Risk Appetite Having Difficult Time Finding Fresh Legs

Notes/Observations

• Initial rebound in risk appetite dissipates as the number of coronavirus cases continue to rise

Asia:

• BOJ Executive Dir Maeda reiterated BOJ policies did not target FX and would take appropriate steps as needed by looking at impact of FX moves on domestic economy and long term price trend

Coronavirus:

• China National Health Commission Coronavirus Update for Feb 24th: 508 additional cases v 409 prior; Additional deaths 71 v 150 prior. Hubei Province saw 499 additional cases v 398 prior; additional deaths 68 v 149 prior
• Jiangsu has become the latest China province to lower its emergency alert level
• President Trump tweeted: Coronavirus is very much under control in the US
• Trump administration to send to Congress a budget request for $2.5B to deal with coronavirus which included $1.0B in funding for vaccines (as speculated).
• Moderna [MRNA] confirmed shipping mRNA Vaccine against Novel Coronavirus (mRNA-1273) for Phase 1 Study
• Gilead [GILD]: China to announce clinical test result related to REMDESIVIR and the coronavirus on April 27th
• China’s Tianjin University said to have developed oral vaccine to protect against COVID19

Brexit:

• BoE’s Haldane noted that a lot of political and Brexit uncertainty had dissipated in the UK; reduced uncertainty should help boost investment
• EU said to be prepared to further harden its negotiating position with UK. Member states led by France agreed that EU should have right to impose sanctions if post-Brexit causes ‘disruptions’ in EU polices

Americas:

• Fed’s Kashkari (dove, FOMC voter): monetary policy is appropriate for now; doesn’t see any urgent need to cut rates; open-minded about policy changes due to virus
• Fed’s Mester (hawk, voter in 2020): comfortable with current policy stance; U.S. monetary policy well calibrated

Mid-East/Energy:

• Iran Energy Min Zanganeh: Will attend the OPEC meeting in March

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.51% at 409.76, FTSE -0.59% at 7,114.65, DAX -0.44% at 12,977.53, CAC-40 -0.54% at 5,763.72, IBEX-35 -0.92% at 9,396.00, FTSE MIB -0.85% at 23,228.08, SMI -0.82% at 10,624.50, S&P 500 Futures +0.21%]
• Market Focal Points/Key Themes: European indices in the red following Asia indices mostly lower and higher US futures. Philips down after the company stated that coronavirus will have negative Q1 impact on financial performance but exact magnitude cannot be quantified at this time. Likewise, SMCP plunges on warning that coronavirus is having a significant impact on sales and profitability and has postponed its CMD. Bakkafrost down as the company missed on Q4 EBIT compared to expectations. Other decliners following earnings include Leoni, Jyske, Meggitt and Croda. Implenia, Endesa, Applus, Hammerson, Derwent and Petrofac up following earnings results. Hammerson proposed to rebase the FY20 dividend to a lower level y/y. Hotel Chocolat rallying following strong H1 revenue and earnings growth y/y, and De la Rue surges after announcing trading update and turnaround plan. Prudential up as shareholder Third Point Capital sent a letter to the board calling for the separation of the company’s US and Asia businesses. Notable earners today include Cracker Barrel, Home Depot, Macy’s and Thomson Reuters.

Equities

• Consumer discretionary: Greenyard Foods [GREEN.BE] +8% (earnings), Leoni [LEO.DE] -8% (prelim earnings), Hammerson [HMSO.UK] -1% (earnings)
• Financials: Prudential [PRU.UK] +2% (Third Point disclosed stake), Hammerson [HMSO.UK] -1% (earnings)
• Healthcare: Lysogene [LYS.FR] +51% (FDA designation)
• Industrials: Implenia [IMPN.CH] +6% (earnings), SIG [SIG.UK] -15% (trading update; CEO and CFO resign), Meggitt [MGGT.UK] -3% (earnings)
• Technology: De La Rue [DLAR.UK] +15% (update)

Speakers

• ECB’s de Cos (Spain): central banks’ main objective on climate risks should focus on allowing markets to correctly assess them
• France Fin Min Le Maire: Coronavirus to impact growth in the EU region
• Sweden Central Bank (Riksbank) Jansson: Inflation situation remained fragile with risks to the downside
• Italy said to be seeking EU budget flexibility between €2.0-4.0B due to the coronavirus outbreak
• Japan MOF Top FX Official Takeuchi commenrtd after meeting key Govt departments that the sense of concern and market volatility was increasing. Believed the coronavirus was the cause of the recent developments
• Indonesia Finance Ministry announced IDR10T stimulus measures to counter economic impact from coronavirus. To waive taxes of hotels and restaurants in 10 tourist destinations for three months (Mar-May)
• Saudi Energy Min Abdulaziz reiterated view of no OPEC decision yet on further deepening of oil production cuts
• President Trump: China seemed to be getting the coronavirus under control; had spoken with President Xi on issue

Currencies/Fixed Income

• EUR/USD was slightly higher with continued focus on the coronavirus. The number of confirmed cases continued to rose in Europe, especially in Italy. Analysts believe that coronavirus would make another recession in Italy more likely than not and reports circulated that Italy sought more EU leeway on budget matters. Disruptions to economic activity in region making the case for more fiscal stimulus.
• USD/JPY pair help the new key support at 110.30 level. Japan MOF Top FX Official Takeuchi commented about the pick-up in FX volatility and blamed the Coronavirus as the catalyst. While BOJ Executive Dir Maeda reiterated that the central bank did not target FX

Economic Data

• (FI) Finland Jan Unemployment Rate: 7.2 v 6.0% prior
• (DE) Germany Q4 Final GDP Q/Q: 0.0% V 0.0%e; Y/Y: % V 0.4%e; GDP NSA Y/Y: % V 0.3%e
• (DE) Germany Q4 Private Consumption Q/Q: 0.0% V 0.1%e; Government Spending Q/Q: 0.3% V 0.3%e; Capital Investment Q/Q: -0.2% V -0.2%e
• (ZA) South Korea Dec Leading Indicator: 104.4 V 104.0e
• (FR) France Feb Business Confidence: 105 v 103e; Manufacturing Confidence: 102 v 99e; Production Outlook Indicator: 0 (flat) v -6e; Own-Company Production Outlook: 8 v 6e
• (ES) Spain Jan PPI M/M: +1.1 v -0.4% prior; Y/Y: -0.8% v -1.8% prior
• (AT) Austria Dec Industrial Production M/M: -2.0% v -1.7% prior; Y/Y: -5.3% v -2.1% prior
• (HK) Hong Kong Jan Trade Balance (HKD): -30.6B v -11.1Be; Exports Y/Y: -22.7% v -3.7%e; Imports Y/Y: -16.4% v -2.5%e
• (PL) Poland Jan Unemployment Rate: 5.5% v 5.5%e; Q4 Unemployment Rate: 2.9% v 3.3%e

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) opened its book to sell new EUR-denominated Oct 2050 SPGB bond via syndicate; guidance seen +89bps to mid-swaps
• (EU) ESM opened its book to sell €2.0B in Mar 2030 bonds; guidance seen -8bps to mid-swaps
• (ID) Indonesia sold total IDR7.0T vs. IDR7.0T indicated in 6-month Islamic bills, 2-year, 4-year and 25-year Islamic bonds (sukuk)
• (ZA) South Africa sold total ZAR4.53B vs. ZAR4.53B indicated in 2030, 2032 and 2044 bonds
• (CH) Switzerland sold CHF464.5 in 3-month bills; Avg Yield: -0.762%
• (IT) Italy Debt Agency (Tesoro) sold total €1.5B vs. €1.0-1.5B indicated range in 2030 and 2032 Inflation-linked bonds (BTPei)
• (IT) Italy Debt Agency (Tesoro) sold €2.25B vs. €1.75-2.25B indicated in Zero Coupon Nov 2021 CTZ; Avg Yield: -0.143% v -0.168% prior; Bid-to-cover: 1.55x v 1.75x prior

Looking Ahead

• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €1.0B with 20 bids recd; €1.0Be
• 05:30 (UK) DMO to sell £3.25B in 0.875% Oct 2029 Gilts
• 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:00 (UK) Feb CBI Retailing Reported Sales: 3e v 0 (flat) prior; Total Reports Distributed Sales: 10e v 11 prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Q4 Final GDP Q/Q: -0.1%e v 0.0% prelim; Y/Y: -0.4%e v -0.3% prelim; Nominal GDP Y/Y: No est v 2.8% prior; Overall 2020 GDP Y/Y: No est v 2.0% prior
• 07:00 (MX) Mexico Dec IGAE Economic Activity Index (Monthly GDP): M/M: 0.1%e v 0.1% prior; Y/Y: +0.5%e v -1.2% prior
• 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
• 07:00 (TR) Turkey to sell 2022 Bonds
• 07:45 (US) Goldman Economist Chain Store Sales
• 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%; Expected to leave Overnight Deposit Rate unchanged at -0.05%
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (US) Dec FHFA House Price Index M/M: 0.4%e v 0.2% prior; Q/Q: No est v 1.1% prior
• 09:00 (US) Dec S&P Case-Shiller (20-city)M/M: 0.41%e v 0.48% prior; Y/Y: 2.80%e v 2.55% prior; House Price Index (HPI): No est v 218.68 prior
• 09:00 (US) Dec S&P Case-Shiller (overall) Y/Y: No est v 3.54% prior; House Price Index (HPI): No est v 212.56 prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (NO) Norway Fin Min Sanner
• 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
• 10:00 (US) Feb Consumer Confidence: 132.1e v 131.6 prior
• 10:00 (US) Feb Richmond Fed Manufacturing Index: 10e v 20 prior
• 10:00 (MX) Mexico weekly International Reserve data
• 10:00 (MX) Mexico Q4 Current Account Balance: $3.8Be v $2.0B prior
• 11:30 (US) Treasury to sell 52-Week Bills
• 12:30 (CA) Bank of Canada (BOC) Lane in Montreal
• 13:00 (US) Treasury to sell 2-Year Notes
• 15:15 (US) Fed’s Clarida at NABE Conference in Washington
• 16:00 (KR) South Korea Mar Manufacturing Business Survey: No est v 77 prior; Non-Manufacturing Business Survey: No est v 74 prior
• 16:30 (US) Weekly API Oil Inventories
• 19:00 (AU) Australia to sell AUD800M in 1.5% 2031 Bonds
• 19:01 (UK) Feb BRC Shop Price Index Y/Y: -0.2%e v -0.3% prior
• 19:30 (AU) Australia Q4 Completed Construction Work: -1.0%e v -0.4% prior
• 22:00 (HK) Hong Kong Q4 Final GDP Q/Q: -0.4%e v -0.4% prelim; Y/Y: -2.9%e v -2.9% prelim; Overall 2019 GDP: No est v -1.2% prior
• 22:00 (TH) Thailand to sell THB17B in 2-29 Bonds
• 22:30 (TH) Thailand Jan ISIC Manufacturing Production Index Y/Y: No est v -4.4% prior; Capacity Utilization: No est v 63.96 prior
• (US) Tenth Democratic Primary Debate (Charleston, SC)