Notes/Observations
- Hong Kong market reopens to crisis as virus tests resilience (travel and casino stocks among the biggest decliners)
- Risk sentiment trying to find its groove again; markets try to assess the economic fallout from coronavirus
- Fed widely expected to keep interest rates on hold
Asia:
- China govt update on Coronavirus: 5,974 confirmed cases v 4,515 yesterday; Deaths 132 v 106 prior (Note: There were 5,327 cases of Sars on the Chinese mainland during the 2002-03 epidemic. Sars had also killed ~800 people globally)
- Australia Q4 CPI beats expectations but remained below target. Q/Q: 0.7% v 0.6%e; Y/Y: 1.8% v 1.7%e; Drought conditions are impacting prices for a range of food products
- BOJ Summary of Opinions on Jan meeting: The probability that the global economy would follow its recovery trend through the middle of this year seems to be increasing
Europe:
- ECB’s Weidmann (Germany): welcomed more open discussion in the ECB governing council. Agreed that loose policy remained necessary
- ECB’s De Cos (Spain): it’s a priority for countries with high debt and structure deficit to put public finances in order. urgent to find solution to WTO’s current paralysis
- Sweden Central Bank (Riksbank) Dep Gov Skingsley: just because monetary policy can become more expansionary if necessary did not mean that it is the best medicine. Riksbank did not lack tools to counteract future downturns, but low level of interest rates made it more difficult
- Italy Econ Min Gualtieri: Italian Government 2020 budget deficit target of 2.2% would be ‘very easily reachable’
Brexit:
- Britain said to introduce bill to end automatic EU fishing rights in UK waters on Wed (Jen 30th). Future access to fish in UK waters would be a matter for the UK to negotiate and to decide on the rules that foreign vessels must follow,
Americas:
- Sen Maj Leader McConnell reportedly told GOP in closed door meeting that he did not have the votes to block impeachment witnesses. Senate tentatively scheduled to vote Friday on whether or not to allow witness testimony at impeachment trial
- Congressional Budget Office (CBO) issued 10-year budget and economic outlook: saw US budget deficit at $1.015T in FY20; Forecasted federal deficits at $1T per year for at least 11 years
- Mid-East/ Energy:- Weekly API Crude Oil Inventories: -4.3M v +1.6M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.36% at 419.08, FTSE +0.12% at 7,489.84, DAX 0.00% at 13,323.42, CAC-40 +0.29% at 5,943.28, IBEX-35 +0.44% at 9,526.00, FTSE MIB +0.30% at 24,098.64, SMI +0.58% at 10,844.00, S&P 500 Futures +0.15%]
Market Focal Points/Key Themes:
- European indices in the green following Asia indices mixed (Shanghai closed) and higher US futures. On a busy corporate earnings front, Billerud jumps on earnings, cost savings program and payment of special dividend. Wizz Air up on earnings and raised FY20 profit guidance. SMCP surges on strong Q4 sales figures and Hurricane Energy rallying on trading update and raised FY19 revenue outlook. Other risers following earnings/trading updates include Novartis, Telenor, Telia, Banco Santander, LVMH, Siltronic and De Longhi. Dialog Semiconductor up on sympathy from Apple results yesterday after market close. Software AG tanks on disappointing earnings results. Other decliners include KPN on earnings and Pendragon after guiding FY19 profit at lower end of forecasted range. Temenos shares trading higher after forming strategic partnership with Google Cloud. Notable earners today include Automatic Data Processing, Anthem, Avery Dennison, Boeing, CH Robinson, Canadian Pacific Railway, Brinker International, General Dynamics, General Electric, Corning, Hess, Ingersoll-Rand, MasterCard, McDonald’s, Marathon Petroleum, NASDAQ OMX Group, Norfolk Southern, Progressive Corp, Rockwell Automation, Scotts-Miracle Gro, Stanley Black & Decker, AT&T, T Rowe Price and Textron.
Equities
- Consumer discretionary: Wizz Air [WIZZ.UK] +1% (earnings), LVMH [MC.FR] +1% (earnings), IAG [IAG.UK] +1% (British Airways suspends all flights to and from mainland China), Gattaca [GATC.UK] -14% (trading update)
- Financials: Banco Santander [SAN.ES] +3.5% (earnings)
- Healthcare: Novartis [NOVN.CH] +1.5% (earnings)
- Technology: AMS [AMS.CH] +2.5% (Apple earnings), Software [SOW.DE] -10% (earnings)
- Telecom: Royal KPN [KPN.NL] -7.5% (earnings)
Speakers
- ECB’s Rehn (Finland): If negative risks did not materialize then Euro Zone 2020 GDP growth could be 1.5%. Reiterated stance that ECB tools have not been exhausted
- German Bundesbank Board Member Wuermeling: Pressure on German banks to ncrease this year
- German Foreign Min Maas: Must conduct negotiations on post-Brexit relations in a manner that will not harm the EU
- Czech Central Bank’s Nidetzky: Saw rate stability as most likely scenarion at upcoming Feb meeting
- IMF Article IV Report on Italy: Forecasted Italy 2020 Budget Deficit to GDP ratio at 2.4% vs. 2.2% government target. Saw Italy Debt/GDP ratio remaining close to 135% in coming years, then rise due to pension spending
Currencies/ Fixed Income
- USD continued to hold onto its recent gains. Focus on upcoming Fed rate decision where it was expected to keep interest rates on hold. Policymakers had previously indicated they’re on hold until there was “material change” in the outlook
- EUR/USD lower by 0.2% as the pair tested the psychological $1.10 level. Better confidence from more European countries failed to buoy the Euro.
- GBP/USD holding above the 1.30 level ahead of Thursday’s BOE rate decision. Dealers noted that a rate cut seemed unlikely. Data since the Dec. 12th general election has suggested growth would gather pace in 2020. Dealers also noted that looser fiscal policy would also be highly supportive
Economic Data
- (DE) Germany Feb GfK Consumer Confidence: 9.9 v 9.6e
- (DE) Germany Dec Import Price Index M/M: 0.2% v 0.2%e; Y/Y: -0.7% v -0.7%e
- (UK) Jan Nationwide House Price Index M/M: 0.5% v 0.2%e; Y/Y: 1.9% v 1.5%e
- (TR) Turkey Jan Economic Confidence: 97.1 v 96.5 prior
- (FR) France Jan Consumer Confidence: 104 v 102e
- (ES) Spain Dec Adjusted Retail Sales Y/Y: 1.7% v 2.5% prior; Retail Sales (unadj) Y/Y: 1.9% v 3.0% prior
- (SE) Sweden Jan Consumer Confidence: 92.6 v 93.5e; Manufacturing Confidence: 101.8# v 94.5e; Economic Tendency Survey: 97.1 v 93.5e
- (HU) Hungary Dec Unemployment Rate: 3.3% v 3.5%e
- (SE) Sweden Dec Household Lending Y/Y: 5.0% v 5.0% prior
- (EU) Euro Zone Dec M3Money Supply Y/Y: 5.0% v 5.5%e
- (AT) Austria Jan Manufacturing PMI: 49.2 v 46.0 prior (10th straight contraction but highest since Dec 2018)
- (IT) Italy Jan Consumer Confidence Index: 111.8 v 110.5e; Manufacturing Confidence: 99.9 v 99.4e; Economic Sentiment: 99.2 v 100.7 prior
- (CH) Swiss Jan Expectations Survey: 8.3 v 12.5 prior
- (PL) Poland 2019 Annual GDP Y/Y: 4.0% v 4.2%e
- (IT) Italy Dec PPI M/M: 0.0% v -0.2% prior; Y/Y: -3.1% v -3.6% prior
Fixed Income Issuance
- (AT) Austria Debt Agency (AFFA) opened book to sell EUR-denominated 10-year RAGB bond via syndicate; guidance seen -10bps to mid-swaps
- (IN) India sold total INR130B v INR130B in 3-month, 6-month and 12-month bills
- (SE) Sweden sold total SEK2.0B vs. SEK2.0B indicated in 2023 and 2029 bonds
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 1.75% 2025 bond; Yield: 1.31% v 1.36% prior; bid-to-cover: 2.52x v 2.33x prior
- (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month bills; Avg Yield: -0.355% v -0.221% prior; Bid-to-cover: 1.72x v 1.47x prior
Looking Ahead
- 05:30 (EU) ECB allotment in 3-month LTRO tender
- 05:30 (DE) Germany to sell €4.0B in new 0.0% Apr 2025 BOBL
- 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 26-week bills
- 06:00 (IL) Israel Dec Chain Store Sales M/M: No est v -0.4% prior
- 06:00 (CZ) Czech Republic to sell 2027 and 2057 bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e Jan 23rd: % v -1.2% prior
- 07:00 (UK) Weekly PM question time in House of Commons
- 07:00 (RU) Russia to sell OFZ bonds
- 07:30 (BR) Brazil Dec Total Outstanding Loans(BRL): 3.451Te v 3.410T prior; M/M: 1.2%e v 1.1% prior; Personal Loan Default Rate: No est v 5.0% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (US) Dec Advance Goods Trade Balance: -$65.0Be v -$63.2B prior
- 08:30 (US) Dec Preliminary Wholesale Inventories M/M: +0.1%e v -0.1% prior; Retail Inventories M/M: +0.1%e v -0.8% prior (revised from -0.7%)
- 10:00 (US) Dec Pending Home Sales M/M: 0.5%e v 1.2% prior; Y/Y: 10.3%e v 5.6% prior
- 10:30 (US) Weekly DOE Oil Inventories
- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged between 1.50-1.75% range ; Expected to leave Interest Rate on Excess Reserves (IOER) unchanged at 1.55%
- 14:30 (US) Fed Chair Powell holds post rate decision press conference
- 16:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 1.75%
- 16:00 (KR) South Korea Feb Business Manufacturing Survey: No est v 73 prior; Non-Manufacturing Survey: No est v 75 prior
- 16:45 (NZ) New Zealand Dec Trade Balance (NZD): +0.1Be v -0.8B prior; Exports: 5.6Be v 5.2B prior; Imports: 5.4Be v 6.0B prior
- 18:50 (JP) Japan Dec Loans & Discounts Corp Y/Y: No est v 2.0% prior
- 19:01 (UK) Jan Lloyds Business Barometer: No est v 10 prior
- 19:30 (AU) Australia Q4 Import Price Index Q/Q: 0.4%e v 0.4% prior; Export Price Index Q/Q: -5.2%e v 1.3% prior
- 20:05 (NZ) New Zealand to sell NZD250M in 2.75% 2025 Bonds
- 21:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave Key rates unchanged
- 21:30 (SG) Singapore Q4 Unemployment Rate: 2.3%e v 2.3% prior
- 22:35 (JP) Japan to sell 2-Year JGB Bonds
- 23:30 (TW) Taiwan to sell TWD35B in 3-month Bills
