Major Euro Zone Flash Manufacturing PMI Paints A Dismal Picture, German 10-Years Turns Negative

Notes/Observations

• EU avoid a hard Brexit from occurring next week; gives UK an extra two weeks unconditional extension to Apr 12th
• Weaker EU data prompted risk aversion flows; German 10-year turns negative for the 1st time since Oct 2016
• Major European PMI data misses expectations (Misses: France, Germany)

Asia:

• Australia Mar Preliminary PMI Manufacturing 52.0 v 52.9 prior
• Japan National CPI comes in a bit light Y/Y: 0.2% v 0.3%e; CPI Ex Fresh Food (Core) Y/Y: 0.7% v 0.8%e v 0.8% prior
• Japan Mar Preliminary PMI Manufacturing: 48.9 v 49.9e (2nd straight contraction)
• Japan Fin Min Aso reiterated plans to raise sales tax as planned in October; reiterates govt stance that domestic economy in moderate recovery

Europe:

• EU Tusk on Leader Summit draft conclusions: EU could agree on Brexit extension until May 22nd with extension conditional on Withdrawal Agreement approved by UK parliament during week of Mar 25th (next week). EU offered Brexit delay, postponing no-deal risk from March 29th but no extension possible beyond elections to European parliament. Reiterated stance withdrawal agreement could not be renegotiated and any unilateral commitments, Statements or other acts should be compatible with withdrawal agreement. Confirmed if UK lawmakers back the deal, UK would leave in ‘orderly’ way by May 22nd otherwise if UK lawmakers did not agree to Brexit deal, UK would leave EU on April 12th.
• PM May decided that she was willing to take Britain out of the EU without a deal if she could not secure her Brexit deal through UK parliament – Graham Brady (1922 Chairman) said to tell PM May that MPs wanted her to quit because of the way she had handled the Brexit process
• EU said to be considering 9 month delay if May’s Brexit deal fails for a third time in parliament next week

Americas:

• President Trump said to consider Stephen Moore and Herman Cain for Federal Reserve Board

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.44% at 379.04, FTSE -0.75% at 7,299.85, DAX -0.58% 11,482.52, CAC-40 -0.78% at 5,336.94, IBEX-35 -0.67% at 5,336.94, FTSE MIB -0.85% at 21,190.50, SMI -0.34% at 9,421.90, S&P 500 Futures -0.40%]
• Market Focal Points/Key Themes: European Indices trade sharply lower reversing earlier strength after both France and Germany Manufacturing PMI missed forecasts and entered into contractionary territory. US Index futures also trade lower following the decline in European Indices. On the corporate front Schaffner Holding declines over 6% after guiding 2019 Revenue lower; while Compenenta also declines on earnings. Interoll trades higher on record high earnings, with Smith Group, Henry Boot, and Hapag Lloyd also trading higher on earnings. Elsewhere Targovax falls over 30% after a 10.5M placing, Pearsons trades higher following an analyst upgrade while Adidas and Puma edge higher after weaker earnings from Nike after the close in the US. Looking ahead notable earners include Tiffany & Co, Destination Xl and Hibbett Sport among others.

Equities

• Consumer discretionary: Adidas [ADS.DE] +0.5%, Puma [PUM.DE] -0.5% (Nike’s earnings), Smiths Group [SMIN.UK] +1.5% (earnings; plans unit listing), Debenhams [DEB.UK] -22% (Consent solicitation to bondholders)
• Financials: Deutsche Bank [DBK.DE] +0.5% (annual report), Commerzbank [CBK.DE] +1% (Supervisory Board meeting resulted in no decisions on possible merger with Deutsche Bank), Credit Suisse [CSGN.CH] -1.5% (annual report), RPC Group [RPC.UK] -1% (offer), Swedbank [SWEDA.SE] -1% (update on money laundering)
• Healthcare: Targovax [TRVX.NO] -34% (placing), Novartis [NOVN.CH] n/c (Alcon spin-off update), Roche Holding [ROG.CH] -0.5% (FDA alert)
• Industrials: Schaffner Holding [SAHN.CH] -6% (profit warning), Hapag-Lloyd [HLAG.DE] +3% (final earnings)
• Technology: Interroll [INRN.CH] +5.5% (earnings), Learning Technologies [LTG.UK] +5% (analyst action)

Speakers

• SNB’s Maechler: FX reserves could not be hedged
• Norway Central Bank (Norges) Bank Dep Gov Nicolaisen: Households are optimistic on outlook as wages were rising faster than prices and the employment situation was good

Currencies/Fixed Income

• Weaker EU data prompted risk aversion flows and sent the German 10-year Bund yield into negative territory for the 1st time since Oct 2016. Senitment cemented after the major European PMI data (France, Germany, Euro Zone) missed expectations and were all in contraction territory.
• EUR/USD declining over 0.5% in the session to probe back below the 1.13 level in the aftermath of the disappointing PMI data.
• GBP/USD saw its initial gains erode to test back below 1.31. The pair briefly saw some positive flows after EU avoid a hard Brexit from occurring next week and gave the UK an extra two week of an unconditional extension now set at Apr 12th
• USD/JPY lower on safe-haven flows to test 110.50 in the session.

Economic Data

• (CN) Weekly Shanghai copper inventories (SHFE): 259.2K v 264.6K tons prior
• (FR) France Q4 Final Wages Q/Q: 0.2% v 0.2% prelim
• (RU) Russia Narrow Money Supply w/e Mar 15th (RUB): 10.32T v 10.30T prior
• (TW) Taiwan Feb Unemployment Rate: 3.7% v 3.7%e
• (FR) France Mar Preliminary Manufacturing PMI: 49.8 v 51.4e (1st contraction in 3 months); Services PMI: 48.7 v 50.6e; Composite PMI: 48.7 v 50.7e
• (DE) Germany Mar Preliminary Manufacturing PMI: 44.7 v 48.0e (3rd straight contraction); Services PMI: 54.9 v 54.8e; Composite PMI: 51.5 v 52.7e
• (HK) Hong Kong Q4 Current Account Balance: $42.1B v $48.0B prior; Overall Balance of Payment (BoP): +$24.0B v -$41.72B prior
• (EU) Eurozone Mar Preliminary Manufacturing PMI: 47.6 v 49.5e (2nd straight contraction and lowest since Apr 2013); Services PMI: 52.7 v 52.7e; Composite PMI: 51.3 v 52.0e
• (EU) Euro Zone Jan Current Account: €36.8B v €16.2B prior
• (IS) Iceland Feb Wage Index M/M: 0.2% v 0.3% prior; Y/Y: 5.6% v 5.8% prior – (IT) Italy Jan Current Account Balance: €0.0B v €4.5B prior

Fixed Income Issuance

• (IN) India sold total INR180B vs. INR180B indicated in 2024, 2029, 2033 and 2046 bonds

Looking Ahead

• 05:30 (EU) ESM’s Regling with Eurogroup chief Centeno
• 06:00 (EU) Daily Euribor Fixing
• 06:00 FR) France Debt Agency (AFT) announces upcoming issuance
• 06:00 (ZA) South Africa to sell ZAR650M in I/ L 2029, 2033 and 2050 bonds
• 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 1-Week Auction Rate unchanged at 7.75%
• 07:00 (IE) Ireland Feb PPI M/M: No est v 0.2% prior; Y/Y: No est v -8.9% prior
• 07:00 (UK) DMO to sell €4.5B in 1-month, 3-month and 6-month bills £1.5B, £1.5B and £1.5B respectively)
• 07:30 (IN) India Weekly Forex Reserves w/e Mar 8th: No est v $402.0B prior
• 07:30 (IS) Iceland to sell 1.5% Feb 2026 RIKB inflation-linked Bonds
• 07:45 (US) Daily Libor Fixing
• 08:00 (CL) Chile Feb PPI M/M: No est v -1.8% prior
• 08:30 (CA) Canada Jan Retail Sales M/M: +0.4%e v -0.1% prior; Retail Sales (Ex-Auto) M/M: +0.1%e v -0.5% prior
• 08:30 (CA) Canada Feb CPI M/M: 0.6%e v 0.1% prior; Y/Y: 1.4%e v 1.4% prior; CPI Core- Common Y/Y: 1.8%e v 1.9% prior; CPI Core- Median Y/Y: 1.8%e v 1.8% prior; CPI Core- Trim Y/Y: 1.8%e v 1.9% prior; Consumer Price Index: 134.4e v 133.6 prior
• 09:00 (PL) Poland Feb M3 Money Supply M/M: +0.6%e v -1.4% prior; Y/Y: 9.0%e v 8.8% prior
• 09:00 (UK) Baltic Dry Bulk Index
• 09:00 (IN) India announces upcoming bill issuance (held on Wed)
• 09:45 (US) Mar Preliminary Markit Manufacturing PMI: 53.4e v 53.0 prior; Services PMI: 55.5e v 56.0 prior; Composite PMI: No est v 55.5 prior
• 10:00 (US) Feb Existing Home Sales: 5.10Me v 4.94M prior
• 10:00 (US) Jan Wholesale Inventories M/M: 0.1%e v 1.1% prior; Wholesale Trade Sales M/M: No est v -1.0% prior
• 11:00 (CO) Colombia Central Bank Interest Rate Decision
• 11:00 (EU) Potential sovereign ratings after European close
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 14:00 (US) Feb Monthly Budget Statement: -$277.0Be v +$8.7B prior
• 15:00 (CO) Colombia Jan Economic Activity Index (Monthly GDP): 3.0%e v 1.9% prior