Major EU PMI Manufacturing Data Builds The Case For Stabilization In The Region

Notes/Observations

• Major European Jan Final PMI manufacturing revised higher (Beats: France, Germany, Euro Zone, UK; Misses: Spain)
• Mainland China returns from extended Lunar New Year holiday (markets were closed since Jan 23rd)
• China announced multiple support measures; PBoC unexpectedly cut the reverse repo rates to help economy as virus spreads; injected CNY1.2T in liquidity

Asia:

• Coronavirus update: Mainland China deaths attributed to the coronavirus 361 fatalities overtaken the Sars epidemic of 2003) and 17,205 cases
• Death in Philippines was 1st reported one outside China
• China Finance Ministry, PBOC, Banking/ Insurance/ Securities regulators and FX Regulator SAFE Joint statement noted that it would use various monetary policy tools to ensure ample liquidity. To lower lending rates to support firms affected by coronavirus outbreak. Stressed that broader economic impact from coronavirus should be temporary – – China announced multiple support measures; PBoC unexpectedly cut the reverse repo rates to help economy as virus spreads; injected CNY1.2T in liquidity
• China Jan Caixin PMI Manufacturing registered its 6th month of expansion (51.1 v 51.0e)
• Japan Jan Final PMI Manufacturing: 48.8 v 49.3 prelim (confirmed 9th consecutive month of contraction)
• Fitch affirmed Japan sovereign rating at A, Outlook stable Brexit

Transition:

• UK PM Johnson said no need to the UK to follow EU rules to get a trade deal; To call for a Canada style FTA and threaten to walk away if a deal can’t be agreed
• UK PM said to plan to impose full customs/border checks on EU goods after 2020 to ramp up pressure on the Bloc in trade talks
• UK said to be open to a looser Australian style FTA with EU rather than follow EU rules to reach a Canada style deal

Americas:

• Senate to vote Wed (Feb 5th) on 2 articles of impeachment against President Trump

Mid-East/Energy:

• OPEC+ joint committee will meet Feb 4-5th in Vienna to review the impact of coronavirus outbreak on oil demand
• OPEC delegate: OPEC+ weighs emergency response. Potential dates being discussed

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.15% at 408.30, FTSE +0.35% 7,311.41, DAX +0.09% at 12,993.92, CAC-40 +0.05% at 5,809.39, IBEX-35 +0.04% at 9,372.00, FTSE MIB +0.16% at 23,273.66, SMI -0.25% at 10,601.50, S&P 500 Futures +0.32%]
• Market Focal Points/Key Themes: European indices mostly in the green following a lower session in Asia, particularly Shanghai Composite, after reopening today; US futures are trading higher. Siemens Healthineers down after Q1 earnings results that saw meaningfully lower adj EBIT y/y. Julius Baer down on FY19 earnings and job cut announcement. Stabilus also down on quarterly earnings. Ryanair up following solid Q3 earnings topline beat and affirmed guidance. Tele2 up on earnings and Ingenico rallying after reporting solid annual earnings results. Furthermore, Worldline has extended a friendly cash and shares acquisition offer for Ingenico, valuing the company at €7.8B. Worldline shares down. Notable earners today include Asbury Automotive Group, Aecom Technology and Sysco.

Equities

• Consumer discretionary: Ryanair [RYA.UK] +4% (earnings), Future [FUTR.UK] +8.5% (trading update)
• Financials: Julius Baer [BAER.CH] -4% (earnings; job cuts)
• Healthcare: Siemens Heathineers [SHL.DE] -7% (earnings)
• Telecom: Tele2 [TEL2A.SE] -1.5% (earnings)

Speakers

• ECB De Guindos (Spain): reiterated Council stance of starting to see signs of stabilization on the global level; Risk remain tilted to the downside but less pronounced . Saw inflation seen hovering at current level for the coming year.
• EU Brexit Negotiator Barnier: Bloc to hold nine negotiating rounds by October. Reiterated EU stance need to more than 10-months is needed in order to get a UK-EU trade deal – South Africa Presidential Office: Govt to stay the course on reforms to aid the economic recovery; unrealistic to expect immediate results
• World Health Organization (WHO) General Dir Ghebreyesus: coronavirus spread outside China was slow. The ght should be at the source – in China
• China Foreign Ministry spokesperson Geng Shuang: some countries especially US have overreacted to the virus outbreak; US had not provided ‘substantial’ help (**Reminder: NSA O’Brien stated that US had offered China help in battle against virus,China has yet to accept help)
• Hong Kong Exec Lam on measures to contain the spread of coronavirus: Have suspended 10 of 13 border checkpoints. Urged people to stay home if possible
• Australia Resource Min Canavan said to resign
• Iran Oil Min Zanganeh: reiterated stance that would not reduce oil production because of sanctions

Currencies/Fixed Income

• The GBP/USD was softer in the post Brexit area as the transition period began. GBP softer on the perceived tough trading negotiation environment on the trade front. Johnson was expected to use a speech in London to say Britain would refuse close alignment of EU rules in any trade deal. Pair off by 0.8% hovering around the 1.3100 area mid-session.
• EUR/USD was lower by 0.2% at 1.1070 area despite the Major European Jan Final PMI manufacturing being revised higher (Beats: France, Germany, Euro Zone, UK; Misses: Spain). The signs of stabilization yet to aid the currency.
• USD/JPY higher by 0.2% to retest the key 108.70 level. Global impact of the coronavirus still being debated. JPY currency a tad softer on hopes the outbreak would have a limited short-term impact on the Chinese economy

Economic Data

• (RU) Russia Jan PMI Manufacturing: 47.9 v 48.2e – (TR) Turkey Jan CPI M/M: 1.4% v 1.1%e; Y/Y: 12.2% v 11.9%e; CPI Core Y/Y: 9.9% v 9.7%e (3rd straight month inflation accelerated) – (TR) Turkey Jan PPI M/M: 1.8% v 1.1%e; Y/Y: 8.8% v 8.1%e
• (TH) Thailand Jan Business Sentiment Index: 48.5 v 45.1 prior
• (SE) Sweden Jan PMI Manufacturing: 51.5 v 47.6e (1st expansion in 5 months)
• (NL) Netherlands Jan Manufacturing PMI: 49.9 v 48.3 prior (3rd month of contraction)
• (NO) Norway Jan PMI Manufacturing: 50.9 v 54.4e (6th month of expansion)
• (PL) Poland PMI Manufacturing: 47.4 v 48.3e (15th month of contraction)
• (HU) Hungary Jan Manufacturing PMI: 52.5 v 53.9e
• (HU) Hungary Dec PPI M/M: -0.2% v +0.4% prior; Y/Y: 2.4% v 2.1% prior
• (ES) Spain Jan Manufacturing PMI: 48.5 v 48.7e (8th straight contraction but highest reading since Aug 2019) – (CH) Swiss Jan PMI Manufacturing: 47.8 v 50.3e (11th month of contraction)
• (CZ) Czech Republic Jan PMI Manufacturing: 45.2 v 44.6e (14th month of contraction)
• (HK) Hong Kong Q4 Advance GDP Q/Q: -1.2% v -1.5%e; Y/Y: -2.9% v -3.9%e
• (IT) Italy Jan Manufacturing PMI: 48.9 v 47.3e (15th month of contraction but highest reading since May 2019)
• (FR) France Jan Final Manufacturing PMI: 51.1 v 51.0e (confirmed 6th month of expansion)
• (DE) Germany Jan Final Manufacturing PMI: 45.3 v 45.2e (confirmed 13th straight contraction but highest since Feb 2019)
• (EU) Euro Zone Jan Final Manufacturing PMI: 47.9 v 47.8e (confirmed 12th straight contraction but highest since Apr 2019)
• (GR) Greece Jan Manufacturing PMI: 54.4 v 53.9 prior (32nd month of expansion)
• (ZA) South Africa Jan Manufacturing PMI: 45.2 v 47.0e (9th straight contraction)
• (CH) Swiss Weekly Total Sight Deposits (CHF): 588.7B v 587.2B prior; Domestic Sight Deposits: 503.7B v 508.9B prior
• (UK) Jan Final Manufacturing PMI: 50.0 v 49.8e (1st non-contraction in 9 months)
• (DK) Denmark Jan PMI Survey: # v 50.7 prior

Fixed Income Issuance

• (PL) Poland to sell EUR-denominated 5-year bonds; guidance seen high 20 bps area to mid-swaps
• (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 6-month Bills; Avg Yield: 1.40% v 1.19% prior; Bid-to-cover: 1.96x v 2.77x prior

Looking Ahead

• (ZA) South Africa Jan Naamsa Vehicle Sales Y/Y: No est v 4.2% prior
• (RO) Romania Jan International Reserves: No est v $37.5B prior
• (IT) Italy Jan Budget Balance: No est v €9.7B prior
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month
• 06:25 (BR) Brazil Central Bank Weekly Economists Survey
• 06:30 (CL) Chile Dec Economic Activity Index (Monthly GDP) M/M: No est v 1.0% prior; Y/Y: -0.5%e v -3.3% prior; Economic Activity Index (ex-mining) Y/Y: No est v -3.1% prior
• 06:45 (US) Daily Libor Fixing – 07:00 (TR) Turkey to bonds
• 07:00 (IL) Israel to sell bonds
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:00 (BR) Brazil Jan PMI Manufacturing: No est v 50.2 prior
• 08:00 (RU) Russia Annual 2019 GDP Y/Y: No est v 2.3% prior
• 08:00 (CZ) Czech Jan Budget Balance (CZK): No est v -28.5B prior
• 08:00 (SG) Singapore Jan Purchasing Managers Index (PMI): No est v 50.1 prior; Electronics Sector Index: No est v 49.9 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance
• 08:30 (CA) Canada Dec MLI Leading Indicator M/M: No est v 0.3% prior
• 08:50 (FR) France Debt Agency (AFT) to sell €3.3-4.5B in 3-month, 6-month and 12-month bills
• 09:30 (CA) Canada Jan Manufacturing PMI: No est v 50.4 prior
• 09:45 (US) Jan Final Markit US Manufacturing PMI: 51.7e v 51.7 prelim
• 09:45 (EU) ECB weekly QE bond buying update
• 10:00 (US) Jan ISM Manufacturing: 48.5e v 47.2 prior Prices Paid: 51.5e v 51.7 prior
• 10:00 (US) Dec Construction Spending M/M: 0.5%e v 0.6% prior
• 10:00 (CO) Colombia Jan PMI Manufacturing: No est v 52.4 prior
• 10:00 (CO) Colombia Dec Exports: No est v $2.9B prior
• 12:00 (IT) Italy Jan New Car Registrations Y/Y: No est v 12.5% prior
• 13:00 (BR) Brazil Jan Trade Balance: No est v $5.6B prior; Total Exports: No est v $18.2B prior; Total Imports: No est v $12.6B prior
• 13:00 (MX) Mexico Jan IMEF Manufacturing Index: No est v 46.8 prior; Non-Manufacturing Index: No est v 48.8 prior
• 16:45 (NZ) New Zealand Dec Building Permits M/M: No est v -8.5% prior
• 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v # prior
• 18:00 (KR) South Korea Jan CPI M/M: 0.2%e v 0.2% prior; Y/Y: 0.9%e v 0.7% prior; CPI Core Y/Y: No est v 0.7% prior
• 18:50 (JP) Japan End- Jan Monetary Base: No est v ¥518.2T prior
• 22:30 (AU) RBA Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 0.75%
• 22:35 (JP) Japan to sell 10-Year JGB Bonds
• 23:00 (MY) Malaysia Dec Trade Balance (MYR): 8.0Be v 6.5B prior; Exports Y/Y: -3.8%e v -5.5% prior; Imports Y/Y: -2.3%e v -3.6% prior