Notes/Observations
China Feb FX Reserves fall for the 1st time in over a year
UK Feb Halifax House Prices beat expectations but registers its lowest level in 5 years
Trade war concerns escalate
Gary Cohn departure gives conservatives and protectionists much more influence over White House policy
Asia:
Australia Q4 GDP misses expectations with quarterly growth at slowest pace since Q1 of 2017 (/Q: 0.4% v 0.5%e; Y/Y: 2.4% v 2.5%e)
RBA Gov Lowe reiterated there was no strong case for a near-term policy adjustment; likely that next RBA rate move would be up
China PBoC conducts 1-year MLF facility at unchanged rate of 3.25%; skips daily OMO for third straight session
BoJ Dep Gov Nominee Wakatabe: Won’t automatically propose more easing, but did not exclude proposing extra easing
BoJ Dep Gov Nominee Amamiya (‘Mr BoJ’) reiterated Japan economy making progress toward CPI goal
Europe:
EU internal report argued that UK PM May was ‘double cherry-picking’ on Brexit and called her model unworkable; Report dismissed May’s Brexit speech as “being more about Conservative Party management than putting forward sensible solutions on trade”
Americas:
White House economic adviser Gary Cohn to resign; Expected to leave Administration in coming weeks
Fed Kaplan (non-voter, dove) reiterated base case was approx 3 interest rate hikes in 2018
Fed Brainard (voter, dove): Had greater confidence Fed to achieve 2% inflation target; tailwinds could speed up pace of rate hikes
Energy:
Weekly API Oil Inventories: Crude: +5.7M v 0.9M prior
Economic Data:
(ZA) South Africa Feb Gross Reserves: $50.1B v $50.5B prior; Net Reserves: $43.3B v $43.7Be
(RO) Romania Q4 Preliminary GDP (2nd reading) Q/Q: 0.6% v 0.6%e; Y/Y: 6.9% v 6.9%e
(MY) Malaysia Central Bank (BNM) left the Overnight Policy Rate unchanged at 3.25%; as expected
(DK) Denmark Jan Industrial Production M/M: +2.6% v -1.4% prior
(NO) Norway Q4 Current Account (NOK): 35.0B v 21.2B prior
(MY) Malaysia End-Feb Foreign Reserves: $103.7B v $103.6B prior
(FR) France Jan Trade Balance: -$5.6B v -$4.5Be
(FR) France Jan Current Account: -€1.6B v -€0.8B prior
(TW) Taiwan Feb CPI Y/Y: 2.2% v 2.0%e; CPI Core Y/Y: 2.4% v 0.8% prior, WPI Y/Y: -0.3% v -0.7% prior
(TW) Taiwan Feb Trade Balance: $2.9B v $3.7Be; Exports Y/Y: -1.2% v +3.7%e; Imports Y/Y: 0.9% v 4.9%e
(CH) Swiss Feb Foreign Currency Reserves (CHF): 732.8B v 732.0Be
(HU) Hungary Jan Industrial Production M/M: 1.5% v 1.3%e; Y/Y: 6.7% v 5.4%e
(CN) China Feb Foreign Reserves: $3.135T v $3.155Te (1st decline in 13 months)
(UK) Feb Halifax House Prices M/M: 0.4% v 0.4%e; 3M/Y: 1.8% v 1.6%e (lowest annual pace since 2013)
(SE) Sweden Feb Budget Balance (SEK): 49.9B v 0.0B prior
(CZ) Czech Feb International Reserves: $150.9B v $152.1B prior
(SG) Singapore Feb Foreign Reserves: $282.8B v $282.4B prior
(ZA) South Africa Feb Sacci Business Confidence: 98.9 v 99.7 prior
(EU) Euro Zone Q4 Final GDP Q/Q: 0.6% v 0.6%e; Y/Y: 2.7% v 2.7%e
Fixed Income Issuance:
(IN) India sold total INR140B vs. INR140B indicated in 3-month, 6-month and 12-month bills
(DK) Denmark sold total DKK2.38B in 2020 and 2027 Bonds
(SE) Sweden sold SEK1.5B vs. SEK1.5B indicated in 0.75% May 2028 Bonds; Avg Yield: 0.8080% v 0.9046% prior; Bid-to-cover: 3.16x v 4.33x prior
(NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 1.75% Feb 2027 Bonds; Avg Yield: 1.93% v 1.81% prior; Bid-to-cover: 3.49x v 2.48x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.3% at 370.1, FTSE flat at 7146, DAX -0.3% at 12077, CAC-40 -0.5% at 5146 , IBEX-35 -0.2% at 9569, FTSE MIB -0.2% at 22156 , SMI -0.3% at 8739, S&P 500 Futures -1.0%]
Market Focal Points/Key Themes:
European Indices trade mostly lower tracking sharp declines in US futures as President Trump’s White House Economic adviser Gary Cohn announced his resignation, which has hit sentiment.
On the corporate front Rolls Royce reported a beat on the top and bottom line, with shares trading sharply higher, while Legal and General, Esure also trade higher after results. To the downside
Deutsche Post trades lower after earnings, with Paddy Power, Agfa Gevaert and Page Group also trading lower.
Looking ahead looking notable earnings include Dollar Tree and Brown Forman.
Movers
Consumer Discretionary [Paddy Power Betfair [PPB.UK] -3.2% (Earnings), Lookers [LOOK.UK] +1.3% (Earnings), Pagegroup [PAGE.UK] -5.6% (Earnings), Restaurant Group [RTN.UK] +11.6% (Earnings) ]
Industrials [ Rolls Royce [RR.UK] +13.6% (Earnings), Smurfit Kappa [SKG.UK] +3.4% (Follow through following rejected bid from IP), Deutsche Post [DPW.DE] -1.2% (Earnings)]
Financial [ Legal and General [LGEN.UK] +1.1% (Earnings), Esure [ESUR.UK] +1.5% (Earnings) ]
Technology [Agfa Gevaert [AGFB.BE] -1.1% (Earnings)]
Speakers
EU’s Dombrovskis: EU ready to discuss banking cooperation with UK
China FX Regulator SAFE stated that falling asset price led to decline in FX reserves but reiterated its view that FX reserves expected to remain stable overall
Currencies
USD was slightly lower against most major pairs in quiet trading on Wed. The headwinds did loom for the greenback as analysts commented on the departure of While House Economic advisor Cohn. Overall view that Cohn was the most important and powerful pragmatic, pro-business member of the President’s inner circle with the immediate impact to be on trade policy
EUR/USD was higher by 0.2% at 1.2425 and seemed poised to retest the upper-end of its 2018 range with 1.25 in sight
GBP/USD bucked the trend and was softer in session. The UK Feb Halifax House Prices beat expectations but still registered its lowest level in 5 years. Pair off by 0.2% at 1.3865
USD/JPY was hovering around the 105.60 level and within striking distance of re-testing Nov 2016 lows
Fixed Income
Bund Futures trades 18 ticks higher at 156.68 popping higher after President Trump’s top economic advisor Cohn’s resigned. Upside targets 157.50, while a return lower targets the155.75 level.
Gilt futures trade at 122.13 up 26 ticks as Gilts resume their push higher. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.85 then 123.35.
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.879T from €1.878T prior. Use of the marginal lending facility fell to €40M from €51M prior.
Corporate issuance saw 2 issuers raise $1.7B in the primary market
Looking Ahead
(EU) EU President Tusk presents Brexit strategy
(IE) Ireland Debt Agency (NTMA) to sell 2022 and 2028 IGB bonds
(IL) Israel Feb Foreign Currency Balance: No est v $117.6B prior
(UR) Ukraine Feb CPI M/M: 0.8%e v 1.5% prior; Y/Y: 14.0%e v 14.1% prior
05:30 (DE) Germany to sell €4.0B in 0% Apr 2023 BOBL; Avg Yield: % v 0.08% pior; Bid-to-cover: x v 1.3x prior (Jan 31st 2018)
06:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Benchmark Repurchase Rate unchanged at 8.00%
06:00 (IE) Ireland Jan Retail Sales Volume M/M: No est v -0.1% prior; Y/Y: No est v 7.2% prior
06:00 (IE) Ireland Jan Industrial Production M/M: No est v 3.0% prior; Y/Y: No est v 3.0% prior
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:00 (BR) Brazil Feb FGV Inflation IGP-DI M/M: 0.1%e v 0.6% prior; Y/Y: -0.2%e v -0.3% prior
06:00 (RU) Russia to sell RUB 40B in OFZ Bonds
06:30 (CL) Chile Central Bank Traders Survey
06:30 (CL) Chile Feb Trade Balance: $1.1Be v $1.2B prior; Exports: $6.5Be v $6.7B prior; Imports: $5.4Be v $5.5B prior; Copper Exports: No est v 2.6B prior
06:30 (CL) Chile Feb International Reserves: No est v $38.7B prior
06:45 (US) Daily Libor Fixing
07:00 (US) MBA Mortgage Applications w/e Mar 2nd: No est v 2.7% prior
07:00 (CL) Chile Jan Nominal Wage M/M: No est v 0.5% prior; Y/Y: 4.6%e v 4.6% prior
08:00 (PL) Poland Feb Official Reserves: No est v $117.5B prior
08:00 (RU) Russia Feb Official Reserve Assets: $457.7Be v $447.7B prior
08:00 (RU) Russia Gold and Forex Reserves w/e Mar 2nd: No est v $450.9B prior
08:00 (US) Fed’s Dudley (dove, FOMC voter) speaks in Puerto Rico
08:00(US) Fed’s Bostic (2018 voter, dove) speaks on the Economic Outlook
08:05 (UK) Baltic Dry Bulk Index
08:15 (US) Feb ADP Employment Change: +200Ke v +234K prior
08:30 (US) Q4 Final Nonfarm Productivity: -0.1%e v -0.1% prelim; Unit Labor Costs: 2.1%e v 2.0% prelim
08:30 (US) Jan Trade Balance: -$55.0Be v -$53.1B prior
08:30 (CA) Canada Q4 Labor Productivity Q/Q: +0.1%e v -0.6% prior
08:30 (CA) Canada Jan Int’l Merchandise Trade (CAD): -2.5Be v -3.2B prior
09:30 (TR) Turkey Feb Cash Budget Balance (TRY): No est v -1.6B prior
10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rate unchanged at 1.25%
10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
10:30 (US) Weekly DOE Crude Oil Inventories
14:00 (US) Federal Reserve Beige Book
15:00 (US) Jan Consumer Credit: $17.7Be v $18.4B prior
18:50 (JP) Japan Q4 Final GDP Q/Q: 0.2%e v 0.1% prelim; Annualized GDP Q/Q: 1.0%e v 0.5% prelim; Nominal GDP Q/Q: 0.1%e v 0.0% prelim
(JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to leave Interest Rate on Excess Reserves (IOER) Unchanged at -0.10%
