Notes/Observations
US President Trump is set to announce tariffs on steel and aluminum imports (25% and 10% respectively) as early as today
Major European PMI data remained in expansion territory (Beats: Euro Zone, Germany, Swiss, Sweden; Misses: France, Italy, Russia, Norway, Poland, Czech)
Euro Zone Jan unemployment falls to lowest level since 2008
Asia:
China Feb Caixin Manufacturing PMI hits 6-month high (51.6 v 51.3e)
BoJ Gov Kuroda reiterated that BOJ’s easing had contributed to growth. Wages and inflation had been somewhat weak despite a solid real economy
BoJ Kataoka: Still ‘quite distant’ from mulling shift from easy policy, must ease more to achieve price goal quickly
Europe:
German CSU party leader Seehofer: Germany should hold a new election if members of SPD vote against a new coalition
Press reports on EU Brexit draft noted that EU officials were fairly certain the draft Brexit deal would be unacceptable to UK PM May as a large part of their strategy is to be so inflexible it puts so much pressure on the British Govt it will eventually decide to keep the UK as close as possible to the EU
Americas:
US said to plan announcement on Thursday, Mar 1st related to steel and aluminum import
Fed’s Kashkari (dove, non-voter): lack of wage growth signaled there is still slack in job market
Economic Data:
(JP) Japan Feb Consumer Confidence: 44.3 v 44.8e
(PE) Peru Feb CPI M/M: 0.3% v 0.3%e; Y/Y: 1.2% v 1.2%e
(JP) Japan Feb Vehicle Sales Y/Y: -4.9% v -5.7% prior
(RU) Russia Feb Manufacturing PMI: 50.2 v 52.0e (19th month of expansion)
(IE) Ireland Feb Manufacturing PMI: 56.2 v 57.6 prior
(CH) Swiss Q4 GDP Q/Q: 0.6% v 0.5%e; Y/Y: 1.9% v 1.7%e
(UK) Feb Nationwide House Price Index M/M: -0.3% v +0.1%e; Y/Y: 2.2% v 2.6%e
(TR) Turkey Feb Manufacturing PMI: 55.6 v 55.7 prior (12th month of expansion)
(SE) Sweden Feb Manufacturing PMI: 59.9 v 58.0e
(TW) Taiwan Jan Export Orders Y/Y: 19.7% v 16.1%e
(ES) Spain Q4 Final GDP Q/Q: 0.7% v 0.7%e; Y/Y: 3.1% v 3.1%e
(NL) Netherlands Feb Manufacturing PMI: 63.5 v 62.5 prior (54th month of expansion)
(NO) Norway Feb Manufacturing PMI: 57.5 v 57.8e
(HU) Hungary Feb Manufacturing PMI: 57.4 v 60.9 prior (27th month of expansion)
(PL) Poland Feb Manufacturing PMI: 53.7 v 54.3e (39th month of expansion)
(ES) Spain Feb Manufacturing PMI: 56.0 v 54.8e (52nd month of expansion)
(CH) Swiss Jan Retail Sales Real Y/Y: -1.4% v +0.7% prior
(CZ) Czech Feb Manufacturing PMI: 58.8 v 59.0e (19th month of expansion)
(CH) Swiss Feb Manufacturing PMI: 65.5 v 64.0e (highest since Apr 2011)
(IT) Italy Feb Manufacturing PMI: 56.8 v 58.0e (18th month of expansion)
(FR) France Feb Final Manufacturing PMI: 55.9 v 56.1e (confirmed its 17th month of expansion)
(DE) Germany Feb Final Manufacturing PMI: 60.6 v 60.3e (confirmed its 39th month of expansion)
(EU) Euro Zone Feb Final Manufacturing PMI: 58.6 v 58.5e (confirmed its 55th month of expansion)
(IT) Italy Jan Preliminary Unemployment Rate: 11.1% v 10.8%e
(GR) Greece Feb Manufacturing PMI: 56.1 v 55.2 prior (9th month of expansion)
(ZA) South Africa Feb Manufacturing PMI: 50.8 v 49.9 prior (1st expansion in 8 months)
(UK) Feb Manufacturing PMI: 55.2 v 55.0e (19th month of expansion but lowest since Jun)
(UK) Jan Net Consumer Credit: £1.4B v £1.4Be; Net Lending: £3.4B v £3.6Be
(UK) Jan Mortgage Approvals: 67.5K v 62.0Ke
(UK) Jan M4 Money Supply M/M: +1.5 v -0.6% prior; Y/Y: 4.3% v 3.8% prior, M4 Ex IOFCs 3M Annualized Y/Y: 5.5 v 4.5% prior
(EU) Euro Zone Jan Unemployment Rate: 8.6% v 8.6%e (lowest reading since Dec 2008)
(DK) Denmark Feb PMI Survey: 69.4 v 68.0 prior
(IT) Italy 2017 GDP Annual Y/Y: 1.5% v 1.5%e, Budget Deficit to GDP Ratio: 1.9% v 2.5% prior
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) sold total €3.89B vs. €3.5-4.5B indicated range in 2021, 2022 and 2028
Sold €1.08B in 0.05% Jan 2021 SPGB; Avg yield: -0.034% v -0.021% prior, Bid-to-cover: 3.14x v 2.57x prior
Sold €1.61B in 0.45% Oct 2022 SPGB; Avg yield: 0.358% v 0.385% prior, Bid-to-cover: 1.88x v 4.62x prior
Sold €1.20B in 5.15% Oct 2028 SPGB bond; Avg Yield 1.502% v 1.691% prior; Bid-to-cover: 1.99x v 1.46x prior
(ES) Spain Debt Agency (Tesoro) sold €480M vs. €250-750M indicated range in 1.0% Nov 2030 Inflation-linked Bonds; Real Yield: 0.306% v 0.479% prior; Bid-to-cover: 2.6x v 1.9x prior
(FR) France Debt Agency (AFT) sold total €7.021B vs. €7.0-8.0B indicated rangein 2026, 2028, 2041 and 2048 Oats
Sold €1.954B in 0.50% May 2026 Oat; Avg Yield: 0.61% v 0.19% prior; Bid-to-cover: 1.78x v 2.82x prior
Sold €2.921B in 0.75% May 2028 Oat; Avg Yield: 0.90% v 0.98% prior; Bid-to-cover: 1.86x v 2.02x prior
Sold €890M in 4.50% Apr 2041 Oat; Avg yield 1.47% v 1.49% prior; Bid-to-cover: 2.26x v 1.95x prior
Sold €1.256B in 2.00% May 2048 Oat; Avg Yield: 1.71% v 1.75% prior, Bid-to-cover: 1.96x v 2.00x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.9% at 376.1, FTSE -0.5% at 7195, DAX -1.4% at 12259, CAC-40 -1.1% at 5264 , IBEX-35 -1.0% at 9745, FTSE MIB -0.8% at 22421 , SMI -0.9% at 8828, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes:
European Indices trade lower across the board following another weaker close in Wallstreet overnight, and mostly weaker markets in the Far East.
On the corporate front WPP and Carrefour are two big names trading sharply lower afyer results and cautious outlook, with WPP posting its worst earnings since the financial crisis. Other notable decliners include Adecco, Carpetright; Earnings related upside movers include PSA Group, AB Inbev, Kion Group.
In the M&A space Laird trades over 70% higher after Advent is to acquired the company in a £1B deal, while Burberry trades higher after naming a new Creative Officer.
Looking ahead notable earner include retailer Kohls, as well as QVC Group and TD Bank.
Movers
Consumer Discretionary [Laird [LRD.UK] +74% (To be acquired for 200p/shr, Results), Merlin Entertainment [MERL.UK] +9.2% (Earnings), AB Inbev [ABI.BE] +5.6% (Earnings), Carpetright [CPR.UK] -30% (Trading update), Adecco [ADEN.CH] -8% (Earnings), WPP [WPP.UK] -13% (Earnings, outlook), Zalando [ZAL.DE] -4.2% (Earnings), Carrefour [CA.FR] -7% (Earnings, cautious outlook), Essilor [EI.FR] +1.3% (Earnings), Burberry [BRBY.UK] +3.8% (Names new Chief creative officer)]
Industrials [ PSA Group [PSA.FR} +4.8% (Earnings), Kion [KGX.DE] +5.2% (Earnings)]
Financial [Schroders [SDR.UK] +2.7% (Earnings) ]
Real Estate [Bovis Homes[BVSUK] +1.9% (Earnings)]
Speakers
EU President Tusk: London has confirmed its red lines on Brexit which was not cause for enthusiasm or satisfaction. EU must treat red lines seriously but sure all elements of draft text to be accepted. To ask London if they have better ideas for Ireland. Reiterates stance that friction-less trade outside customs union is impossible
Greece Fin Min Tsakalotos: Hoped to complete the 4th bailout review by Jun 21st
Russia President Putin state of the union address noted that a stable macroeconomic situation opened the door to growth
Indonesia Central Bank Dir Zulverdi stated that was keeping close watch on forex market; intervened when IDR currency (Rupiah) hit 13,800 level in session. IDR currency was now too weak against fundamentals; No reason for it weaken further; believed that price action to rebound once volatility subsides
Ukraine Fin Min Danylyuk: Seek a €1.0B loan program from with EU
China Foreign Ministry spokesperson Hua: Will take measures to safeguard its interests
Libya current oil production said to be at 1.1M bpd
Currencies
USD was holding onto it its recent gains. Focus in FX was on the upcoming US inflation data with PCE deflator and Core on the docket. Dealers noted that risks may be to the USD downside as market expectations seemed to have been building for an upside surprise
EUR/USD probing the lower end of its 2018 range ass it dipped below the 1.22 level. Euro unable to muster any strength from continued improvement on the economic front in Europe. Euro Zone Jan unemployment falls to lowest level since 2008 while Manufacturing PMI data for the region remained at robust levels
GBP/USD at multi-week lows in the lower end of the 1.37 area. PM May will give her Brexit clarity speech on Friday. Dealers noted that EU Brexit draft from Wed felt that EU officials were fairly certain the draft Brexit deal would be unacceptable to UK PM May as a large part of their strategy is to be so inflexible it puts so much pressure on the British Govt it will eventually decide to keep the UK as close as possible to the EU
USD/JPY little changed at 106.70
Fixed Income
Bund Futures trades up 27 ticks at 159.75 with large duration supply ahead from Spain and France. Upside targets 160.25, while a return lower targets the157.75 level.
Gilt futures trade at 122.52 up 35 ticks as Gilts continue to attempt to push higher. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.85 then 123.35.
Tuesday’s liquidity report showed Monday’s excess liquidity rose to €1.860T from €1.845T prior. Use of the marginal lending facility rose to €90M from €20M prior.
Corporate issuance saw 8 issuers raise $14.3B in the primary market
Looking Ahead
(RO) Romania Feb International Reserves: No est v $37.1B prior
05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3-tranches)
05:30 (UK) DMO to sell £2.75B in 0.75% July 2023 Gilts
06:00 (IE) Ireland Feb Live Register Monthly: No est v -3.0K prior, Live Register Level: No est v 238.4K prior
06:00 (ZA) South Africa Jan Electricity Production Y/Y: No est v 1.4% prior; Electricity Consumption Y/Y: No est v 1.0% prior
06:00 (HU) Hungary Central Bank (NBH) holds Interest Rate Swap (IRS) Tender
06:45 (US) Daily Libor Fixing
07:00 (UR) Ukraine Central Bank Rate Decision: Expected to leave Key Rate unchanged at 16.00%
07:00 (BR) Brazil Q4 GDP Q/Q: 0.4%e v 0.1% prior; Y/Y: 2.6%e v 1.4% prior, GDP 4-quarters accumulated: +1.1%e v -0.2% prior
08:00 (RU) Russia Gold and Forex Reserve w/e Feb 23rd: No est v $454.0B prior
08:00 (BR) Brazil Feb Manufacturing PMI: No est v 51.2 prior
08:00 (CZ) Czech Feb Budget Balance (CZK): No est v 26.5B prior
08:05 (UK) Baltic Dry Bulk Index
08:00 (ZA) South Africa Feb Naamsa Vehicle Sales Y/Y: No est v -8.9% prior
08:30 (US) Initial Jobless Claims: 225Ke v 222K prior; Continuing Claims: 1.92Me v 1.875M prior
08:30 (US) Jan Personal Income: 0.3%e v 0.5% prior; Personal Spending: 0.2%e v 0.4% prior, Real Personal Spending (PCE): -0.2%e v +0.3% prior
08:30 (US) Jan PCE Deflator M/M: 0.4%e v 0.1% prior; Y/Y: 1.7%e v 1.7% prior
08:30 (US) Jan PCE Core M/M: 0.3%e v 0.2% prior; Y/Y: 1.5%e v 1.5% prior
08:30 (CA) Canada Q4 Current Account: -$17.5Be v -$19.4B prior
08:30 (CA) Canada Jan MLI Leading Indicator M/M: No est v 0.5% prior
08:30 (US) Weekly USDA Net Export Sales
09:30 (CA) Canada Feb Manufacturing PMI: No est v 55.9 prior
09:45 (US) Feb Final Markit Manufacturing PMI: 55.9e v 55.9 prelim
10:00 (US) Feb ISM Manufacturing: 58.6e v 59.1 prior; Prices Paid: 70.0e v 72.7 prior
10:00 (US) Jan Construction Spending M/M: 0.3%e v 0.7% prior
10:00 (MX) Mexico Jan Total Remittances: $2.2Be v $2.6B prior
10:00 (MX) Mexico Central Bank Economist Survey
10:00 (US) Fed Chair Powell testifies in Senate
10:30 (US) Weekly EIA Natural Gas Inventories
10:30 (MX) Mexico Feb Manufacturing PMI: No est v 52.6 prior
12:00 (IT) Italy Feb New Car Registrations Y/Y: No est v 3.4% prior
13:00 (MX) Mexico Feb IMEF Manufacturing Index: 52.0e v 51.2 prior; IMEF Non-Manufacturing Index: 52.6e v 53.1 prior
(RU) Russia Feb Sovereign Wealth Funds: Wellbeing Fund: No est v $66.3B prior
(IT) Italy Feb Budget Balance: No est v €0.5B prior
(AR) Argentina Feb Government Tax Revenue (ARS): 214.0Be v 262.0B prior