Sat, Jan 22, 2022 @ 13:57 GMT
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European Market Update: China FX Reserves Rises For 1st Time In 8 Months, Swiss And Czech Reserves Also Rise

China FX Reserves rises for 1st time in 8 months, Swiss and Czech reserves also rise

Notes/Observations

China Feb FX Reserves registers its 1st monthly rise since June amid capital curbs

SNB foreign-currency reserves soar signaling interventions

German Jan industry orders post biggest monthly decline since 2009

Overnight:

Asia:

RBA left its Cash Rate Target unchanged at 1.50% (as expected). Maintains policy rhetoric that global economic conditions had improved over recent months; reiterated rising AUD currency could complicate economic transition; expecteds headline inflation to pickup over 2017

China Fin Min Xiao Jie: 2016 govt debt to GDP ratio at 36.7% China govt debt level generally under control; won’t change much in 2017

BOJ’s Masai reiterated Board view that expected domestic economy to move into moderate expansion; would maintain its highly accommodative policy and overcome deflation

Commander of US Pacific Command: North Korea’s latest missile launch confirms the need for THAAD deployment. Started to deploy anti-missile systems in South Korea despite Chinese opposition

Europe:

German Chancellor Merkel called for a European Union that allowed member states to advance at their own pace to ensure that the bloc was able to confront future challenges

French Conservative Party Chairman: Conservative Political Committee unanimously backed Fillon candidacy (France’s Fillon wins party backing after Juppe rules out election bid)- House of Lords holds final debate and vote on Article 50 Bill. Govt at risk of 2nd defeat in House of Lords as Peers might call for a ‘meaningful vote’ and a guarantee that Parliament could veto the final terms of Brexit agreement if the deal Govt makes was not good enough

Fixed Income Issuance:

(EU) ESM opened its book to sell €3.0B in 10-year bond via syndicate; guidance seen +1bp to mid-swaps

(IT) Italy Debt Agency (Tesoro) opened book to sell EUR-denominated May 2028 I/L bond (BTPei); guidance seen +13bps

(ID) Indonesia sold IDR6.1T in Islamic bonds (Sukuk)

(ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2023, 2037 and 2044 bonds

(ES) Spain Debt Agency (Tesoro) sold total €4.64B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills

(AT) Austria Debt Agency (AFFA) sold total €1.32B vs. €1.32B indicated in 2026 and 2034 RAGB bonds

Sold €660M in 0.75% Oct 2026 RAGB bond; Avg Yield: 0.498% v 0.601% prior; Bid-to-cover: 2.31x v 2.30x prior

Sold €660M in 2.4% 2034 RAGB; Avg Yield 1.078% v 0.964% prior; Bid-to-cover: 2.47x v 1.89x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.1% at 3,385, FTSE +0.1% at 7,359, DAX +0.1% at 11,972, CAC-40 -0.3% at 4,959, IBEX-35 -0.2% at 9,782, FTSE MIB -0.2% at 19,407, SMI flat at 8,664, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading mixed after a positive end to the Chinese markets despite a negative end to Japan’s Nikkei; Banking stocks trading generally negative across the board with Eurostoxx losses led by shares of Deutsche Bank; shares of Intertek leading the gains in the FTSE 100 after releasing their FY16 results; Commodity and mining stocks also trading notably higher despite copper prices trading lower, but with energy prices higher intraday; shares of Paddy Power and Ashtead Group the notable laggards in the index after releasing respective results.

Upcoming scheduled US earnings (pre-market) include Brown-Forman, Calavo Growers, Dicks Sporting Goods, John Wiley & Sons, KLX, LGI Homes, Michaels Companies, Momo, and Navistar International.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Aggreko AGK.UK -12.4% (FY16 results), Ashtead Group AHT.UK -2.9% (Q3 results), Casino Guichard CO.FR -4.8% (FY16 results), Intertek ITRK.UK +4.1% (FY16 results), Just Eat JE.UK +4.2% (FY16 results), Lindt & Spruengli LISP.CH -0.9% (FY16 results), Paddy Power Betfair PPB.UK -4.9% (FY16 results), St Ives SIV.UK +1.4% (H1 results), Zumtobel ZAG.AT +3.8% (Q3 results)]

Energy: [EDF EDF.FR +0.1% (€4B rights issue)]

Financials: [Direct Line DLG.UK -1.0% (FY16 results), Paysafe PAYS.UK -3.1% (FY16 results), Shawbrook SHAW.UK -1.6% (Board rejects 330p/shr proposal, FY16 results), Vonovia VNA.DE +0.2% (FY16 results), Worldpay WPG.UK -2.0% (final FY16 results)]

Industrials: [Brenntag BNR.DE -2.8% (FY16 results, div increase), Forbo Holding FORN.CH +5.3% (FY16 results), VTG VT9.DE -2.9% (prelim FY16 results)]

Technology: [Logitech LOGN.CH +1.5% (Affirms outlook, $250M share buyback)]

Telecom: [Iliad ILD.FR +3.5% (FY16 results)]

Speakers

EU Leaders Summit draft: To stress WTO role and commit to address all free trade agreements

Czech Central Bank Gov Rusnok: Could correct any excessive FX move once cap is removed. Reiterated CZK currency (Koruna) cap removal most likely to occur around mid-2017

China FX Regulator SAFE: Foreign Reserves to gradually stabilize; reiterated that outflow pressure expected to ease

China PBoC’s Zhou: FX Reserves were not inexhaustible; govt would not allow radical fluctuation of CNY currency (Yuan) rate

Currencies

USD was steady with markets now expected the Fed to hike rates this month.

GBP/USD hit fresh 7-week lows after Halifax data also revealed weaker-than-forecast house price growth and registered its lowest reading since July 2013. Focus set to turn to UK budget on Wednesday

Fixed Income:

June Bund futures trade at 161.18 up 30 ticks trading off highs as Futures roll to June. The Mar-Jun spread currently stands at 322 ticks. Resistance lies initially at 161.59 followed by 162.32 then contract high at 163.12. Support lies at 160.63 then 159.96.

Gilt futures trade at 126.61 up 9 ticks pushing to session highs despite a reversal in Equities. Resistance moves to 126.87 followed by 127.35. Support moves to 126.39 followed by 126.12.

Tuesday liquidity report showed Monday’s excess liquidity fell to €1.345T down €3B from €1.348T prior. Use of the marginal lending facility rose to €276M from €232M prior.

Corporate issuance saw $22.7B come to market via 11 issuers in an active start to the week headlined by HSBC 2 part $5B offering, Great Plains Energy $4.3B 4 part offering and McDonald’s $2B 3 part offering. This puts issuance for the month at $36.7B.

Looking Ahead

(UK) Lords hold final debate and vote on Article 50 Bill

(IL) Israel Feb Foreign Currency Balance: No est v $101.6B prior

05.30 (UK) Weekly John Lewis LFL sales data

05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender

05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills

05:30 (BE) Belgium Debt Agency (BDA) to sell 3-Month and 12-Month Bills

06:00 (BR) Brazil Apr FGV Inflation IGP-DI M/M: 0.1%e v 0.4% prior; Y/Y: 5.2%e v 6.0% prior

06:30 (CL) Chile Feb Trade Balance: $0.3Be v $0.7B prior; Total Exports: $5.0Be v $5.5B prior; Total Imports: $4.8Be v $4.8B prior

06:30 (CL) Chile Feb International Reserves: No est v $39.9B prior

06:30 (EU) ESM to sell €1.5B in 3-month Bills

06:45 (US) Daily Libor Fixing

07:00 (BR) Brazil Q4 GDP Q/Q: -0.5%e v -0.8% prior; Y/Y: -2.4%e v -2.9% prior, GDP 4-quarters accumulated: -3.6%e v -4.4% prior

07:00 (BR) Brazil Jan PPI Manufacturing M/M: No est v 0.7%prior; Y/Y: No est v 0.8% prior

07:00 (CL) Chile Jan Nominal Wage M/M: No est v 0.8% prior; Y/Y: 4.4%e v 4.7% prior

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (PL) Poland Feb Official Reserves: No est v $113.7B prior

08:00 (RU) Russia Feb Official Reserve Assets: $395.5Be v $390.6B prior

08:00 (RU) Russia announces weekly OFZ bond auction

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Jan Trade Balance: -$48.5Be v -$44.3B prior

08:30 (CA) Canada Jan Int’l Merchandise Trade: C$0.8Be v C$0.9B prior

08:30 (SI) Slovenia Debt Agency to sell 12-month Bills

08:55 (US) Weekly Redbook Sales

09:00 (BR Brazil Jan CNI Capacity Utilization: No est v 76.0% prior

09:00 (EU) Weekly ECB Forex Reserves

09:20 (BR) Brazil Feb Vehicle Production: No est v 174.1K prior; Vehicle Sales: No est v 147.2K prior; Vehicle Exports: No est v 37.2K prior

09:50 (UK) BOE to buy £0.78Bin APF Gilt purchase operation (over 15 years)

10:00 (BR) Brazil to sell I/L 2022, 2026, 2035 and 2055 Bonds

10:00 (CA) Canada Feb Ivey Purchasing Managers Index (Seasonally Adj): 58.5e v 57.2 prior; PMI unadj: No est v 52.3 prior

11:30 (US) Treasury to sell 4-Week Bills

13:00 (US) Treasury to sell 3-Year Notes

15:00 (US) Jan Consumer Credit: $19.0Be v $14.2B prior

15:00 (MX) Mexico Banamex Survey of Economists

16:30 (US) Weekly API Oil Inventories

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