Optimism From Policy Response To Combat The Impact Of The Coronavirus

Notes/Observations

• Risk appetite finding fresh legs on hope the pace of corona infection rate would slowly level off; optimism from policy response to combat the impact of the coronavirus
• Chinese policymakers said to be readying measures to support an economy impacted by the coronavirus outbreak
• Reports of a significant breakthrough being made in the search for a coronavirus vaccine
• Numerous central banks hints of moves to contain any negative effects of slowing growth (RBA, MAS); Thailand unexpectedly cuts to offset impact from virus)
• Major Euro Area PMI Services data missed in session (Beats: Euro Zone, Italy); Misses: France, Spain; In-line: Germany)

Asia:

• CoronaVirus Update: 24,363 cases confirmed; 23,260 cases suspected; 492 deaths; 897 patients cured
• Australia Jan Final PMI Services: 50.6 v 48.9 prelim (1st expansion in 3 months)
• Japan Jan Final PMI Services: 51.0 v 52.1 prelim ((confirms move back into expansion for 1st time in 4 months
• China Jan Caixin PMI Services: 51.8 v 52.0e (3 month low)
• RBA Gov Lowe: Existing stimulus and long lags have prompted rates on hold. If no progress seen on unemployment and inflation then would see a stronger case to cut rates further
• BOJ Dep Gov Wakatabe: Coronavirus raising uncertainties for global economy, given current situation needed to be mindful of chance downside economic risks materialize and affect prices. No plans to conduct a policy review at this time but BOJ to carefully examine economic, price moves to check whether mechanism for hitting price goal was working
• Singapore Central Bank (MAS): Policy stance remains unchanged, there is sufficient room within the band to accommodate S$NEER easing

Americas:

• White House econ adviser Kudlow: US is supporting development of 5G alternative to Huawei. Dell, AT&T, and Microsoft are working very rapidly on 5G plan
• Senate expected to formally acquit President Trump on two counts of impeachment later today

Mid-East/ Energy:

• Weekly API Crude Oil Inventories: +4.2M v -4.3M prior
• OPEC+ Delegate: OPEC+ Joint Technical Committee (JMMC) did not discuss oil cuts on Tuesday but will revisit matter on Wed (Feb 5th). OPEC+ studied 200-400K bpd virus impact on oil demand (Note: Saudi’s Arabia’s push for oil production cut said to run into Russian resistance)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +1.12% at 423.12, FTSE +0.78% at 7,498.05, DAX +1.28% at 13,451.21, CAC-40 +0.97% at 5,992.79, IBEX-35 +0.69% at 9,629.00, FTSE MIB +0.86% at 24,050.49, SMI +1.10% at 10,919.50, S&P 500 Futures +0.91%]

Market Focal Points/Key Themes:

• European indices well in the green following Asia indices higher and higher US futures. Imperial Brands plunges following trading update and cutting FY20 revenue and EPS guidance. BNP Paribas, Siemens, Vestas Wind Systems, Danske Bank and Naturgy lower after earnings results. ABB, Handlesbanken, Kesko, Novo Nordisk, Infineon, Hexagon, Melexis, Barratt Developments, Svenska Handelsbanken and Vinci up after earnings results. Vodafone higher following trading update and Astaldi surges after reporting solid FY19 backlog. Smurfit Kappa up on FY19 earnings and highlighting good start to the year from demand perspective and expect another strong year of FCF growth. Outokumpu rallying on earnings results, guiding Q1 EBITDA q/q and announcement of strategic review of Long Products business. CompuGroup Medical trading meaningfully higher after raising FY19 revenue and EBITDA guidance. Domino’s Pizza rises on quarterly revenue increase. Notable earners today include Boston Scientific, Chubb Limited, General Motors, Humana and Merck.

Equities

• Consumer discretionary: Imperial Brands [IMB.UK] -8.5% (earnings), TomTom [TOM2.NL] -2.5% (earnings)
• Financials: BNP Paribas [BNP.FR] +0.5% (earnings), Danske Bank [DANSKE.DK] -1% (earnings)
• Industrials: ABB [ABBN.CH] +2.5% (earnings), Barratt Developments [BDEV.UK] +3% (earnings), Siemens [SIE.DE] -1% (earnings)
• Technology: Infineon [IFX.DE] +6% (earnings), Melexis [MELE.BE] +7.5% (earnings), CompuGroup [COP.DE] +10% (earnings)
• Telecom: Vodafone [VOD.UK] +1.5% (trading update)

Speakers

• Hong Kong Chief Exec Lam: Situation over coronavirus is worrying; next two weeks are critical
• Thailand Central Bank (BOT) Policy Statement noted that the decision to cut rates was unanimous. It now saw 2020 GDP growth lower than forecasts due to coronavirus, delayed budget, lower tourism. THB currency (Baht) might not be in line with fundamentals
• China President Xi urged itss legislation coupled with strict law enforcement for virus control
• IMF chief Georgieva said to have discussed Argentina’s efforts to stabilize its economy with Econ Min Guzman

Currencies/ Fixed Income

• Risk appetite again found some fresh legs on hope the pace of corona infection rate would slowly level off and building optimism that gov t policy response to combat the impact of the coronavirus was appropriate. Dealers cited reports that China policymakers were preparing measures to support the economy from any negative effects from the coronavirus outbreak
• USD/JPY tested the 109.70 area as safe-haven flows unwound.
• Continued better data out of the UK had dealers dial back any expectations of a BOE rate cut in 2020. The PMI Services reading was the most recent in a string of better data to provide some comfort in the UK economy. GBP/USD higher by 0.2% at 1.3060 by mid-session.
• EUR/USD was softer by 0.2% at 1.1020 area as mixed Euro Area PMI Services data clouded any optimism for the region. Analysts note that the region is growing too slowly to erode any slack.

Economic Data

• (RU) Russia Jan PMI Services: 54.1 v 53.5e (7th month of expansion); PMI Composite: 52.6 v 51.8 prior
• (CH) Swiss Q1 SECO Consumer Confidence: -9.4 v -8.0e
• (TH) Thailand Central Bank (BoT) cut the Benchmark Interest Rate by 25bps to 1.00% (not expected)
• (ZA) South Africa Jan PMI (overall economy): 48.3 v 47.7e
• (SE) Sweden Jan PMI Services: 52.5 v 49.1 prior (1st expansion in 5 months); Composite PMI: 52.2 v 48.7 prior
• (CZ) Czech Dec Retail Sales Y/Y: 4.6% v 6.3%e; Retail Sales (ex-auto)Y/Y: 4.8% v 5.5%e
• (HU) Hungary Dec Retail Sales Y/Y: 6.1% v 6.5%e
• (ES) Spain Jan Services PMI: 52.3 v 54.0e (75th month of expansion but lowest since Nov 2013); Composite PMI: 51.5 v 52.6e
• (TW) Taiwan Jan Foreign Reserves: $479.1B v $478.1B prior
• (SE) Sweden Dec Private Sector Production M/M: -0.4% v 0.0%e; Y/Y: -0.3% v +1.6% prior
• (SE) Sweden Dec Industrial Orders M/M: -0.5% v +0.4% prior; Y/Y: -4.7% v -1.8% prior
• (SE) Sweden Dec Industry Production Value Y/Y: -3.2% v 0.4% prior; Service Production Value Y/Y: 0.1% v 1.5% prior
• 03:45 (NG) Nigeria Jan PMI: # v 56.8 prior
• (IT) Italy Jan Services PMI: 51.4 v 50.5e (12th straight expansion); Composite PMI: 50.4 v 49.4e
• (FR) France Services Jan Final PMI Services: 51.0 v 51.7e (confirms 10th month of expansion); PMI Composite: # v 51.5e
• (DE) Germany Jan Final PMI Services: # v 54.2e (confirmed 79th month of expansion); PMI Composite: # v 51.1e
• (IS) Iceland Central Bank (Sedibanki) cut the 7-Day Term Deposit Rate by 25bps to 2.75%
• (EU) Euro Zone Jan Final PMI Services: 52.5 v 52.2e (confirms 80th month of expansion); PMI Composite: # v 50.9e
• (UK) Jan New Car Registrations Y/Y: -7.3% v +3.4% prior
• (UK) Jan Final PMI Services: 53.9 v 52.9e (confirmed 2nd month of expansion); PMI Composite: 53.3 v 52.4e
• (UK) Jan Official Reserves Changes: $2.2B v $2.1B prior
• (EU) Euro Zone Dec Retail Sales M/M: -1.6% v -1.1%e; Y/Y: 1.3% v 2.3%e

Fixed Income Issuance

• (DK) Denmark sold total DKK2.2B in 2022 and 2029 DGB Bonds
• (IN) India sold total INR130B vs. INR130B indicated in 3-month, 6-month and 12-month bills
• (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month Bills; Avg Yield: -0.1952% v -0.2252% prior; Bid-to-cover: 1.83x v 1.89x prior

Looking Ahead

• (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50% (no set time; typicality before 08:00 ET/13:00 GMT))
• (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Rate Target by 25bps to 4.25% (no set time; usually late US afternoon ~16:00 ET/21:00 GMT))
• 06:00 (IE) Ireland Dec Industrial Production M/M: No est v -4.0% prior; Y/Y: No est v -2.6% prior
• 06:00 (PT) Portugal Q4 Unemployment Rate: No est v 6.1% prior
• 06:30 (IE) ECB’s Lane (Ireland, chief economist) in Berlin
• 07:00 (US) MBA Mortgage Applications w/e Jan 31st: No est v 7.2% prior
• 07:00 (MX) Mexico Dec Leading Indicators M/M: No est v 0.1 prior
• 07:00 (MX) Mexico Jan Vehicle Domestic Sales: No est v 130.5K prior
• 07:00 (UK) Weekly PM question time in House of Commons
• 07:00 (RU) Russia to sell OFZ bonds
• 07:15 (EU) ECB chief Lagarde in Paris
• 08:00 (BR) Brazil Jan PMI Services: No est v 51.0 prior; PMI Composite: No est v 50.9 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:15 (US) Jan ADP Employment Change: +158Ke v +202K prior
• 08:30 (US) Dec Trade Balance: -$48.2Be v -$43.1B prior
• 08:30 (CA) Canada Dec Int’l Merchandise Trade (CAD): -0.6Be v -1.1B prior
• 09:45 (US) Jan Final Markit PMI Services: 53.2e v 53.2 prelim; PMI Composite: No est v 53.1 prelim
• 10:00 (US) Jan ISM Non-Manufacturing Index: 55.1e v 54.9 prior (revised from 55.0)
• 10:00 (MX) Mexico Weekly International Reserve data
• 10:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference
• 10:30 (US) Weekly DOE Oil Inventories
• 12:30 (CA) Bank of Canada (BOC) Wilkins in Toronto
• 14:00 (AR) Argentina Dec Industrial Production Y/Y: No est v -4.5% prior; Construction Activity Y/Y: No est v -5.2% prior
• 18:00 (KR) South Korea Dec Current Account Balance: No est v $6.0B prior; Balance of Good (BoP): No est v $7.4B prior
• 19:00 (CO) Colombia Jan CPI M/M: 0.6%e v 0.3% prior; Y/Y: 3.8%e v 3.8% prior
• 19:00 (CO) Colombia Jan CPI Core M/M: No est v 0.4% prior; Y/Y: No est v 3.5% prior
• 19:30 (AU) Australia Dec Trade Balance: A$5.6Be v A$5.8B prior
• 19:30 (AU) Australia Dec Retail Sales M/M: -0.2%e v +0.9% prior; Q/Q: +0.3%e v -0.1% prior
• 19:30 (AU) Australia Q4 NAB Business Confidence: No est v -2 prior
• 20:30 (JP) BOJ’s Masai speech in Nara
• 21:00 (JP) Japan Jan Tokyo Avg Office Vacancies: No est v 1.55 prior
• 22:30 (TH) Thailand Jan CPI M/M: 0.1%e v 0.0% prior; Y/Y: 1.0%e v 0.9% prior; CPI Core Y/Y: 0.5%e v 0.5% prior
• 22:30 (JP) Japan to sell 6-Month Bills
• 22:35 (JP) Japan to sell 30-Year JGB Bonds