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European Market Update: France Conservative Political Juppe Confirmed He Would Not Run For President

France Conservative political Juppe confirmed he would not run for President

Notes/Observations

France Conservative political Juppe confirms he will not run for President; brings political riks back into elections

Geopolitical tensions on Korean peninsula flared up again ahead of the annual joint US-South Korea military exercises

Deutsche Bank confirmed plans to raise €8B (31.9% of market cap) through rights issue on Mar 21st

Overnight:

Asia:

China National Peoples’ Congress (NPC) formally sets 2017 GDP growth target of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016 (in-line with press speculation). CPI maintained at 3.0%

China NDRC State Planner Vice Chairman: Will deepen reforms in 2017 and ensure prices are basically stable

China PBoC Dep Gov Yi Gang: China did not need to raise interest rates or cut RRR for the time being; Yuan to remain relatively strong but will fluctuate in near term

Former China Commerce Min Chen Deming: Both China and the US will be weakened if there is a trade war

North Korea said to have fired 4 missiles into eastern Japanese sea (**Note: Event comes as South Korea and United States are currently holding their annual military exercises, known as Foal Eagle)

Japan PM Abe said to consider potential snap election in 2018. The ruling LDP party endorsed changes to party rules that would allow PM Abe to remain until 2021 (run for a 3rd term) and become the country’s longest-serving leader in the post-World War II era

Europe:

France conservative politician Alain Juppe expected to announce he would NOT run for president if candidate Fillon stepped down

French Republican Political Committee Statement: To discuss situation of its Presidential Candidate Fillon at 12:00 ET (17:00 GMT) on Monday, Mar 6th. Meeting brought forward by 24 hours due to ‘evolution of political situation’

Germany BDB Banking Association: Given the economic growth and prices outlook, the exceptionally strong monetary policy impulse provided by the European Central Bank (ECB) is no longer necessary

UK Chancellor Hammond: To take a cautious approach to spending in Wednesday’s Budget to ensure that the UK has "got enough in the tank" to get out of the EU

UK Manufacturer’s Organization EEF/BDO Survey: UK manufacturers growing at fastest pace in more than 3 years, helped by lower GBP currency and recovery in core EU markets

Italy Govt said to be considering measures to spur economy

ECB’s Stournaras (Greece) reiterated view to swiftly conclude Greece bailout review

Fitch affirmed France sovereign rating at AA; outlook Stable

S&P affirmed Sweden sovereign rating at AAA; outlook Stable

Americas:

President Trump claimed Obama ordered wire taps on his phones back in October; Obama spokesperson denied the allegation

Economic data

(DE) Germany Feb Construction PMI: 54.1 v 52.0 prior

(EU) Euro Zone Mar Sentix Investor Confidence (beat): 20.7 v 18.5e

(GR) Greece Q4 Final GDP Q/Q: -1.2% v -0.4%e; Y/Y: -1.4% v 0.2%e

Fixed Income Issuance:

None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.2% at 3,396, FTSE -0.3% at 7,354, DAX -0.3% at 11,993, CAC-40 -0.3% at 4,982, IBEX-35 +0.1% at 9,811, FTSE MIB -0.4% at 19,592, SMI -0.1% at 8,661, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading generally lower after a mixed session in Asia overnight; shares of Deutsche Bank the notable laggard in the Eurostoxx after confirming plans to raise €8B through rights issue; shares of Standard Life in the FTSE 100 the notable gainer after confirming they are to acquire Aberdeen Asset Management for 286.5p/shr; shares of EasyJet also notably higher after releasing their February metrics; commodity and mining stocks trading lower in the index as copper prices trade sharply lower intraday; Shares of PSA Group the notable gainer in the French CAC-40 after they confirmed to acquire GM’s European units Opel/Vauxhall for €2.2B to become Europe’s second largest automobile manufacturer.

Upcoming scheduled US earnings (pre-market) include Armstrong Flooring, Ecopetrol, and Fairpoint Communications.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Aurelius AR4.DE +0.9% (FY16 results), Devro DVO.UK -2.3% (FY16 results), EasyJet EZJ.UK +1.5% (Feb metrics), Synthomer 7YC.DE +1.5% (FY16 results)]

Energy: [Alpiq ALPH.CH +1.1% (FY16 results), Bowleven BLVN.UK -5.1% (farm-out agreement with Victoria Oil & Gas), Victoria Oil & Gas VOG.UK +12.0% (farm-out agreement with Bowleven)]

Financials: [Aberdeen Asset Management ADN.UK +4.2% (confirms to be acquired by Standard Life for 286.5p/shr), Deutsche Bank DBK.DE -6.2% (confirms plans to raise €8B through rights issue; exec changes), Flughafen Zuerich FHZN.CH -1.3% (FY16 results), Standard Life SL.UK +5.2% (to acquire Aberdeen Asset Management)]

Industrials: [Norwegian Air NAS.NO -1.6% (Feb metrics), PSA UG.FR +2.2% (Confirms to acquire GM’s Opel/Vauxhall for €2.2B)]

Technology: [Ultra Electronics ULE.UK +6.0% (FY16 results)]

Speakers

France politician Juppe (Conservative) stated that he would not run for President; He added that the Fillon candidacy was now a ‘dead-end’; uniting right and center was more difficult at this time

Greece PM Tsipras: 2016 saw growth return to country and 2017 would see high growth rate. National growth strategy was needed for a 2021 roadmap

Turkey Central Bank: General FX impact observed in Feb inflation data. TRY currency (Lira) weakening led to price gains in basic goods last month, resulting in faster core inflation

China PBoC Dep Gov Yi Gang stated that to maintain exchange rate policy framework of managed flows based on market supply and demand with reference to basket. CNY currency (Yuan) was stable at a reasonable and balanced level

Currencies

FX markets saw the USD mixed just ahead of the NY morning. Overall dealers noted opposing forces battled for momentum. USD consolidating its recent gains from its Fed-inspired rally. Fed Chair Yellen virtually confirmed intentions to raise rates this month in her speech on Friday while dealers noting a lot of EUR supportive news over recent days particularly France’s political centre looked less fragmented from weekend press reports. ECB meets on Thursday, with stronger global inflation and calmer peripheral sovereign spread markets working in its favor. EUR/USD moved off session highs after France politician Juppe (Conservative) confirmed he would not run for President.

GBP/USD hovering around seven-week low after weak UK data from last week. Pair lower by 0.2% at 1.2270 area. Focus will be on Chancellor of the Exchequer Hammond budget statement on Wednesday.

USD/JPY softer on Korean Peninsula jitters. North Korea said to have fired 4 missiles into eastern Japanese sea (**Note: Event comes as South Korea and United States are currently holding their annual military exercises, known as Foal Eagle)

Fixed Income:

Bund futures trade at 161.19 up 48 ticks trading in the lower part of today’s range, with price remaining close to the lows made on Friday. Key resistance remains the 163.50 level. Downside momentum targets 160.50 initially followed by 160.00 level. Another major leg lower could target 157.50.

Gilt futures trade at 128.28 up 35 ticks with the focus falling on the UK budget, which will be announced on March 8th. Resistance lies at the 130.00 level, with further upside targets including the 132.36 region. Support lies at 127.50 level, followed by 126.80 then 125.90.

Looking Ahead

05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

06:25 (BR) Brazil Central Bank Weekly Economists Survey

06:30 (CL) Chile Jan Economic Activity Index (Monthly GDP) M/M: -0.1%e v +0.9% prior; Y/Y: 1.0%e v 1.2% prior

06:30 (TR) Turkey Feb Real Effective Exchange Rate (REER): No est v 88.17 prior

06:45 (US) Daily Libor Fixing

07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

08:00 (BR) Brazil Feb PMI Services: No est v 45.1 prior, Composite: No est v 44.7 prior

08:00 (ES) Spain Debt Agency (Tesoro) to announce size of upcoming Bill issuance (held on Tuesday)

08:15 (UK) Baltic Dry Bulk Index

08:30 (CH) Swiss Government Question Time in Parliament

08:50 (FR) France Debt Agency (AFT) to sell combined €5.6-6.8B in 3-month, 6-month and 12-month BTF Bills

09:00 (MX) Mexico Feb Consumer Confidence: 68.6e v 68.5 prior

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:00 (US) Jan Factory Orders: 1.0%e v 1.3% prior

10:00 (US) Jan Final Durable Goods Orders: 1.0%e v 1.8% prelim; Durables Ex-Transportation : +0.1%e v -0.2% prelim; Capital Goods Orders (Non-defense ex aircraft): No est v -0.4% prelim, Capital Goods Shipments (Non-defense/ex-aircraft): No est v -0.6% prelim – Durables Ex-Defense: No est v 1.5% prelim

11:30 (US) Treasury to sell 3-Month and 6-Month Bills

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