Notes/Observations
Risk-averse sentiment seemed to have cooled for the time being as major indexes rebound
Germany said to reach an agreement on a grand coalition
Asia:
Japan Dec Real Cash Earnings posts its fastest decline since July 2017 with YoY reading -0.5% v +0.1% prior ; Labor Cash Earnings y/y: 0.7% v 0.5%e
China PBoC again skipped its Open Market Operation (OMO) for the 10th straight session citing ample liquidity
Europe:
European Commission wants to punish UK non-compliance during the Brexit transition by summarily cutting off the country’s access to parts of the single market. Wants to restrict UK access to the single market if there is a dispute over Brexit
EU said to be prepared to ask Britain for higher financial contributions to the single bloc’s post-Brexit budget that could go beyond what was agreed last year
Ireland said to be pushing for a settled “legal text” over the Brexit border question as early as next month in a move that threatened once again to derail the Brexit negotiations
National Institute of Economic and Social Research (NIESR): raises UK 2018 and 2019 GDP growth forecasts from 1.7% to 1.9%
President Zuma reportedly to resign as soon as preconditions are finalized
Americas:
US House has votes to pass stopgap funding bill to fund government until March 23rd; final vote 245 to 182; bill now moves to the Senate
Energy:
Weekly API Oil Inventories: Crude: -1.1M v +3.2M prior
OPEC Sec Gen Barkindo: OPEC still has a ways to go in market rebalancing. OPEC was satisfied with oil price gains seen in 2017
Economic Data:
(ZA) South Africa Jan Gross Reserves: $50.5B v $50.7B prior; Net Reserves: $43.6B v $43.4Be
(DE) Germany Dec Industrial Production M/M:-0.6% v -0.7%e; Y/Y: 6.5% v 6.8%e
(DK) Denmark Dec Industrial Production M/M: 0.7 v 2.7% prior
(FI) Finland Dec Preliminary Trade Balance: -€0.3B v -€0.2B prior
(NO) Norway Dec Industrial Production M/M: -0.4 v +0.6% prior; Y/Y: +0.3 v -1.3% prior
(NO) Norway Dec Manufacturing Production M/M: 1.3% v 0.4%e; Y/Y: 3.4% v 2.3% prior
(CH) Swiss Q4 UBS Real Estate Bubble Index: 1.32 v 1.34 prior
(MY) Malaysia Dec Trade Balance (MYR): 7.3B v 9.3Be; Exports Y/Y: 4.7% v 12.7%e; Y.Y: 7.9% v 13.6%e
(FR) France Dec Trade Balance: -€3.5B v -€4.9Be
(FR) France Dec Current Account: -€0.9B v -€3.3B prior
(TW) Taiwan Jan Trade Balance: $2.2B v $4.9Be; Exports Y/Y: 15.5% v 18.1%e; Imports Y/Y: 23.3% v 14.5%e
(CH) Swiss Jan Foreign Currency Reserves (CHF): 731.4B v 744.1B prior
(SE) Sweden Jan Budget Balance (SEK): 0.0B v -69.9B prior
(UK) Jan Halifax House Prices M/M: -0.6% v +0.2%e; 3M/3M: 2.2% v 2.4%e
(IS) Iceland Central Bank (Sedlabanki) left its 7-Day Term Deposit rate (currently at 4.25%)
(IN) India Central Bank (RBI) left its Repurchase Rate unchanged at 6.00%; as expected
(IT) Italy Dec Retail Sales M/M: -0.3% v -0.2%e; Y/Y: -0.1% v +1.0%e
(CZ) Czech Jan International Reserves: $151.7B v $148.0B prior
(SG) Singapore Jan Foreign Reserves: $282.4B v $279.9B prior
(CN) China Jan Foreign Reserves: $3.162T v $3.170Te
Fixed Income Issuance:
(EU) EFSF opened its book to sell €3.0B in 10-year bond; guidance seen -7bps to mid-swaps
(IN) India sold total INR140B vs. INR140B indicated in 3-month, 6-month and 12-month bills
(DK) Denmark sold DKK5.065B in 0.1%2030 DGBi Bonds; Avg Yield: -0.46%; Bid-to-cover: 2.48x
(SE) Sweden sold SEK2B vs. SEK2B indicated in 0.75% May 2028 bonds; Avg Yield: 0.9046% v 0.8437% prior;Bid-to-cover: 4.33x v 2.91x prior
(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2021 bonds; Avg Yield: 1.06% v 0.92% prior;Bid-to-cover: 3.88x v 2.65x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.8% at 375.9, FTSE +0.6% at 7187, DAX +0.7% at 12474, CAC-40 +0.6% at 5191 , IBEX-35 +0.6% at 9869, FTSE MIB +0.8% at 22518 , SMI +1.0% at 8926, S&P 500 Futures -0.8]
Market Focal Points/Key Themes: European Indices have rebounded from yesterday’s sharp sell off following a strong rebound in the US over night. US futures this morning however are pointing lower once again as volatility continues. On the earnings front Sanofi reported mixed results with shares little changed; Statoil, Tullow Oil, Vestas Wind trade higher after results, while ABN Amro, Carlsberg trade lower. Elsewhere Adidas shares outperform in Germany following an analyst upgrade. In the US shares of of Wynn Resorts trades lower after the resignation of its CEO and Founder Steve Wynn. Looking ahead notable earners include Humana, Hasbro and Michael Kors.
Movers
Consumer Discretionary [ Carlsberg [CARLB.DK] -4.1% (Earnings)]
Healthcare [Sanofi [SAN.FR] -1.5% (Earnings)]
Financial [ ABN Amro [ABN.NL] -1.7% (Earnings), Hannover Re [HNR1.DE] +2.6% (FY18 outlook), Talanx [TLX.DE] +2.3% (Earnings)]
Energy [ Statoil [STL.NO] +3.2% (Earnings), Vestas Wind [VWS.DK] +1.7% (Earnings), Tullow Oil [TLW.UK] +2.8% (Earnings)]
Speakers
German CDU/CSU, SPD political parties are said to agree on a grand coalition treaty. Parties said to have agreed upon ministry positions. SPD said to have received the Finance Ministry positions (**Note: SPD had been negotiating for more-Europe in the coalition talks). Merkel bloc to get Economy, Defense and Interior Ministries (CSU Seehofer as Interior Min; CDU party with economy and defense post)
UK Govt official: PM May was unlikely to provide the kind of clarity on her blueprint Brexit plan that the EU sought by end of this week
ECB’s Nouy (SSM chief) said to call summit on Non-performing Loans (NPLs) for Friday, Feb 9th
ECB’s Nouy: Bank have made great strides to become more resilient; things are improving but more needs to be done. To shift the date for which the guidance applies to new NPLs; To publish final guidelines in March
ECB’s Lautenschlaeger: ECB would not tolerate empty shells in post Brexit environment. Banks will have to prepare for all options on Brexit
Spain formally nominated Spain Econ Min de Guindos for ECB post (as expected)
Cyprus Fin Min Georgiades to step down
Italy Stats Agency (ISTAT) Monthly Economic Note: Sees lesser intensity in domestic growth
Japan PM Abe: Spoke with US VP Pence about North Korea in detail and reiterated that could not accept nuclear armed North Korea. US and Japan were 100% together
India Central Bank Policy Statement noted that –the decision to keep policy steady was not unanimous (5-1) with dissenter calling for 25bps hik. It maintained its neutral monetary policy stance and reiterated to keep Headline inflation close to 4% target on a durable basis. It saw the need for vigilance around evolving inflation scenario in coming months; fiscal slippage as indicated in budget could impinge on inflation outlook. Forecasted Headline inflation between 5.1-5.6% in H1 and between 4.5-4.6% in H2
Currencies
FX market appeared to be a calm presence in the face of increased global equity volatility. Overall the USD remained locked within recent ranges against the major pairs. US equity market had swoon over the last few days is in part rooted in worries higher inflation could cause the Fed to be more aggressive with rate rises. Dealers noted that USD would likely to come under renewed broad-based selling pressure as participants digest why currency markets have stayed calm with FX volatility remaining well below levels witnessed from 2015 to early 2017
EUR/USD was fractionally lower despite reports of a grand coalition agreement in Germany. The pair continued to find headwinds above the 1.24 level.
GBP/USD was facing headwinds as various press outlets noted that the EU would harden its stance during the transition phase of negotiations. Pair at 1.3930 just ahead of the NY morning.
USD/JPY was the only real mover in the session as the pair was lower by 0.5% just above the 109 handle. The Nikkei225 Index did see its 2% gain evaporate in the final hour of trading.
Fixed Income
Bund Futures trades up 37 ticks at 158.88 reversing earlier losses. Upside targets 159.85, while a continued move lower targets the157.75 level.
Gilt futures trade at 121.91 up 11 ticks, slightly off the highs from last night. Support continues to stand at 121.25 then 120.75, with upside resistance at 122.75 then 123.25.
Wednesday’s liquidity report showed Tuesday’s excess liquidity fell to €1.888T from €1.889T prior. Use of the marginal lending facility rose to €51M from €35M prior.
Corporate issuance saw 1 issuer raise $350M in the primary market.
Looking Ahead
(GR) Greece Debt Agency (PDMA) to sell EUR-denominated 7-year note
(IL) Israel Jan Foreign Currency Balance: No est v $113.0B prior
(RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rates by 25bps to 2.25% (no set time)
(MX) Mexico Jan Vehicle Production: No est v 246.3K prior; Vehicle Exports: No est v 252.7K prior
05:30 (DE) Germany to sell €3.0B in 0.5% Feb 2028 Bunds
06:00 (PT) Portugal Q4 Unemployment Rate: No est v 8.5% prior
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:00 (US) Fed’s Kaplan (non-voter, dove) in Frankfurt
06:00 (RU) Russia to sell combined RUB35B in 2021 and 2028 OFZ bonds
06:30 (CL) Chile Jan Trade Balance: $1.2Be v $1.06B prior; Total Exports: $6.7Be v $6.8B prior; Total Imports: $5.5Be v $5.7B prior; Copper Exports: No est v $3.9B prior
06:30 (CL) Chile Jan International Reserves: No est v $39.0B prior
06:45 (US) Daily Libor Fixing
07:00 (US) MBA Mortgage Applications w/e Feb 2nd: No est v -2.6% prior
07:00 (CL) Chile Dec Nominal Wage M/M: No est v 0.5% prior; Y/Y: 5.5%e v 5.5% prior
08:00 (PL) Poland Jan Official Reserves: No est v $113.3B prior
08:00 (RU) Russia Jan Official Reserve Assets: 453.8Be v $432.7B prior
08:05 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada Dec Building Permits M/M: +2.0%e v -7.7% prior
08:30 (US) Fed’s Dudley (voter, dove) on panel
09:30 (TR) Turkey Jan Cash Budget Balance (TRY) No est v -21.1B prior
10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
10:15 (US) Fed’s Evans (non-voter, dove) on economy and monetary policy
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (CA) Canada to sell 2-Year Bonds
13:00 (US) Treasury to sell $24B in 10-Year Notes
14:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Rate by 25bps to 6.75%
15:00 (US) Dec Consumer Credit: $20.0Be v $28.0B prior
15:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 1.75%
16:00 (NZ) New Zealand Central Bank (RBNZ) Gov Spencer post rate decision press conference
