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European Market Update: Quiet Start To Busy Week

Quiet start to busy week


Quiet EU session on Monday; Looking ahead numerous key events includes Netherlands election (Wed), G20 gathering in Germany and possible trigger to UK’s article 50. There are also numerous rate decision (FOMC on Wed, SNB, Norges and BOE on Thurs)

Italy Jan Industrial production saw its biggest monthly decline in 5 years (MoM: -2.3$ v -0.8%e)



China Commerce Min (MOFCOM) Zhong Shan reiterated view that outlook for foreign trade faced lots of risks and uncertainties; Trade war between China and US would harm both economies

PBoC Gov Zhou Xiaochuan: Reiterates view that CNY currency (yuan) would remain stable and added it did not have a ‘bottom line’ for either dollar/yuan rate or FX reserves

China National Development and Reform Commission (NDRC) Vice Chairman Ning Jizhe: China’s economic growth still mainly relied on domestic demand; unemployment rate in 31 major cities was about 5% in Jan-Feb period; industrial output grew more that 6%


German Chancellor Merkel said to warn US President Trump that changes to US corporate tax could prompt retaliatory measures when they meet this Tuesday, Mar 14th; reviewing responses to border adjust tax, levying only US companies imports and not exports; May label the measure aprotective tariffwhich violates WTO rules.

PM May reportedly could trigger Article 50 as soon as Tuesday, March 14th if Parliament passed Brexit bill on Monday night

Brexit Min Davis stated that the govt was drawing up contingency plans for the unlikely event it had to walk away from talks with the European Union without a deal

Netherlands banned several Turkey ministers from entering Rotterdam over political campaigning among Turksih emigres; President Erdogan vowed to retaliate in the "harshest way" and called the Netherlands a "Nazi remnant"

Italy govt said to be working on plan to cut public debt which would transfer main assets of €50-60B into a vehicle which it would sell on market to raise money to cut public debt


Weekly Baker Hughes US Rig Count: 768 v 756 w/w (+1.6%) (8th straight weekly rise)

Goldman Sachs analyst said to maintain positive outlook across the commodity complex; upholds Q2 WTI Oil & copper forecasts

Economic data

(TR) Turkey Jan Current Account: -$2.8B v -$2.8Be

(SE) Sweden Feb PES Unemployment Rate: 4.0% v 4.1% prior

(IT) Italy Jan Industrial Production M/M: -2.3% (largest decline in 5 years) v -0.8%e; Y/Y: 5.7% v 3.4% prior; Industrial Production WDA Y/Y: -0.5% v +3.2%e

Fixed Income Issuance:

None seen


Index snapshot (as of 09:30 GMT)

Indices [Stoxx50 -0.2% at 3,414, FTSE flat at 7,346, DAX flat at 11,967, CAC-40 flat at 4,992, IBEX-35 -0.2% at 9,985, FTSE MIB +0.1% at 19,669, SMI flat at 8,667, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are trading relatively flat after a generally positive end to the Asian session overnight; Banking stocks mixed in the Eurostoxx with shares of Deutsche Bank and Intesa Sanpaolo trading higher, despite shares of Santander and BNP Paribas weighing in the index; Commodity and mining stocks trading notably higher in the FTSE 100 as copper prices trade sharply higher intraday; conversely energy stocks are trading lower as oil prices gapped lower over the weekend, despite trading higher intraday.

Upcoming scheduled US earnings (pre-market) include Lifetime Brands, Del Taco Restaurants, and Townsquare Media.

Equities (as of 09:30 GMT)

Consumer Discretionary: [Aryzta ARYN.CH -6.4% (H1 results), Bang & Olufsen BO.DK -1.0% (Divests Czech subsidiary), Bovis Homes BVS.UK +7.3% (Rejects proposals from Redrow and Galliford Try)]

Consumer Staples: [HOCHDORF Holding HOCN.CH -0.5% (FY16 results)]

Energy: [Amec Foster Wheeler AMFW.UK +15.4% (to be acquired by Wood Group for £5.64/shr; FY16 results; contract win), Innogy IGY.DE -1.4% (FY16 results), Seadrill SDRL.NO +8.6% ($170M West Mira arbitration settlement), Senvion SEN.DE +2.5% (restricting measures, job cuts)]

Financials: [Helvetia Holding HELN.CH -3.9% (FY16 results), HSBC HSBA.UK +0.8% (Confirms Mark Tucker as new Chairman), Klepierre LI.FR +1.1% (€500M share repurchase)]

Healthcare: [TiGenix TIG.BE +1.6% (Top-Line Phase I/II Results of AlloCSC-01 in Acute Myocardial Infarction), Virbac VIRP.FR -7.7% (final FY16 results)]

Industrials: [ABB ABBN.CH -0.1% (Lower Pre-tax profit impact in 2016 from Korea case from $100M to $73M)]

Telecom: [Telit Communications TCM.UK +12.6% (FY16 results)]


ECB’s Smets (Belgium): improved economic outlook did not in itself signal a coming change in policy stance. Reiterated ECB view that it has not taken first step towards removing stimulus as it saw no considerable improvement in March inflation assessment (Staff Projections) compared to Dec outlook.

ECB’s Visco (Italy): Reiterates view that a higher employment level is key to revive Italian growth. Euro skepticism was growing in member States and Europe political paralysis risk was never as high as it is today. USD currency appreciation and Fed hikes could intensify; have negative impact on emerging market economies

Swiss Stats Office updated inflation forecasts which raised 2017 CPI forecast from 0.0% to 0.5% and raise2018 CPI forecast from 0.2% to 0.3%

Poland Central Bank commented on inflation and growth outlook for 2017-19 period. Forecasted 2017 GDP at 3.7%, 2018 GDP at 3.3% and 2019 GDP at 3.2%. Forecasted 2017 and 2018 CPI at 2.0% and 2019 CPI at 2.3%. Inflation to stay below the 2.5% target in horizon period

France Presidential candidate Le Pen (Far right): New French franc currency would decline approx 10% against the Euro; falling currency will help more than it hurts

Japan reportedly to dispatch biggest warship on tour through South China Sea


Busy week on central bank meetings and other key events. Wednesday’s Netherlands election outcome may well set the scene for the French April/May Presidential election. UK Govt could trigger Article 50 at any time in the next three weeks

Euro firmed to 1-month high during Asia in the aftermath of press reports last week that ECB discussed whether rates could rise before QE ended (idea did not get much discussion and did not have broad support). EUR/USD steady just ahead of the NY morning at 1.0670 area.

GBP/USD continued to move off recent 7-week lows and back above the 1.22 level. Amended EU (notification of withdrawal) Bill moved back in House of Commons today and reports that article 50 could be triggered as soon as Tuesday if all goes well in removing the amendments placed by the House of Lords last week.

USD/JPY in the mid-part of the 114 level in quiet trade.

Fixed Income:

Bund futures trade at 159.58 up 57 ticks rebounding sharply following a fortnight of declines having traded below 159 on Friday following the strong US jobs report. Support moves to Friday low of 158.87 followed by 158.74. Resistance moves to 159.85 Friday high followed by 160.20 then 161.06.

Gilt futures trade at 126.63 up 50 ticks trading up with Bunds on slight risk off tone ahead of the House of Commons vote on the Lords amendments to the latest Brexit Bill due to commence later today. Support moves to 125.88 the low seen on Friday followed by 125.57. Resistance remains at 126.87 followed by 127.35. Short Sterling futures trade flat to up 1bp, in slight flattening trade with Jun17Jun18 spread falling to 16/17bp.

Monday liquidity report showed Friday’s excess liquidity rose to a record high of €1.371T up €6B from €1.365T prior. Use of the marginal lending facility rose to €450M from €136M prior.

Corporate issuance saw a further $1.1B come to market on Friday via 2 issuers headlined by John Deere 3 part $1B offering bringing last weeks issuance to $45B via 65 tranches, putting the Months volume to just shy of $60B. For the week ahead analysts see issuance to slow to around $15-20B.
In Euro denominated issuance last week saw €27.3B come to market via 37 issuers and 41 tranches, with Tuesday seeing the bulk of the issuance with just over €14B priced.

Looking Ahead

(UK) Amended EU (notification of withdrawal) Bill back in House of Commons

(CH) Swiss Parliament holds Spring Session in Bern

(IL) Israel Central Bank (BOI) Feb Minutes

(MX) Mexico Feb ANTAD Same-Store Sales Y/Y: 3.0%e v 4.1% prior

06:00 (EU) Daily Euribor Fixing

06:00 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)

06:00 (IT) Italy Debt Agency (Tesoro) to sell 2019, 2024, 2033 and 2046 medium BTP Bonds

06:00 (LT) Lithuania to sell Bonds

06:00 (RO) Romania to sell Bonds

06:00 (NO) Norway to sell NOK6.0B in 12-month Bills

06:30 (DE) Germany to sell €2.0B in 6-month BuBills

07:00 (PT) Portugal Jan Trade Balance: No est v -€1.4B prior

07:00 (IL) Israel Jan Trade Balance: No est v -$0.9B prior

07:00 (IL) Israel to sell 2018, 2020, 2021, 2025 and 2027 bonds

07:25 (BR) Brazil Central Bank Weekly Economists Survey

07:30 (TR) Turkey TCMB Survey of Expectations

07:30 (EU) NATO’s Stoltenberg Press Conference in Brussels

07:30 (UK) (UK) Scottish First Min Sturgeon (SNP) speech

07:30 (IS) Iceland to sell Bills

07:45 (DE) German Chancellor Merkel meets leaders of German Industry Groups in Munich

07:45 (US) Daily Libor Fixing

08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

09:00 (ES) Spain Debt Agency (Tesoro) to announce size of upcoming Bill and bond issuance (held on Tuesday/Thursday)

09:15 (UK) Baltic Dry Bulk Index

09:50 (FR) France Debt Agency (AFT) to sell combined €5.8-7.0B in 3-month, 6-month and 12-month BTF Bills

09:30 (CH) Swiss Government Question Time in Parliament

09:30 (EU) ECB’s Draghi

10:00 (US) Feb Labor Market Conditions Index Change: +2.5e v +0.25 prior

10:30 (EU) ECB announces Covered-Bond Purchases

10:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:50 (UK) BoE conducts reverse Gilt auction

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

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