Notes/Observations
Eurogroup nomination of Spain’s de Guindos as the next ECB Vice-Chair allows the potential successor to Draghi to come from a core northern European country
EU said to be more willing to call for more flexibility in future relationship talks with Britain
Asia:
RBA Feb Minutes reiterates that low interest rates was helping reduce unemployment and help raise inflation further. Further progress on inflation likely to be only gradual and saw underlying inflation rising to 2.25% by mid-2020. Reiterated view that rising AUD currency would impede pickup in economic growth and inflation
Japan Fin Min Aso: Expect BOJ to keep working with govt to beat deflation; reaching 2% inflation is a way to prove Japan has beat deflation
Europe:
Eurogroup formally nominated Spain’s Luis de Guindos for ECB vice president role (as expected)
Spain Econ Min de Guindos stated that he would resign as Econ Min within days after being chosen as ECB VP. Reiterated view that steps need to be taken to deepen economic and monetary union and vowed to defend ECB independence
Eurogroup chief Centeno: Greece has only 2 prior actions outstanding before disbursement of new loans; technical work on debt relief measures for Greece has already start (in-line with recent press reports)
PM May said to have a contingency plan to withhold payments of the £40B Brexit bill if EU leaders backtrack on their post-Brexit free trade deal. Fall-back option that could be triggered if negotiations go wrong
UK Brexit Min Davis upcoming speech to reassure the European Union that the U.K. won’t try to undercut the bloc by tearing up regulations after the split, making the case for mutual trust between regulators on each side
ECB has purchased €1.924T worth of bonds in public sector purchase program (PSPP, QE) as of w/e Feb 16th v €1.919T prior week
Energy:
OPEC Sec Gen Barkindo: Jan compliance seen at 133% for OPEC/Non-Opec members on production cut agreement. Rebalancing of market gaining massive momentum
Economic Data:
(JP) Japan Jan Final Machine Tool Orders Y/Y: 48.8% v 48.8% prelim
(DE) Germany Jan PPI M/M: 0.5% v 0.3%e; Y/Y: 2.1% v 1.8%e
(CH) Swiss Jan Trade Balance (CHF): 1.3B v 3.4B prior, Exports Real M/M: -5.1 v +3.3% prior; Imports Real M/M: 3.8% v 1.0% prior
(FI) Finland Jan Unemployment Rate: 8.8 v 8.4% prior
(ZA) South Africa Dec Leading Indicator: 104.6 v 105.2 prior
(DK) Denmark Feb Consumer Confidence Indicator: 8.5 v 8.0e
(TR) Turkey Feb Consumer Confidence: 72.3 v 72.3 prior
(JP) Japan Jan Convenience Store Sales Y/Y: +0.1 v -0.3% prior
(HU) Hungary Dec Average Gross Wages Y/Y: 13.5% v 14.2%e
(SE) Sweden Jan CPI M/M: -0.8% v -0.7%e; Y/Y: 1.6% v 1.8%e
(SE) Sweden Jan CPIF M/M: -0.9% v -0.7%e; Y/Y: 1.7% v 1.9%e, CPI Level: 322.51 v 322.92e
(ES) Spain Dec Trade Balance: -€2.1B v -€1.6B prior
(PL) Poland Jan Sold Industrial Output M/M: 4.1% v 3.7%e; Y/Y: 8.6% v 8.5%e, Construction Output Y/Y: 34.7% v 20.4%e
(PL) Poland Jan PPI M/M: 0.1% v 0.1%e ; Y/Y: 0.2% v 0.1%e
(PL) Poland Jan Retail Sales M/M: -20.5% v -21.2%e; Y/Y: 8.2% v 6.9%e, Real Retail Sales Y/Y: 7.7% v 6.5%e
(GR) Greece Dec Current Account Balance: -€1.2B v -€1.0B prior
(DE) German Feb ZEW Current Situation Survey: 92.3 v 93.9e; Expectations Survey: 17.8 v 16.0e
(EU) Euro Zone Feb ZEW Expectations Surveys: 29.3 v 29.0 prior
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) opens book to sell Oct 2048 bonds; guidance seen +107bps to mid-swaps with order book over €22.5B
(ID) Indonesia sold total IDR8.475 in 6-month Islamic Bills; 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
(ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2030, 2037, 2041 and 2048 bonds
(ES) Spain Debt Agency (Tesoro) sold total €1.31B vs. €1.0-2.0B indicated range in 3-month and 9-month Bills
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 flat at 378.3, FTSE -0.5% at 7213, DAX -0.1% at 12373, CAC-40 flat at 5257 , IBEX-35 +0.2% at 9829, FTSE MIB +0.1% at 22582 , SMI flat at 8907, S&P 500 Futures -0.8%]
Market Focal Points/Key Themes: European Indices trade mostly higher across the board following the weakness seen yesterday, with the FTSE under performing being weighed on by HSBC and BHP Billiton following results. Also weighing on the FTSE is shares of IHG trading over 4% lower after announces results and a cost cutting plans. Elsewhere, HeidelbergCement, Covestro trade higher in Germnay following results, with Edenred also rising. In the M&A space Fidessa trades sharply higher after confirming an approach by Temenos. Looking ahead notable earners include Home Depot, Duke Energy, Genuine Parts and MGM Resorts.
Movers
Consumer Discretionary [ Edenred [EDEN.FR] +7.4% (Earnings), Sports Direct [SPD.UK] +3% (Share buyback), IHG [IHG.UK] -4.6% (Earning), Dunelm [DNLM.UK] -10% (Earnings)]
Materials [ BHP [BLT.UK] -3.3% (Earnings) ]
Industrials [HeidelbergCement [HEI.DE] +1.8% (Earnings)]
Healthcare [ Covestro [1COV.DE] +1.8% (Earnings)]
Financial [ HSBC [HSBA.UK] -4.2% (Earnings), Fidessa [FDSA.UK] +23% (Confirms takeover approach)]
Speakers
European Parliament said to be preparing a "detailed," 60-paragraph resolution which will call for more flexibility in future relationship talks with Britain. European Parliament said to call for Britain to have ‘privileged’ single market access after Brexit
ECB’s Rimsevics (Latvia): All allegations against me wee false; never asked for or receive a bribe
EU’s Moscovici: stated that had questions on US policy and WTO rules. Tax dumping was not the right answer to US tax reform
Germany Fin Min Altmaier: EU to keep a close watch on US tax reform
Sweden Fin Min Andersson stated that Sweden to vote no to EU budget discharge; hoped for further improvements. Positions on bank union risk sharing was locked; discussion on how to measure risks included govt bonds
Luxembourg Fin Min Gramegna: stated that EU should be united on tax reform. UK would be a reliable partner after Brexit
German CDU Parliamentary Whip Grosse-Broemer: Markel could be voted in 2nd week of March with SPD vote
ZEW Economists: Inflation expectations for both Germany and the Euro Zone had increased; Domestic economy expected to improve in coming months –
Japan PM Abe: Must consider steps on demand swings from sales-tax hike (**Note: The 1st phase was in Apr 2014 and the 2nd phase is planned for Oct 2019
OPEC Committee said to see pace of oil rebalancing quickening
UAE Energy Min Mazrouei: Oil market monitoring beyond 2018 was minimum we could do. OPEC had draft charter for future cooperation with allies (OPEC and non-OPEC members). Hoped OPEC and allies framework cooperation to be presented to all members in June
Currencies
The USD recovered from recent 3-year lows by having its best run in two months over the past few sessions as participants scaled back dollar shorts. One analyst believed that the USD correction should remain limited and was mainly driven by technical factors
EUR/USD was off 0.4% to test the 1.2350 area. The pair seemed to ignore the outcome of the ECB VP position to Spain’s de Guindos which now placed Bundesbank President Weidmann as one of the leading contenders to succeed Draghi in 2019
The GBP/USD pair recovered from initial losses as reports circulated that EU Parliament was preparing a "detailed," 60-paragraph resolution which would call for more flexibility in future relationship talks with Britain. Pair back testing the 1.40 area after testing 1.3930 earlier
Higher US yields helped the USD/JPY pair to move back above the 107 level.
Fixed Income
Bund Futures trades down 17 ticks at 158.12 after the German ZEW survey declines. Upside targets 158.85, while a continued move lower targets the157.25 level.
Gilt futures trade at 120.89 down 17 ticks as the Gilt spread over Bunds near a 2-month high sets to narrow. Support continues to stand at 120.75 then 120.15, with upside resistance at 121.75 then 122.25.
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.854T from €1.863T prior. Use of the marginal lending facility rose to €47M from €98M prior.
Corporate issuance saw the primary market finish last week with ~$9B sold.
Looking Ahead
(DE) German SPD party begins membership ballot on coalition pact with CDU/CSU
(UK) House of Commons reconvenes after February Recess
(IL) Israel Feb CPI 12-Month Forecast: No est v 0.7% prior
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
05:30 (DE) Germany to sell €5.0B in new Mar 2020 Schatz
06:00 (UK) Feb CBI Industrial Trends Total Orders: 11e v 14 prior, Selling Prices: No est v 40 prior
06:00 (IL) Israel Dec Manufacturing Production M/M: No est v % prior
06:00 (TR) Turkey to sell 2024 Floating Bonds; Yield: % v 6.18% prior
06:30 (EU) ESM to sell €2.0B in 6-month bills
06:30 (CL) Chile Central Bank Traders Survey
06:30 (SE) Sweden Central Bank ( Riksbank) Gov Ingves/Floden speech in New York
06:45 (US)Daily Libor Fixing
07:00 (RU) Russia announces weekly OFZ bond auction
08:15 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada Dec Wholesale Trade Sales M/M: 0.4%e v 0.7% prior
09:00 (NZ) Fonterra Global Dairy Trade Auction
09:00 (EU) Weekly ECB Forex Reserves
10:00 (EU) Euro Zone Feb Advance Consumer Confidence: 1.0e v 1.3 prior
10:30 (CA) Canada to sell 3-month, 6-month and 12-month BTF Bills
11:30 (US) Treasury to sell 4-Week Bills
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
13:00 (US) Treasury to sell 2-Year Notes
(IT) Italy Debt Agency (Tesoro) announcement for BTPei and CTZ auctions for Feb 23rd
15:00 (MX) Mexico Citibanamex Survey of Economists
16:00 (KR) South Korea Jan PPI Y/Y: No est v 2.3% prior
