Inflation in Europe continues its improving trend
Notes/Observations
Lunar NY distortions has China register its 1st trade deficit since early 2014
Switzerland Feb CPI beats expectations as the country continues to slowly emerge from years of deflation brought on by the strong franc; Hungary Feb CPI near target and at 4-year high
UK budget seen as non-event but FY16/17 gilt issuance seen significant lower
Asia:
Japan Q4 Final GDP misses estimates but above preliminary levels (QoQ: 0.3% v 0.4%e; YoY: 1.2% v 1.5%e). Prelim readings were 0.2% and 1.0% respectively; capex rises at fastest pace in almost 3 years
Europe:
UK House of Lords voted in favor of adding extra conditions to Brexit Bill (loss for PM May govt); called for a binding vote on the final Brexit agreement with Europe; bill moves back to House of Commons
Two Govt ministers said to call for PM May to call a snap election to give her a clear mandate for her Brexit plan –
EU Official stated that Greece bailout discussions were progressing but an agreement prior to their next Eurogroup meeting on March 20th was unlikely; Greece official believes deal was possible by Mar 20th.
Americas:
US Jan Consumer Credit registers its smallest gain since July 2012 ($8.8B v $17.3Be)
Energy:
Weekly API Oil Inventories: Crude: +11.6M v +2.5M prior (6th build in the past 7 weeks; Highest build since Feb 7th)
Saudi Oil Min Al-Falih stated that compliance on OPEC/Non-Opec oil cut agreement was not 100% yet but it was satisfactory. To look at extension of oil cuts in May period
Economic data
(DE) Germany Jan Industrial Production M/M: 2.8% v 2.7%e; Y/Y: 0.0% v -0.6%e
(FR) France Jan Trade Balance (miss): -€7.9B v -€3.8Be
(HU) Hungary Feb CPI M/M: 0.4% v 0.4%e; Y/Y: 2.9% v 2.8%e (annual pace at a 4-year high)
(CZ) Czech Feb Unemployment Rate: 5.1% v 5.2%e
(CH) Swiss Feb CPI (beat) M/M: 0.5% v 0.2%e; Y/Y: 0.6% v 0.4%e; highest annual since Jun 2011
(CH) Swiss Feb CPI EU Harmonized M/M: 0.6% v 0.2%e; Y/Y: 0.7% v 0.4%e
Fixed Income Issuance:
(IN) India sold total INR100B vs. INR100B indicated in 3-month and 6-month Bills
(DK) Denmark sold total DKK2.46B in 2021 and 2027 Bonds
(SE) Sweden sold SEK2.5B vs. SEK2.5B indicated in 2025 and 2026 Bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 +0.4% at 3,395, FTSE +0.1% at 7,344, DAX +0.4% at 12,009, CAC-40 +0.1% at 4,959, IBEX-35 +0.4% at 9,836, FTSE MIB +0.4% at 19,536, SMI -0.2% at 8,610, S&P 500 Futures flat]
Market Focal Points/Key Themes: European equity indices are trading generally higher but mixed ahead of the UK Spring Budget scheduled later today; Banking stocks trading higher in the Eurostoxx with the sector gains led by shares of Deutsche Bank, ING and SocGen; shares of Adidas the notable gainer in the index after releasing their Q4 results; shares of Deutsche Post the notable laggard however after releasing their Q4 results; Insurers Admiral and Legal & General the laggards in the FTSE 100 after releasing their respective results, as the recent Ogden rate change takes further toll on the industry; Energy stocks trading lower as WTI and Brent contracts trade lower intraday.
Upcoming scheduled US earnings (pre-market) include Bob Evans Farms, CIENA Corp, Express, Hovnanian Enterprises, Orbital ATK, Children’s Place Retail, Stein Mart, Tech Data Corp, and Valspar Corp.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Adidas ADS.DE +6.4% (Q4 results), Air France AF.FR +4.9% (Feb metrics), Beiersdorf BEI.DE -1.3% (FY16 results), G4S GFS.UK +6.4% (FY16 results), PageGroup PAGE.UK -0.1% (FY16 results)]
Energy: [EDF EDF.FR -6.5% (French Govt sold 231M shares), Verbund VER.AT -2.0% (FY16 results)]
Financials: [Admiral Group ADM.UK -1.5% (FY16 results), Deutsche Pfandbriefbank PBB.DE +6.9% (FY16 results), Foxtons FOXT.UK -1.3% (FY16 results), Legal & General LGEN.UK -1.2% (FY16 results)]
Industrials: [Boskalis Westminster BOKA.NL -6.7% (FY16 results), Dassault Aviation AM.FR -0.4% (final FY16 results), Deutsche Post DPW.DE -2.3% (Q4 results), Dorma+Kaba DOKA.CH -5.1% (H1 results), SAS SAS.SE +0.7% (Q1 results, Feb metrics)]
Technology: [Agfa Gevaert AGFB.BE +4.7% (FY16 results)]
Telecom: [Inmarsat ISAT.UK +6.7% (Q4 results)]
Speakers
Turkey Central Bank gov Cetinkayastated that more monetary tightening was possible if required. He noted that inflation was expected to trend lower by mid-2017
S&P stated that the UK economy was gradually losing momentum and saw the first signs of gradual slowing of GDP growth
China Foreign Exchange Trade System (CFETS): CNY currency (Yuan) was basically stable against the basket in Feb. Fundamentals to support currency as a stable and strong currency and saw 2-way moves of yuan currency with flexibility
Currencies
FX markets were quiet and stable in the session but a bit of USD strength remained evident. Focus turning to ECB rate decision on Thursday and US jobs report on Friday. Dealers believe that discussions regarding a change in the ECB rate guidance should gain traction later in the year, but politics should prevent the ECB from striking a hawkish tone just yet even as inflation data in the region improves.
GBP was softer and back below 1.22 level to fresh 7-week lows after the House of Lords voting to add extra conditions to the Brexit bill. Dealers now see if the changes would be removed now that the bill was moving back to the lower house. Little impact seen from spring budget speech by Chancellor Hammond later today but Gilt issuance could be significantly reduced as the economy has been resilient since last June
CHF was mixed as Swiss Feb CPI reading of 0.6% was highest annual pace since June 2011.
Fixed Income:
June Bund futures trade at 160.86 down 44 ticks continuing to decline on risk on trade, with Equities recovering from earlier weakness. The Mar-Jun spread currently stands at 309 ticks down . Support remains at 160.63 then 159.96.Resistance remains at 161.59 followed by 162.32 then contract high at 163.12.
Gilt futures trade at 126.46 down 35 ticks tracking declines in the Bund as futures continue to come off from highs seen last week. Support remains at 126.12 followed by 125.57. Resistance remains at 126.87 followed by 127.35. Short Sterling futures trade flat to down 1bp, in slight steepening trade with Jun17Jun18 spread widening to 12/13bp.
Wednesday liquidity report showed Tuesday’s excess liquidity rose to €1.352T up €7B from €1.345T prior. Use of the marginal lending facility rose to €383M from €276M prior.
Corporate issuance saw $13.1B come to market via 9 issuers led by Siemens 7 part $7.5B offering which was just under 2 times covered. Weekly issuance now stands at $35.75B bringing monthly issuance to $49.8B.
Looking Ahead
05:30 (DE) Germany to sell €4.0B in 0% Apr 2022 BOBL
05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2020 and 2026 OT bonds
06:00 (CL) Chile Feb CPI M/M: 0.3%e v 0.5% prior; Y/Y: 2.8%e v 2.8% prior, CPI Ex Food and Energy M/M: 0.2%e v 0.5% prior
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:00 (IL) Israel Q4 Current Account Balance: No est v $2.8B prior
06:00 (CZ) Czech Republic to sell 2020, 2023 and 2028 bonds
06:30 (CL) Chile Central Bank’s Traders Survey
07:00 (BR) Brazil Jan Industrial Production M/M: -0.4%e v +2.3% prior; Y/Y: +1.0%e v -0.1% prior
07:00 (US) MBA Mortgage Applications w/e Mar 3rd: No est v 5.8% prior
07:00 (UK) Prime Minister’s Question Time in House of Commons
07:30 (UK) Chancellor Hammond announces spring Budget (DMO forecasts)
08:15 (US) Feb ADP Employment Change: +187ke v +246k prior
08:15 (CA) Canada Feb Annualized Housing Starts: 200.0Ke v 207.4K prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Q4 Final Nonfarm Productivity: 1.5%e v 1.3% prelim; Labor Costs: 1.6%e v 1.7% prelim
08:30 (CA) Canada Q4 Labor Productivity Q/Q: 0.4%e v 1.2% prior
08:30 (CA) Canada Jan Building Permits M/M: +3.0%e v -6.6% prior
10:00 (US) Jan Wholesale Inventories (Final) M/M: -0.1%e v -0.1% prelim; Wholesale Trade Sales M/M: 0.5%e v 2.6% prior
10:00 (PL) Poland Central Bank Gov Glapinski post rate decision press conference
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (CA) Canada to sell 3-Year Bonds
13:00 (US) Treasury to sell 10-Year Notes Reopening
