Major EU Production Data Questions The Theme Of Stabilization In Region

Notes/Observations

• France and German Dec production data handily miss expectations; questioning theme of stabilization in region
• Focus on US Jan jobs data following big beat on ADP Employment earlier in the week
• Markets hope that conronavirus outbreak outside of the Chinese province of Hubei would level off

Asia:

• Japan Dec Labor Cash Earnings Y/Y: 0.0% v -0.1%e; Real Cash Earnings Y/Y: -0.9% v -0.9
• Japan Dec Household Spending registered its 3rd straight decline (YoY: -4.8% v -1.7%e). Some analysts have cited Japan’s prior sales tax hike and the warm weather for the data
• RBA Statement On Monetary Policy (SOMP): Cuts 2020 GDP growth outlook to reflect drought, bushfires, and coronavirus; raises 2021 growth outlook
• RBA Gov Lowe: Discussed lower rates extensively at Feb policy meeting. If the unemployment rate were to be moving materially in the wrong direction and there was no further progress being made toward the inflation target, the balance of arguments would tilt toward a further easing of monetary policy. Would not raise rates until confident that inflation was within target range of 2-3%
• China National Health Commission Feb 6th: Confirmed cases 31,161 v 28,018 prior; Death toll of 636 v 563 prior; 1551 patients cured v 1,200 prior
• China PBOC Vice Gov Pan stated that would strengthen counter cyclical adjustments, promote healthy, steady development of economy; maintaining economic growth was a priority amid virus. Reiterated stance that had ample policy room to deal with economic pressure
• Speculation is circulating that Japan authorities began selling yen, using cash from the Government Pension Investment Fund (GPIF)

Europe:

• EU spokesperson: Trade Chief Hogan had constructive meeting with US Trade Rep Lighthizer; more talks to come

Americas:

• President Trump and China President Xi Jinping reaffirmed their commitment to implementing the phase-one trade deal signed between the two countries
• Fed’s Quarles (hawk, voter): Current policy is appropriate with inflation muted. Coronavirus is a notable risk and needs to be monitored carefully

Mid-East/Energy:

• Russia Energy Min reiterates Russia needed ‘few days’ to analyze situation on oil market
• Russia Foreign Min Lavrov: Russia supported a recommendation an OPEC+ technical panel made for a provisional cut in oil output of 600K bpd. President Putin had spoken with Saudi Arabia about the new coronavirus. Virus to have consequences for the oil market

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.37% at 423.90, FTSE -0.61% at 7,459.35, DAX -0.47% at 13,511.65, CAC-40 -0.24% at 6,023.71, IBEX-35 -0.47% at 9,765.00, FTSE MIB -0.22% at 24,437.05, SMI -0.42% at 10,966.50, S&P 500 Futures -0.38%]
• Market Focal Points/Key Themes: European indices in the red following Asia indices lower and lower US futures. On the corporate earnings front, L’Oreal up after solid earnings and Q4 SSS meaningfully beat estimates. Ceconomy jumps on after strong Q1 adj EBIT growth and margin expansion y/y, as well as affirmed FY20 outlook of slight revenue increase. Other risers on earnings include Yara, Neste, Finnair and Natixis. Burberry down after withdrawing guidance on coronavirus sales impact. Decliners following earnings include Saab, Skanska, Umicore and Aker Solutions. Norsk Hydro falls after Q4 results missed on top and bottom line. XXL shares tank as the company reported weak results and warned of breaching debt covenants. Credit Suisse down after CEO Tidjane Thiam resigns. Novacyt surges after coronavirus test update. Notable earners today include Hanesbrands, Domtar and FirstEnergy Corp.

Equities

• Consumer discretionary: L’Oreal [OP.FR] +2.5% (earnings), Ceconomy [CEC.DE] +15% (earnings), Burberry [BRBY.UK] -2% (warning on coronavirus)
• Materials: Umicore [UMI.BE] -5% (earnings), Covestro [1COV.DE] -1% (analyst action)
• Energy: SMA Solar [S92.DE] +7% (prelim earnings)
• Financials: Credit Suisse [CSGN.CH] -4% (earnings), Norsk Hydro [NHY.NO] -10% (earnings)

Speakers

• ECB’s Villeroy (France) French Q4 GDP contraction seen as a temporary hiccup; growth to rebound
• Italy Stats Agency (Istat) Monthly Economic Note: Jan leading indicator continues to be negative but at a decelerating past to prior months
• Thailand Constitutional Court said to rule that THB3.2T budget bill for FY20 is not void (as anticipated) and ordered thenew Parliament vote on the budget
• China FX Regulator SAFE: Forex reserves to remain stable, supported by the nation’s sound economic fundamentals and improved market operations. Impact from coronavirus outbreak on Chinese economy will be temporary
• Singapore raised its response level for coronavirus, now on par with SARS. Confirmed 3 new virus cases with no known China links

Currencies/Fixed Income

• USD retained its recent gains against the majors.
• EUR/USD lower by 0.2% as France and German Dec production data handily missed expectations thus questioning any theme of stabilization occurring within region
• GBP/USD was steady around 1.2930 after suffering its worst week since mid-December amid lingering fears about trade negotiations between Britain and the EU. Pair lower by over 2% during the week.

Economic Data

• (SE) Sweden Maklarstatistik Jan Housing Prices Y/Y 6% v 5% prior; Apartment Prices Y/Y: 6% v 5% prior
• (NL) Netherlands Dec Manufacturing Production M/M: -1.7% v -1.0% prior; Y/Y: -0.6% v -1.1% prior; Industrial Sales Y/Y: +4.3 v -4.4% prior
• (ZA) South Africa Jan Gross Reserves: $54.6B v $55.4Be; Net Reserves: $45.2B$45.1Be
• (DE) Germany Dec Current Account Balance: €29.4B v €23.5Be; Trade Balance: €15.2B v €15.0Be; Exports M/M: 0.1% v 0.5%e; Imports M/M: -0.7% v +0.3%e
• (DE) Germany Dec Industrial Production M/M: -3.5% v -0.2%e; Y/Y: -6.8% v -3.7%e
• (NO) Norway Q4 Overall GDP Q/Q: 1.6% v 0.0% prior; GDP Mainland Q/Q: 0.2% v 0.3%e
• (NO) Norway Dec Overall GDP M/M: 0.3% v +0.8% prior; GDP Mainland M/M: -0.3% v +0.1% prior
• (NO) Norway Dec Industrial Production M/M: 1.5% v 2.6% prior; Y/Y: +1.1% v -0.9% prior
• (NO) Norway Dec Manufacturing Production M/M: 0.0% v -0.4% prior; Y/Y: 0.6% v 1.0% prior
• (DK) Denmark Dec Industrial Production M/M: -$5.2B v -5.2% prior
• (MY) Malaysia end-Jan Foreign Reserves: $104.2B v $103.7B mid-month reading
• (FR) France Dec Industrial Production M/M: -2.8% v -0.3%e; Y/Y: -3.0% v +1.0%e
• (FR) France Dec Manufacturing Production M/M: -2.6% v +0.1%e; Y/Y: -3.2% v +1.2%e
• (FR) France Dec Trade Balance: -€4.1B v -€5.2Be
• (FR) France Dec Current Account Balance: -€0.6B v +€0.5B prior
• (FR) France Q4 Preliminary Private Sector Payrolls Q/Q: 0.2% v 0.2%e; Wages Q/Q: 0.2% v 0.3%e
• (CN) Weekly Shanghai copper inventories (SHFE): 206.3K v 155.8K tons prior
• (TW) Taiwan Jan Trade Balance: $3.5B v $1.3Be; Exports Y/Y: -7.6% v 1.0%e; Imports Y/Y: -17.7% v 2.0%e
• (ES) Spain Dec Industrial Output NSA Y/Y: +1.7% v -0.8% prior; Industrial Output SA Y/Y 0.8% v 2.1%e; Industrial Production M/M: -1.4% v -0.9%e
• (CH) Swiss Jan Foreign Currency Reserves (CHF): 764.2B v 771.6B prior
• (AT) Austria Jan Wholesale Price Index M/M: 0.5% v 0.1% prior; Y/Y: +0.7% v -0.4% prior
• (RU) Russia Narrow Money Supply w/e Jan 31st (RUB): 10.61T v 10.67T prior
• (HU) Hungary Dec Preliminary Trade Balance: €0.1B v €0.3Be
• (SE) Sweden Dec Household Consumption M/M: 0.5% v 0.1% prior; Y/Y: 3.7% v 2.4% prior
• (SE) Sweden Jan Budget Balance (SEK): -3.0B v -98.4B prior
• (UK) Jan Halifax House PricesM/M: 0.4% v 0.0%e; 3M/Y: 4.1% v 3.0%e
• (IT) Italy Dec Retail Sales M/M: +0.5% v -0.2% prior; Y/Y: 0.9% v 1.0%e
• (CZ) Czech Jan International Reserves: $148.2B v $149.9B prior
• (SG) Singapore Jan Foreign Reserves: $278.6B v $279.5B prior

Fixed Income Issuance

• (ZA) South Africa sold total ZAR1.04B vs. ZAR1.04B indicated in 2025, 2033 and 2046 I/L bonds

Looking Ahead

• (RO) Romania Central Bank (NBR) Interest Rate Decision: expected to leave Interest Rates unchanged at 2.50%
• (IT) Bank of Italy Balance-Sheet Aggregates
• 05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cut 1-Week Auction Rate by 25bps to 6.00%
• 06:00 (PT) Portugal Dec Trade Balance: No est v -€17B prior
• 06:00 (CL) Chile Jan CPI M/M: 0.4%e v 0.1% prior; Y/Y: 3.3%e v 3.0% prior
• 06:00 (BR) Brazil Jan FGV Inflation IGP-DI M/M: No est v 1.7% prior; Y/Y: No est v 7.7% prior
• 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.5B respectively)
• 06:30 (CL) Chile Jan Trade Balance: $1.4Be v $1.5B prior; Total Exports: No est v $6.6B prior; Total Imports: No est v $5.2B prior; Copper Exports: No est v $3.5B prior
• 06:30 (CL) Chile Jan International Reserves: No est v $40.6B prior
• 06:30 (IN) India Weekly Forex Reserve w/e Jan 31st: No est v $466.7B prior
• 07:00 (MX) Mexico Jan CPI M/M: 0.5%e v 0.6% prior; Y/Y: 3.3%e v 2.8% prior; CPI Core M/M: 0.4%e v 0.4% prior
• 07:00 (MX) Mexico Jan Consumer Confidence: 43.0e v 43.4 prior
• 07:00 (MX) Mexico Jan Vehicle Production: No est v 208.1K prior; Vehicle Exports: No est v 229.2K prior
• 07:00 (BR) Brazil Jan IBGE Inflation M/M: 0.4%e v 1.2% prior; Y/Y: 4.3%e v 4.3% prior
• 07:00 (RU) Russia Central Bank (CBR) Gov Nabiullina post rate decision press conference
• 08:00 (PL) Poland Jan Official Reserves: No est v $128.4B prior –
• 08:00 (RU) Russia Jan Official Reserve Assets: No est v $554.4B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (US) Jan Change in Nonfarm Payrolls: +163Ke v +145K prior; Change in Private Payrolls: +150Ke v +139K prior; Change in Manufacturing Payrolls: -1Ke v -12K prior
• 08:30 (US) Jan Unemployment Rate: 3.5%e v 3.5% prior; Underemployment Rate: No est v 6.7% prior; Participation Rate: No est v 63.2% prior
• 08:30 (US) Jan Average Hourly Earnings M/M: 0.3%e v 0.1% prior; Y/Y: 3.0%e v 2.9% prior; Average Weekly Hours: 34.3e v 34.3 prior
• 08:30 (CA) Canada Jan Net Change in Employment: +17.5Ke v +27.3K prior (revised from +35.2K); Unemployment Rate: 5.7%e v 5.6% prior; Full Time Employment Change: No est v +38.4K prior; Part Time Employment Change: No est v -3.2K prior; Participation Rate: 65.6%e v 65.5% prior; Hourly Wage Rate Y/Y: 3.6%e v 3.8% prior
• (VZ) Russia Foreign Min Lavrov in VZ
• 09:30 (TR) Turkey Jan Cash Budget Balance (TRY): No est v -36.8B prior
• 10:00 (CA) Canada Jan Ivey Purchasing Managers Index (Seasonally adj): No est v 51.9 prior; PMI (unadj): No est v 43.6 prior
• 10:00 (US) Dec Final Wholesale Inventories M/M: -0.1%e v -0.1% prelim; Wholesale Trade Sales M/M: 0.1%e v 1.5% prior
• 11:00 (EU) Potential sovereign ratings after European close (Fitch in Italy sovereign rating)
• 11:00 (US) Fed semi-annual Monetary Policy Report to Congress
• 13:00 (US) Weekly Baker Hughes Rig Count
• 15:00 (US) Dec Consumer Credit: $15.0Be v $12.5B prior