Notes/Observations
Market volatility remained elevated as concern simmer that central banks were not keeping up with global economic growth.
Senate passed a two-year budget deal in the wee hours of Friday morning; after the government was forced into a technical shut down at midnight due to a political stunt by Sen. Rand Paul (R-KY); Government would reopen once the bill cleared the House in the predawn hours
Asia:
RBA Quarterly Statement on Monetary Policy (SOMP) made little resison to its growth and inflation outlook. Outlook for global growth was positive despite volatility in equity markets: Reiterated an appreciating A$ would dampen domestic growth and inflation
China Jan CPI in-line at 1.5% y/y – China PBoC again skipped its Open Market Operation (OMO) for the 12th straight session (12th straight session)
China PBoC noted that it had released Temporary liquidity worth almost CNY2.0T to help satisfy cash demand before Lunar New Year
Japan Economy Min Motegi: Economic fundamentals were strong both in the US and Japan; reiterated monitoring impact of financial markets on economy
Japan PM Abe Adviser Hamada noted that the BOJ should stick with current easy settings; recent stock declines could make BoJ cautious about raising rates
Europe:
UK Govt spokesperson: Business representatives expressed importance of time-limited implementation period in providing clarity
Labour party Jeremy Corbyn (opposition) said to have told EU’s Barnier he was open to keeping Britain in the customs union after Brexit; wlling to allow the UK to submit to ECJ rulings should he become PM
Americas:
Senate approved a far-reaching budget deal that would reopen the federal government and boost spending by hundreds of billions of dollars
Bank of Canada (BOC) Wilkins: high household debt was the largest vulnerability to the Canadian economy
Mexico Central Bank raised the Overnight Rate by 25bps to 7.50% (as expected) for its 12th hike in the current tightening cycle.
Economic Data:
(NL) Netherlands Dec Manufacturing Production M/M: 0.6% v 1.1% prior; Y/Y: 5.2% v 4.4% prior, Industrial Sales Y/Y: 0.7% v 12.9% prior
(CH) Swiss Jan Unemployment Rate: 3.3% v 3.4%e, Unemployment Rate (seasonally Adj): 3.0% v 3.0%e
(FI) Finland Dec Industrial Production M/M: 0.0% v 0.8% prior; Y/Y: 4.2% v 4.2% prior
(NO) Norway Jan CPI M/M: -0.1% v +0.1%e; Y/Y: 1.6% v 1.6%e
(NO) Norway Jan CPI Underlying M/M: -0.8% v -0.2%e; Y/Y: 1.1% v 1.5%e
(NO) Norway Q4 GDP Q/Q: -0.3%v 0.8% prior; Mainland GDP Q/Q: 0.6% v 0.6%e
(CN) Weekly Shanghai copper inventories (SHFE): 186.1K v 172.6K tons prior
(FR) France Dec Industrial Production M/M: 0.5% v 0.1%e; Y/Y: 4.5% v 3.5%e
(FR) France Dec Manufacturing Production M/M: +0.3% v -0.5%e; Y/Y: 4.7% v 3.4%e
(IT) Italy Dec Industrial Production M/M: 1.6% v 0.8%e; Y/Y: -1.3% v +2.3% prior, Industrial Production WDA Y/Y: 4.9% v 1.9%e
(UK) Dec Industrial Production M/M: -1.3% v -0.9%e; Y/Y: 0.0% v 0.3%e
(UK) Dec Manufacturing Production M/M: 0.3% v 0.3%e; Y/Y: 1.4% v 1.2%e
(UK) Dec Construction Output M/M: +1.6% v -0.1%e; Y/Y: -0.2% v -1.9%e
(UK) Dec Visible Trade: -£13.6B v -£11.6Be, Overall Trade Balance: -£4.9B v -£2.4Be, Trade Balance Non EU: -£5.2B v -£4.1Be
Fixed Income Issuance:
(IN) India sold total INR110B vs. INR110B indicated in 2024 and 2028 bonds
(ZA) South Africa sold total ZAR900M vs. ZAR900M indicated in I/L 2029, 2033 and 2050 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.5% at 372.1, FTSE -0.4% at 7144, DAX -0.3% at 12221, CAC-40 -0.4% at 5129 , IBEX-35 -0.7% at 9689, FTSE MIB -0.3% at 22407 , SMI +0.1% at 8768, S&P 500 Futures +0.7%]
Market Focal Points/Key Themes: European Indices trade mostly lower but off the session lows after a rebound in US Futures overnight after sharp falls yesterday. Increased outlook for higher rates in the UK weigh on the FTSE, as the index under performs. Ont he corporate front Maersk trades lower after Q4 results; Ceconomy also trades lower after a fall in profits. To the upside Trinity Mirror outperforms after its trading update, Flow Traders trades over 10% higher after strong y/y growth. In the M&A space Hogg Robinson trades sharply higher after receiving a bid from American Express Global, representing a 54% premium to prior close. Looking ahead earners include PG&E, Tenneco and Moody’s.
Movers
Consumer Discretionary [ Hogg Robinson [HRG.UK] +49% (To be acquired for 120p/shr], Trinity Mirror [TNI.UK] +7.3% (Trading update, acquisition), Ceconomy [CEC.DE] -2.0% (Earnings), L’Oreal [OR.FR] +0.8% (Earnings), Bechtle [BC8.DE] +1.0% (Prelim earnings)]
Industrials [Maersk [MAERSKB.DK] -2.9% (Earnings), Victrex [VCT.UK] +1.2% (Prelim results)]
Technicals [Fingerprint Cards [FINGB.SE] +1.1% (Earnings)]
Financials [Flow Traders [FLOW.NL] +13.0% (Earnings)]
Speakers
BoE Deputy Gov Broadbent reiterated MPC stance that rate hikes could come sooner than expected but will remain limited and gradual
UK PM May said to be planning Brexit meeting with senior cabinet ministers in two weeks’ time. Meeting requested after trade sub-committee ended without a decision
Czech Central Bank Feb Minutes: Interest rate outlook conditional on pace of CZK currency appreciation. Slow return of ECB to normal rates could inhibit Czech rate growth
Romania Central Bank gov Isarescu: Inflation acceleration was broad-based. Reiterated view that RON currency (Leu) had no more room for appreciation
Italy’s Berlusconi Forza (Italia party): Gentiloni should stay as PM if no majority achieved at the March election
Currencies
Risk aversion sentiment remained on the front burner but the major FX pairs stayed locked within recent ranges. The USD maintaining its recent strength as some analysts believe the Fed might be behind the curve on rates. One analyst noted that given how sensitive markets were to a slightly hawkish BoE yesterday, one can only imagine the turmoil on Wednesday next week if US CPI comes in ahead of expectations
EUR/USD was slightly higher by 0.2% at 1.2270
GBP/USD at 1.3920
USD/JPY at 109.03
Fixed Income
Bund Futures trades down 7 ticks at 158.07 as the bearish trend remains intact. Upside targets 159.85, while a continued move lower targets the157.25 level.
Gilt futures trade at 121.09 down 8 ticks, as the BoE turns more hawkish. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.75 then 123.25.
Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.901T from €1.895T prior. Use of the marginal lending facility rose to €70M from €50M prior.
Corporate issuance saw 5 issuers raise $8.5B in the primary market.
Looking Ahead
(MX) Mexico Jan Nominal Wages: No est v 5.2% prior
(UR) Ukraine Jan CPI M/M: No est v 1.0% prior; Y/Y: No est v 13.7% prior
05:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to cuts Key 1-Week Auction Rate by 25bps to 7.50%
06:00 (BR) Brazil Dec Retail Sales M/M: -0.5%e v +0.7% prior; Y/Y: 4.6%e v 5.9% prior
06:00 (BR) Brazil Dec Broad Retail Sales M/M: -0.9% v +2.5% prior; Y/Y: 5.7%e v 8.7% prior
06:00 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-month Bills (£0.5, £0.5B and £2.0B respectively)
06:30 (IN) India Weekly Forex Reserves
06:30 (EU) EU chief Brexit negotiator Barnier to hold press conference
06:45 (US) Daily Libor Fixing
07:00 (UK) Jan NIESR GDP Estimate: 0.5%e v 0.6% prior
08:00 (RU) Russia Dec Trade Balance: $13.0Be v $11.5B prior
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond auction (held on Thurs)
08:05 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada Jan Net Change in Employment: +10.0Ke v +64.8K prior (revised from +78.6K); Unemployment Rate: 5.8%e v 5.8% prior (revised from 5.7%)
09:00 (MX) Mexico Dec Industrial Production M/M: +0.4%e v -0.1% prior; Y/Y: -0.7%e v -1.5% prior, Manufacturing Production Y/Y: 2.5%e v 2.4% prior
10:00 (US) Dec Final Wholesale Inventories M/M: 0.2%e v 0.2% prelim, Wholesale Trade Sales M/M: 0.4%e v 1.5% prior
11:00 (EU) Potential sovereign rating after European close (Czech and Finland Sovereign Debt to be rated by Fitch
11:45 (UK) BOE’s Cunliffe in CA
13:00 (US) Weekly Baker Hughes Rig Count data
14:00 (CO) Colombia Central Bank Jan Minutes 21:00 (US) Fed’s George (non-voter, hawk) on economy
