Notes/Observations
Markets continue to shrugged off the threats of Protectionism
Asia:
South Korea Feb CPI M/M: 0.8% v 0.5%e; Y/Y: 1.4% v 1.2%e
Australia Jan Retail Sales M/M: 0.1% v 0.4%e
RBA left its Cash Rate Target unchanged at 1.50% (as expected). Policy statement unrevised which reiterated view that low level of interest rates was continuing to support the Australian economy and that that inflation to remain low for some time. An appreciating exchange rate could slow economic activity and inflation
BoJ Gov Kuroda Confirmation Hearings had the gov reiterated that BOJ was keeping policy very accommodative as it took time to get rid of deflationary mindset. Less stimulus was unthinkable before reaching CPI target
China National Development and Reform Commission (NDRC) Chairman expressed confidence that China would reach 6.5% GDP target
Europe:
EU’s initial offer on trade will not be very detailed; The lack of detail in the offer would leave the UK having to renegotiate large parts of its trade agreement with the EU during the post-Brexit period. The UK has been seeking to have the entire trade accord squared away before the March 2019 Brexit
Senior EU Brexit negotiator Rynck: not likely that there will be certainty about future ties to the EU by this fall [*Note: previously EU had sought to wrap up trade negotiations by Nov]
Americas:
President Trump: Will not back down on trade; I don’t think we will have a trade war; Reiterates threat to raise tax on car imports
Trump expected to discuss impact of planned tariffs with US companies that use aluminum and steel on Thursday, Mar 8th
Energy:
OPEC Sec Gen Barkindo: Demand has not been this solid and positive since before the financial crisis; Have to wait on a decision about whether production cuts will be extended into 2019; Shale producers are interested in a dialogue with OPEC, but will not be discussion production cuts or prices
Economic Data:
(AT) Austria Feb Wholesale Price Index M/M: -1.0% v +0.9% prior; Y/Y: No est v 3.3% prior
(HU) Hungary Q4 Final GDP Q/Q: 1.3% v 1.3%e; Y/Y: 4.4% v 4.4%e (highest annual pace since 2014)
(CH) Swiss Feb CPI M/M: 0.4% v 0.3%e; Y/Y: 0.6% v 0.6%e
(CH) Swiss Feb CPI EU Harmonized M/M: +0.3% v -0.5% prior; Y/Y: 0.5% v 0.8% prior
(DE) Germany Feb Construction PMI: 52.7 v 59.8 prior
(SE) Sweden Jan Private Sector Production M/M: 0.5% v 1.9%e; Y/Y: 4.5% v 3.9% prior,
(SE) Sweden Jan Industrial Orders M/M: -0.5% v -0.5% prior; Y/Y: 8.3% v 6.3% prior
(IS) Iceland Feb Preliminary Trade Balance (ISK): -5.3B v -5.7B prior
(NO) Norway Feb Region Survey: Output Past 3 Months: 1.32 v 1.22 prior, Output Next 6 Months: 1.42t v 1.19 prior
(EU) Euro Zone Feb Retail PMI: 52.3 v 50.8 prior
(DE) Germany Feb Retail PMI: 53.8 v 53.0 prior
(FR) France Feb Retail PMI: 51.8 v 51.0 prior
(IT) Italy Feb Retail PMI: 50.4 v 47.3 prior
(ZA) South Africa Q4 GDP Annualized Q/Q: 3.1% v 1.8%e; Y/Y: 1.5% v 1.3%e
Fixed Income Issuance:
(ID) Indonesia sold total IDR5.095 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 2026, 2030, 2032 and 2044 bonds
(ES) Spain Debt Agency (Tesoro) sold total €4.92B vs. €4.5-5.5B indicated range in 6-month and 12-month bills
(AT) Austria Debt Agency (AFFA) sold total €1.15B vs. €1.15B indicated in 2022 and 2028 RAGB bonds
(CH) Switzerland sold CHF399.0M in 3-month Bills; Yield: -0.892% v -0.892% prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.7% at 373.5, FTSE +1.0% at 7184, DAX +1.1% at 12227, CAC-40 +0.7% at 5203 , IBEX-35 +0.4% at 9631, FTSE MIB +1.1% at 22056 , SMI +0.1% at 8816, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes: European Indices rebound following strong gains in Wallstreet and Asia overnight and stronger US futures this morning. On the corporate front in Switzerland Oerlikon, Bucher trade higher on earnings while Dorma and Kaba, and Lindt trade lower. In the UK, Aggreko trades sharply lower after results, with Just Eat and Ashtead also lower, while Thales in France trades higher after upbeat results and guidance. In the M&A space Smurfit Kappa trades sharply higher after rejecting a bid from International Paper, while William Hill and Helical trade higher after divesting units. Looking ahead notable earnings include retailer Target, alongside Ciena and Donaldson Company.
Movers
Consumer Discretionary [ Just Eat [JE.UK] -9% (Earnings), Ashtead [ASH.UK] -4.4% (Earnings), Aggreko [AGK.UK] -11.2% (Earnings), McCarthy and Stone [MCS.UK] -2.8% (Earnings), Williams Hill [WMH.UK] +1.6% (Divestment) ]
Industrials [ Smurfit Kappa [SKG.UK] +18.7% (Rejects offer from IP), Thales [HO.FR] +6% (Earnings), Oerlikon [OERL.CH] +7% (Earnings), Dorma + Kaba [DOKA.CH] -7.9% (Earnings)]
Financial [ Helical [HLCL.UK] +3.4% (Divestment) ]
Speakers
EU Commission said to consider retaliatory tariffs of 25% totaling €2.8B on US steel, apparel, textile and footwear and selected industrial goods
Sweden Central Bank (Riksbank) Gov Ingives: Monetary policy needed to proceed cautiously; exchange rate movements were a risk factor. Weaker inflationary pressures was creating uncertainty and reiterated view that SEK currency (Krona) was expected to appreciate slowly
Sweden Central Bank (Riksbank) Dep Gov Ohlsson (hawk): Inflation had remained close to target for some time; unemployment appeared to have bottomed out. Have seen a stable, upward trend in inflation over the past year and could not let temporary variations in inflation affect monetary policy
Italy Stats Agency (ISTAT) Monthly Economic Note stated that thedomestic economy was growing at a strong pace in the short-term
BoJ Gov Kuroda: Did not mean policy exit would begin as soon as FY19/20 (**Reminder: On Mar 2nd Kuroda stated at his confirmation hearing that BOJ would consider an exit around Fiscal 2019 because of the chances of hitting inflation target at that time)
Currencies
FX markets were again generally subdued in price action during the session. There are 3 more major rate decisions this week (Bank of Canada on Wed, ECB on Thursday and BOJ on Friday)
EUR/USD was steady just under the mid-1.23 area as negatives from the hung Parliament in the recent Italian elections seemed to dissipate. Dealers noting that the pair could be poised to retest the upper end of its 1.21-2.5 trading range
USD/JPY was off its Asian session highs as BOJ Gov Kuroda played down his recent commentary regarding a potential exit from its ultra-loose policy stance. Kuroda noted that less stimulus was unthinkable before reaching CPI target
EUR/SEK hit a fresh 8-year high as Riksbank Gov Ingves stressed that monetary policy needed to proceed cautiously with future hikes. The cross test above 10.20 before consolidating
USD/ZAR was lower as South Africa GDP beat expectations with the pair testing 11.75 area. South Africa Parliament delayed a planned debate relating the SARB (Central Bank) mandate and Independence. The SARB has been under the radar to possibly be nationalized.
Fixed Income
Bund Futures trades 15 ticks higher at 156.95 following the move from Treasuries. Upside targets 158.50, while a return lower targets the156.75 level.
Gilt futures trade at 122.02 down 2 ticks as Gilts take a break from the 2 ½ week rally. 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 fell to €1.878T from €1.885T prior. Use of the marginal lending facility fell to €51M from €45M prior.
Corporate issuance saw 2 issuers raise $1.7B in the primary market
Looking Ahead
(RU) Russia Feb Light Vehicle Car Sales Y/Y: No est v 31% 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 combined €1.0B in 2026 and 2030 Inflation-linked bonds (Bundei)
05:30 (UK) DMO to sell 1.5% 2047 Gilts
05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month Bills
06:30 (TR) Turkey Feb Effective Exchange Rate (REER): No est v 85.53 prior
06:30 (EU) ESM to sell €2.0B in 3-month bills; Avg Yield: % v -0.612% prior; Bid-to-cover: x v 4.9x prior (Feb 6th 2018)
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia announces weekly OFZ bond auction
07:00 (BR) Brazil Jan Industrial Production M/M: -2.1%e v 2.8% prior; Y/Y: 5.2%e v 4.3% prior
07:30 (US) Fed’s Dudley (dove, FOMC voter) speaks at U.S. Virgin Islands
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:15 (UK) Baltic Dry Bulk Index
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves
09:00 (MX) Mexico Feb Consumer Confidence: 84.1e v 84.2 prior
09:00 (MX) Mexico Dec Gross Fixed Investment: -0.6%e v -4.5% prior
09:20 (BR) Brazil Feb Vehicle Production: No est v 216.8K prior; Vehicle Sales: No est v 181.3K prior; Vehicle Exports: No est v 47.0K prior
09:30 (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index
10:00 (US) Jan Factory Orders: -1.4%e v +1.7% prior; Factory Orders (Ex-Transportation: No est v 0.7% prior
10:00 (US) Jan Final Durable Goods Orders: -3.6%e v -3.7% prelim; Durables Ex Transportation: No est v -0.3% prelim, Capital Goods Orders (Non-defense/ex-aircraft): No est v 0.2% prelim, Capital Goods Shipment (Non-defense/ex-aircraft): No est v 0.1% prelim
10:00 (CA) Canada Feb Ivey Purchasing Managers Index (Seasonally Adj): No est v 55.2 prior
11:00 (NZ) New Zealand Feb QV House Prices Y/Y: No est v 6.4% prior
11:30 (US) Treasury to sell 4-Week Bills
12:00 (US) DOE Short-Term Crude Outlook
15:00 (MX) Mexico Citibanamex Survey of Economists
16:00 (NZ) New Zealand Government 7-Month Financial Statements
16:30 (US) Weekly API Oil Inventories
19:00 (US) Fed’s Brainard (voter, dove) in NY
19:30 (AU) Australia Q4 GDP Q/Q: 0.5%e v 0.6% prior; Y/Y: 2.5%e v 2.8% prior
