Notes/Observations
Possible appointment of Lui He as PBoC Gov might be a further signal of the Chinese government’s resolve in addressing financial and economic imbalances
New Fed Chair Powell’s inaugural testimony before the House Financial Services and Senate Banking Committees on Tuesday and Thursday
Asia:
Communist Party had moved to repeal language from the constitution that stated the head of state “shall serve no more than two consecutive terms”, which would allow China President Xi to stay in power indefinitely (**Note: Xi’s second term was due to end in 2023)
China Politburo statement reiterated China to continue proactive fiscal policy and prudent monetary policy in 2018
China President Xi top economic advisor Liu He said to be a front runner to be next PBOC Gov (**Note: would assume both the role of PBoC Governor as well as vice-premier in charge of overseeing economic and financial matters, including regulatory bodies. Should this be confirmed, it would be the first time in over two decades hat a Chinese official has held both offices simultaneously)
China Jan Home Prices: rose in 52 out of 70 cities m/m (compared to 57 in Dec)
China CIRC orders three insurers to fix overseas investment rule breaches
PBOC Advisor Huang Yiping: China still faces systemic risks as implicit guarantees from Govt become unsustainable; “bad leveraging" is on the rise while “good leveraging" is falling
BoJ Gov Kuroda reiterated stance to persistently continue powerful monetary easing to achieve price goal
Europe:
EU said to be prepared publish a draft Brexit withdrawal agreement that leaves out key compromise language secured by UK PM May. Draft omitted language to say no new regulatory barriers would be introduced between the UK mainland and Northern Ireland
Labour Leader Corbyn expected to confirm in a speech his support for permanent membership of a customs union after the UK leaves the EU next March
BOE Dep Gov Ramsden reiterated MPC view that interest rates might need to be raised sooner than previously thought due to signs of accelerating wage growth
ECB’s Coeure (France): Not eager to engage in early normalization
Americas:
Fed’s Williams (moderate, voter): economy in US is improving broadly across sectors. Fed’s guidance was for gradual rate hikes, and he expected that to happen; would have to reanalyze view if inflation came in stronger than expected
Energy:
Saudi Oil Min al-Falih: Cuts by OPEC and its allies may be phased out in 2019 in a way that won’t disturb the market
Economic Data:
(FI) Finland Jan PPI M/M: 0.7% v 0.2% prior; Y/Y: 2.4% v 3.0% prior
(FI) Finland Jan Preliminary Retail Sales Volume Y/Y: 4.0% v 3.0% prior
(TW) Taiwan Jan Unemployment Rate: 3.7% v 3.7%e
(CZ) Czech Feb Business Confidence: 17.1 v 16.4 prior, Consumer Confidence: 9.5 v 9.8 prior,
(AT) Austria Feb Manufacturing PMI: 59.2 v 61.3 prior (25th month of expansion)
(UK) Jan BBA Loans for House Purchases: 40.1K v 37.0Ke
Fixed Income Issuance:
(BE) Belgium Debt Agency (BDA) opened its book to sell EUR-denominated Apr 2033 green bond; guidance seen -13bps to mid-swaps
(UK) Bank of England (BOE) to sell $2.0B in 3-year notes; guidance seen 0bps (flat) to mid-swaps
(IT ) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.407% v -0.417% prior; Bid-to-cover: 1.57x v 1.39x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.5% at 383.0, FTSE +0.5% at 7268, DAX +0.6% at 12554, CAC-40 +0.6% at 5348 , IBEX-35 +0.4% at 9861, FTSE MIB +0.3% at 22739 , SMI +0.3% at 8976, S&P 500 Futures +0.4%]
Market Focal Points/Key Themes:
European Indices trade higher across the board tracking a strong close on Wallstreet on Friday, stronger futures this morning as well as strong gains in Asia overnight.
Corporate news flow has been relatively muted with notable downside in shares of PostNL after earnings and cut outlook, while shares of Associated British Foods trades higher after their trading update, and upbeat outlook for Primark.
Elsewhere share of SES rebounds after their results on Friday, with shares of VW also trading higher after preliminary results on Friday.
Looking ahead notable earners include Dean Foods, Boise Cascade and Intelsat.
Movers
Consumer Discretionary [Bunzl [BNZL.UK] +0.5% (Earnings), ABF [ABF.UK] +1.7% (Trading update, Primark outlook)]
Industrials [ PostNL [PNL.NL] -1% (Earnings), Volkswagen [VOW3.DE] +1.4% (Earnings)]
Telecom [SES [SESG.FR] +9.3% (Rebound), Nokia [NOKIA.FI] +2.7% (5G commentary)]
Financial [ Provident Finl -12.4% (Mulls rights issue)]
Speakers
China FX Regulator SAFE reiterated its view that two-way price action for the CNY currency (Yuan) would be the norm. Reiterated Yuan to keep its basic stability at a balance level
North Korea said to be open to dialogue with US
Currencies
USD was softer as US yields drifted lower. Dealers were focusing on the new Fed Chair Powell’s inaugural testimony before the House Financial Services and Senate Banking Committees on Tuesday and Thursday this week.
The GBP was firmer aided by weekend commentary by BOE Dep Gov Ramsden (dove) who reiterated MPC overall view that that interest rates might need to be raised sooner than previously thought due to signs of accelerating wage growth. Market currently saw almost 85% change of a rate hike in May. Focus was on UK Labour leader Corbyn (opposition) speech on Brexit where he was expected to seek a bespoke deal with the EUthat would include a customs union
EUR/USD higher by 0.5% at 1.2350 while USD/JPY was off by 0.3% at 106.55 just ahead of the NY morning.
Fixed Income
Bund Futures trades down 13 ticks at 159.40 ahead of Draghi’s testimony on monetary policy and the inflation outlook before the European Parliament Economic and Monetary Affairs Committee, in Brussels. Upside targets 159.75, while a return lower targets the157.75 level.
Gilt futures trade at 121.93 down 12 ticks as Gilts drop from open after BOE’s Ramsden. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.00-122.25 zone then 122.85.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.834T from €1.831T prior. Use of the marginal lending facility rose to €37M from €0M prior.
Corporate issuance saw the primary market finish last week with ~$18.3B sold.
Looking Ahead
(BR) Brazil Jan Total Federal Debt (BRL): No est v 3.559T prior
(DE) German Chancellor Merkel’s CDU party holds Party Convention to Vote on Coalition
05:30 (IL) Israel to sell Bonds
06:00 (RO) Romania to sell Bonds
06:25 (BR) Brazil Central Bank Weekly Economists Survey
06:45 (US) Daily Libor Fixing
08:05 (UK) Baltic Dry Bulk Index
08:00 (ES) Spain Debt Agency(Tesoro) announces size of upcoming auctions
08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
08:00 (US) Fed’s Bullard (dove, non-voter) speaks on US Economy and Monetary Policy
08:30 (US) Jan Chicago Fed National Activity Index: 0.20e v 0.27 prior
08:30 (BR) Brazil Jan Current Account: -$5.0Be v -$4.3B prior; Foreign Direct Investment (FDI): $3.8Be v $5.4B prior
08:55 (FR) France Debt Agency(AFT) to sell combined €5.2-6.4B in 3-month, 6-month and 12-month BTF Bills
09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
09:00 (MX) Mexico Dec Retail Sales M/M: -0.3%e v -0.3% prior; Y/Y: -0.4%e v -1.5% prior
09:00 (EU) ECB’s Draghi in EU Parliament
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:00 (US) Jan New Home Sales: 648Ke v 625K prior
10:30 (US) Feb Dallas Fed Manufacturing Activity: 30.0e v 33.4 prior
11:30 (US) Treasury to sell 3-Month and 6-Month Bills
13:00 (UK) BOE’s Cunliffe at event at Warwick University
15:15 (US) Fed’s Quarles (hawk, FOMC voter) on US economy
