as unambiguously bad. But you have to also consider the tougher comparables related to front end loading head of the introduction of tariffs this time last year. The US-China trade war thus got a lot of blame, though the data did highlight weakening European demand.
• (EU) Eurozone: Reportedly some ECB officials are even more pessimistic about the outlook and consider the latest staff projections, which put growth at 1.1% this year, to be too optimistic. Draghi signaled yesterday that the risks remain skewed to the downside, despite the downward revisions and the new liquidity program and he also admitted that some council members had wanted to push out the guidance for the timing of the first rate hike beyond March next year, rather than December.
• (EU) Eurozone: The ECB’s Nowotny said details of new TLTRO program would be announced in June. He said the Eurozone “clearly” is not in a recession, but that the ECB “wanted to give an expansionary signal”. Nowotny ahead of the meeting had been on record as saying that he doesn’t see the need for an immediate step, but has now admitted that the downward revisions to the German growth outlook forced the ECB’s hand. At the same time, Nowotny defended the decision to start the third round of TLTRO loans in September, rather than June, when the banks will probably start to feel the impact of the maturation of the previous round of loans.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.63% at 371.52, FTSE -0.75% at 7,103.56, DAX -0.57% at 11,451.59, CAC-40 -0.39% at 5,247.56, IBEX-35 -0.72% at 9,182.90, FTSE MIB -0.51% at 20,592.50, SMI -0.48% at 9,291.80, S&P 500 Futures -0.42%]

Market Focal Points/Key Themes:

• European Indices trade lower across the board following a lower Asian Indices and lower US futures. The Shanghai composite declined over 4% following poor China trade data with Exports reaching a 3 year low declining over 20%.
• On the corporate front shares of GVC trades sharply lower following share sales from the CEO and Chairman. On the earnings front Goals Soccer Centers trades over 25% lower after guiding full year results materially below expectations. Elsewhere fashion name EssilorLuxottica declines after a fall in Revenue and profits while Schouw & Co, VAT Group, SwissQuote and SFS Group are among other decliners on earnings. Bodycote and Ontex are among the notable gainers on earnings, with SIG gaining sharply on earnings and strategic options for its Air Handling Business.
• In other news Debenhams trades higher after Sports Direct has requested a general meeting to shake up the board; BMW declines after a fall in Feb sales.
• Looking ahead notable earners include Big Lots, Vail Resorts and Navistar International.

Equities

• Consumer discretionary: GVC Holdings [GVC.UK] -16% (Chairman and CEO sell shares), Essilor Luxottica [EI.FR] -5.5% (earnings), Debenhams [DEB.UK] +21% (issues statement), Goals Soccer Centers [GOAL.UK] -25% (profit warning)
• Consumer staples: Ontex Group [ONTEX.BE] +4.5% (earnings)
• Industrials: Airbus [AIR.FR] -1.5% (deliveries data), RPC Group [RPC.UK] -1.5% (Berry Global superior offer), VAT Group [VACN.CH] -4% (earnings), Panalpina [PWTN.CH] -0.5% (DSV exec comments)

Speakers

• ECB’s Nowotny ( Austria): Latest decision was meant to send an expansionary signal and was the correct response (**Reports noted that ECB hawks gave little pushback to the dovish ECB move on Mar 7th as they conceded that delaying decisions until April made little sense)
• ECB’s Vasiliauskas (Lithuania): General Council acted preemptively as action was needed as was surprised by extend of Staff Forecasts revisions. ECB had time until Sept to agree on TLTRO details but they would not contain mortgage lending
• Sweden Central Bank (Riksbank) Dep Gov Floden: Surprised by the recent weakness in SEK currency (Krona); fundamentals suggested a stronger currency
• Finland govt to resign; PM Siplia to tender resignation on Friday, Mar 8th citing lack of progress on key reforms (**Note: Next elections schedule for April 14th)
• Czech Central Bank Holub (chief economist): May still have room for more rate hikes. Saw range of hikes in 2019 from 0 to 2 (**Note: his prior view was between 1-2). Recent ECB policy move was a reason for CNB to be cautious.
• US Ambassador to China Branstad: No preparations for US-China Summit underway
• China PBoC Advisor Sheng Songcheng: Benchmark interest rates are very low and expected the economy to stabilize in Q2

Currencies/ Fixed Income

• Markets were in a holding pattern ahead of the US payroll report for Feb due out later today with the greenback just humming along its best levels of the year against a basket of currencies
• EUR/USD was holding above the 1.12 level in quiet trading and just off its lowest since June 2017 following the dovish ECB statement on Thursday. ECB pushed back the timing of its first post-crisis interest rate hike to 2020,cut its economic forecasts and launched a new round of TLTRO (bank lending scheme). EUR currently exhibiting its worst weekly decline in over a year with losses of approx. 1.5%.
• The JPY currency was firmer on safe-haven flows as concerns over weakening global growth continued. The ECB staff projections, and poor components from China and Taiwan tarde data prompted the lasted catalyst. USD/JPY lower by 0.5% holding around the 111.00 area.

Economic Data

• (DE) Germany Jan Factory Orders M/M: -2.6% v +0.5%e; Y/Y: -3.9% v -3.2%e
• (NO) Norway Jan GDP M/M: 0.2 v 0.0% prior; GDP Mainland M/M: 0.3% v 0.3%e
• (FI) Finland Jan Industrial Production M/M: 0.2% v 1.4% prior; Y/Y: 2.6% v 3.3% prior
• (CN) Weekly Shanghai copper inventories (SHFE): 236.2K v 227.1K tons prior
• (FR) France Jan Trade Balance: -€4.2B v -€4.9Be
• (FR) France Jan Current Account Balance: +€0.9B v -€0.1B prior
• (FR) France Jan Industrial Production M/M: 1.3% v 0.1%e; Y/Y: 1.7% v 0.5%e
• (FR) France Jan Manufacturing Production M/M: +1.0% v -0.2%e; Y/Y: +0.9% v -0.2%e
• (TW) Taiwan Feb CPI Y/Y: 0.2% v 0.3%e; CPI Core Y/Y: 0.3% v 0.4%e; WPI Y/Y: 0.8% v 0.5% prior
• (TW) Taiwan Feb Trade Balance: $4.9B v $2.1Be; Exports Y/Y: -8.8% v -0.7%e; Imports Y/Y: -19.7% v +4.8%e
• (ES) Spain Jan Industrial Output NSA Y/Y: +1.8% v -4.2% prior; Industrial Output SA Y/Y: +2.4% v -1.6%e; Industrial Production M/M: 3.4% v 1.6%e
• (HU) Hungary Feb CPI M/M: 0.6% v 0.4%e; Y/Y: 3.1% v 2.9%e
• (CZ) Czech Q4 Average Real Monthly Wage Y/Y: 4.7% v 5.9%e
• (CZ) Czech Feb Unemployment Rate: 3.2% v 3.2%e
• (SE) Sweden Jan Household Consumption M/M: +0.7% v -0.4% prior; Y/Y: 1.1% v 0.3% prior
• (IT) Italy Jan Industrial Production M/M: 1.7% v 0.2%e; Y/Y: -0.8% v -3.0%e; Industrial Production NSA (unadj) Y/Y: -0.9% v -2.5% prior
• (IT) Italy Jan PPI M/M: 0.0% v -0.6% prior; Y/Y: 4.4% v 5.2% prior
• (GR) Greece Jan Industrial Production Y/Y: % v 1.3% prior
• (HU) Hungary Feb YTD Budget Balance (HUF): 67.3B v 244.5B prior

Fixed Income Issuance

• (IN) India sold total INR120B vs. INR120B indicated in 2024, 2029, 2033 and 2055 bonds
• (ZA) South Africa sold total ZAR650M vs. ZAR650M indicatedin I/ L 2025, 2038 and 2046 bonds
• (SE) Sweden sold SEK500M vs. SEK500M indicated in 0.125% 2026 Inflation-Linked bonds; Avg Yield: -1.743% v -1.6130% prior; Bid-to-cover: 5.09x v 6.03x prior

Looking Ahead

• (MX) Mexico Feb Nominal Wages: No est v 5.2% prior
• (IT) Italy Debt Agency (Tesoro) announcement for upcoming BTP auction on Mar 13th
• 05:30 (PL) Poland to sell PLN3.0-5.0B in 2021, 2024, 2028 and 2029 Bonds
• 06:00 (BR) Brazil Feb FGV Inflation IGP-DI M/M: 1.1%e v 0.1% prior; Y/Y: 7.6%e v 6.6% prior
• 06:00 (CL) Chile Feb CPI M/M: 0.1%e v 0.1% prior; Y/Y: 1.8%e v 1.8% prior
• 06:00 (CL) Chile Feb CPI (ex-food/energy) M/M: 0.3%e v 0.4% prior; Y/Y: No est v 1.9% prior
• 06:00 (UK) DMO to sell €6.0B in 1-month, 3-month and 6-month bills £2.0B, £2.0B and £2.0B respectively)
• 06:30 (IN) India Weekly Forex Reserves w/e Mar 1st: No est v $399.2B prior
• 06:45 (US) Daily Libor Fixing
• 08:00 (UK) Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:15 (CA) Canada Feb Annualized Housing Starts: 205.0Ke v 207.9K prior (revised from 208.0K)
• 08:30 (US) Feb Change in Nonfarm Payrolls: +180Ke v +304K prior; Change in Private Payrolls: +170Ke v +296K prior; Change in Manufacturing: +12Ke v +13K prior
• 08:30 (US) Feb Unemployment Rate: 3.8%e v 4.0% prior; Underemployment Rate: No est v 8.1% prior; – 08:30 (US) Feb Average Hourly Earnings M/M: 0.3%e v 0.1% prior; Y/Y: 3.3%e v 3.2% prior; Average Weekly Hours: 34.5e v 34.5prior
• 08:30 (US) Jan Housing Starts: 1.195Me v 1.078M prior; Building Permits: 1.287Me v 1.326M prior
• 08:30 (CA) Canada Feb Net Change in Employment: +1.2Ke v +66.8K prior; Unemployment Rate: 5.8%e v 5.8% prior; Full Time Employment Change: +0.8Ke v +30.9K prior; Part Time Employment Change: -5.7Ke v +36K prior; Participation Rate: 65.6%e v 65.6% prior; Hourly Wage Rate Y/Y: 1.7%e v 1.8% prior
• 08:30 (CA) Canada Q4 Capacity Utilization Rate: 82.0%e v 82.6% prior
• 09:00 (MX) Mexico Dec Gross Fixed Investment: -4.9%e v -3.2% prior
• 11:30 (LX) ECB’s Mersch (Luxembourg) at conference
• 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE)
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 20:30 (CN) China Feb CPI Y/Y: 1.5%e v 1.7% prior; PPI Y/Y: 0.2%e v 0.1% prior
• 21:00 (US) Fed Chair Powell