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Market Update – European Session: UK Jan CPI Comes In Slightly Above Expectations


UK Jan CPI of 3.0% was slightly above forecasts and above the BOE inflation target for the 14th straight month but off the six-year highs registered in the Nov data


Japan PM Abe: Undecided on next appointment of the next BoJ Governor (Kuroda’s first term is set to end on April 8, 2018)

Bank of Japan (BOJ) Gov Kuroda reiterated in parliament that must maintain ‘powerful’ easing for economy as was still distant to price target


BOE’s McCafferty reiterated MPC view that interest rates will likely have rise earlier and gradually. Need to bring inflation back to target in the next 2 or 3 years

ECB’s Stournaras (Greece) reiterated view that Greece economy forecast to grow 2.4% in 2018 and 2.5% in 2019

PM May stated that she asked political parties in Northern Ireland to make final push to restore devolved government. Possible to see devolved government in N. Ireland very soon

Ireland PM Varadkar: Irish and UK govt’s agreed the December Brexit deal on the Irish border still stood; wanted comprehensive free trade agreement with the UK post Brexit. Hopeful that N Irish parties Sinn Fein and the DUP could agree on the resumption of a power sharing govt this week


President Trump proposed a $4.4T federal budget for 2019. White House 2019 budget plan sought $1.7T of cuts to mandatory spending and receipts. Raises GDP growth forecasts for 2018 thru 2020 period while trimming its inflation forecast for 2018 and 2019

Economic Data:

(NO) Norway Q1 Consumer Confidence: 20.3 v 18.3 prior

(NL) Netherlands Dec Retail Sales Y/Y: 1.5 v 6.1% prior

(JP) Japan Jan Preliminary Machine Tool Orders Y/Y: 48.8% v 48.3% prior

(FR) France Q4 Preliminary Private Sector Payrolls Q/Q: 0.3% v 0.3%e; Wages Q/Q: 0.1% v 0.2%e

(HU) Hungary Jan CPI M/M: 0.3% v 0.4%e; Y/Y: 2.1% v 2.0%e

(CH) Swiss Jan Producer & Import Prices M/M: 0.3% v 0.2% prior; Y/Y: 1.8% v 1.8% prior

(UK) Jan CPI M/M: -0.5% v -0.6%e; Y/Y: 3.0% v 2.9%e; CPI Core Y/Y: 2.7% v 2.6%e; CPIH Y/Y: 2.7% v 2.8%e

(UK) Jan RPI M/M: -0.8% v -0.7%e; Y/Y: 4.0% v 4.1%e, RPI-X (ex-mortgage interest payment) Y/Y: 4.0% v 4.1%e, Retail Price Index: 276.0 v 276.2e

(UK) Jan PPI Input M/M: 0.7% v 0.6%e; Y/Y: 4.7% v 4.1%e

(UK) Jan PPI Output M/M: 0.1% v 0.2%e; Y/Y: 2.8% v 3.0%e

(UK) Jan PPI Output Core M/M: 0.3% v 0.2%e; Y/Y: 2.2% v 2.3%e

(UK) Jan ONS House Price Index Y/Y: 5.2% v 4.9%e

(ZA) South Africa Q4 Unemployment Rate: 26.7% v 27.2%e (moves off 15 year high)

Fixed Income Issuance:

(ID) Indonesia sold total IDR20T vs. IDR8T target in 3-month and 12-month, 10-year,15-year and 20-year bonds

(ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2037, 2040, 2044 and 2048 bonds

(ES) Spain Debt Agency (Tesoro) sold total €4.005B vs. €3.5-4.5B indicated range in 6-month and 12-month Bills

(CH) Switzerland sold CHF523.5 in 6-month Bills; Yield: -0.851% v -0.929% prior

(IT) Italy Debt Agency (Tesoro) sold total €7.677B vs. €6.25-7.75B indicated range in 2020, 2024 and 2048 BTP Bonds



Indices [Stoxx600 -0.1% at 372.7, FTSE flat at 7173, DAX -0.1% at 12266, CAC-40 -0.1% at 5133 , IBEX-35 -0.6% at 9708, FTSE MIB -0.5% at 22215 , SMI -0.3% at 8799, S&P 500 Futures -0.6%]

Market Focal Points/Key Themes:

European Indices trade mostly lower taking the lead from weaker US futures. The FTSE trades little changed following a slightly hotter CPI reading, as Gilt Yields pare declines.

Earnings picked up this morning with weakness in shares of Michelin and Kering following results, while TUI, Randstad and Pendragon outperform.

Elsewhere Bourbon trades lower after announcing a new strategic plan, while Cegedim trades sharply lower after BPO France sells stake in the company.

Looking ahead notable earners include PepsiCo, Under Armour, HCA and Tower International.


Consumer Discretionary [Kering [KER.FR] -2.3% (Earnings), TUI [TUI.UK] +4.4% (Earnings), Pendragon [PDG.UK] +15% (Earnings), RWS Holding [RWS.UK]

1.3% (AGM Statement), Metro [B4B.DE] +1.6% (Earnings)]

Industrials [ Michelin [ML.FR] -1.2% (Earnings)]

Telecom [Telenet [TNET.BE] -7% (Earnings)]

Financials [Randstad [RAND.NL] +2.3% (Earnings)]

Energy [Bourbon [GBB.FR] -4% (new strategic plan)]


Ireland Min D’Arcy: March Brexit deadline might not be met

South Africa govt said to have declared a nation disaster on drought

Japan Currency Head Asakawa: Watching to see if speculation was behind the recent JPY currency (Yen) price movements

China FX Regulator SAFE: reiterated its stance to prevent forex risks and to deepen the market opening

China PBoC Gov Zhou reiterated policy stance to maintain prudent monetary policy and appropriate growth in credit and social financing

IEA Monthly Report raised its 2018 global oil demand growth forecast from 1.3M bpd to 1.4M bpd. OPEC had almost cleared oil glut but faces shale danger. Saw US oil production overtaking Saudi soon and top Russia by end-2018


USD was modestly lower as the Trump budget brings into focus the US twin deficits

GBP/USD was little fazed by the slight beat of the Jan CPI data to 3.0%. The BOE was more hawkish in its commentary last week and Carney noted that inflation could climb back to 3% in the short-term. Brexit concerns continued to be a headwind as an Irish minister express some doubt of deadlines being met by next month on negotiations.

EUR/USD was higher by 0.2% just ahead of the NY morning at 1.2315 area.

USD/JPY was lower by 0.9% to test under 107.70 area as dealers pondered the limits of an expansionary policy. Japan PM Abe noted that he was still undecided on next appointment of the next BoJ Governor (**Note: News reports over the possible reappointment of BOJ Gov Kuroda came out late last Friday , but USD/JPY did not recover to above 109). Japan Currency Head Asakawa noted that they were watching to see if speculation was behind the recent JPY currency (Yen) price movements

Fixed Income

Bund Futures trades up 37 ticks at 158.35 as futures maintain defensive conditions. Upside targets 158.85, while a continued move lower targets the157.25 level.

Gilt futures trade at 121.05 up 9 ticks, following mixed UK CPI data. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.75 then 123.25.

Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.891T from €1.899T prior. Use of the marginal lending facility falls to €M from €3M prior.

Corporate issuance saw 2 issuers raise $2.4B in the primary market

Looking Ahead

05.30 (UK) Weekly John Lewis LFL sales data

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

05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender

06:00 (US) Jan NFIB Small Business Optimism: 105.7e v 104.9 prior

06:00 (IL) Israel Jan Trade Balance: No est v -$1.8B prior

06:00 (TR) Turkey to sell 2019 and 2027 bonds

To sell Zero Coupon 2019 Bonds; Yield: % v 13.53% prior, bid-to-cover: x v 6.66x prior

To sell 2027 Bonds; Avg Yield: % v 12.19% prior; Bid-to-cover: x v 2.76x prior

06:45 (US) Daily Libor Fixing

07:00 (RU) Russia announces weekly OFZ bond auction

07:00 (IS) Iceland Jan Unemployment Rate: No est v 2.2% prior

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

08:00 (PL) Poland Dec Current Account: -€0.4Be v +€0.2B prior; Trade Balance: -€0.4Be v +€0.1B prior

08:00 (US) Fed’s Mester (voter, hawk) on monetary policy and economic outlook

08:05 (UK) Baltic Dry Bulk Index

08:55 (US) Weekly Redbook Sales

09:00 (EU) Weekly ECB Forex Reserves: € v € prior

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

16:30 (US) Weekly API Oil Inventories

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