Notes/Observations
Norway Feb CPI moves back above target keeping rate hike hopes intact for 2018 while Czech CPI back with the target range for 1st time in 15 months
German Jan Industrial Production misses expectations; hinting that momentum might have peaked for the time being
UK data releases mixed in session (Industrial Production misses while Visible Trade Balance better than consensus)
President Trump has signed the new steel (25%) and aluminum (10%) tariffs bill taking effect in 15 days. The initial plan was for a global levy, but Trump made it clear that exceptions would be made; risk appetite picks up as a result
President Trump accepted an offer to meet North Korea leader Kim Jong Un; North Korea offered to suspend nuclear missile testing
US Feb jobs reports and hourly earnings in focus
Asia:
China Feb CPI data bests expectations and nears target with YoY reading of 2.9% being the highest since Dec 2013
China PBoC Gov Zhou: Recent FX reserve change mainly due to dollar rate change. China should watch inflation to measure monetary policy. Economy to rely less on quantitative stimulus; real interest rates had been steady, economic conditions to determine whether China would raise rates
BOJ left its Interest Rates on Excess Reserves (IOER) unchanged at -0.10% (as expected). Maintained 10-year JGB Yield Control (YCC) at 0.00% and its annual pace of JGB holdings unchanged at ¥80T. Voted 8 to 1 with member Kataoka dissenting for 5th straight meeting; Kuroda continued to convey his dovish stance during press conference
North Korea Leader Kim Jong Un said to invite US President Trump to meeting
Europe:
Internal ECB staff calculations on monetary policy assumed final €30B of QE purchases in Q4 (**Reminder: At the Oct 2017 ECB policy decision ECB QE bond buying program was downsize to €30B per month until Sept 2018 (9-month extension)
UK govt officials reportedly did not see reaching a Brexit deal until next year with Jan 2019 is the real deadline to reach an accord in time for exit day (**Reminder: EU chief negotiator Barnier had previously stated that he wanted the deal done by October 2018 so there would be time for a withdrawal treaty to go to European and UK parliaments for approval)
UK Foreign Min Johnson: UK govt was prepared for a “no deal” Brexit scenario. Believed that a no deal Brexit should not hold any terrors for UK because we’d ‘do very well’ under WTO rules
Americas:
President Trump signed steel and aluminum tariff proclamation (as expected). Open to modifying or removing tariffs for individual countries as long as find way to ensure products no longer threaten security; US Trade Rep Lighthizer to be in charge of accepting offers from countries seeking exemptions
Steel and aluminum tariffs reportedly to take effect in 15 days, with Mexico and Canada exempted indefinitely
Mexico Fin Min Gonzalez Anaya stated that it would not allow US tariff proposals to pressure NAFTA talks. Mexico had no plans to abandon NAFTA talks and to spend as much time as necessary for successful NAFTA talks
Fed George (hawk) reiterated important to continue gradual normalization of rates
Bank of Canada (BOC) Dep Gov Lane reiterated that higher rates were likely needed over time; key BOC rate was appropriately below neutral. BOC was not on a pre-set path to higher interest rates; every decision was a live decision
Economic Data:
(DE) Germany Jan Current Account: €22.0B v €17.2Be; Trade Balance: €17.4B v €18.1Be; Exports M/M: -0.5% v +0.3%e Imports M/M: -0.5% v -0.1%e
(DE) Germany Jan Industrial Production M/M: -0.1% v +0.6%e; Y/Y: 5.5% v 6.0%e
(DE) Germany Q4 Labor Costs Q/Q: 0.4 v 0.5% prior; Y/Y: 1.5% v 2.2% prior
(NO) Norway Feb CPI M/M: 0.9% v 0.7%e; Y/Y: 2.2% v 1.8%e (moves back above target)
(NO) Norway Feb CPI Underlying M/M: 0.8% v 0.7%e; Y/Y: 1.4% v 1.3%e
(NO) Norway Feb PPI including Oil M/M: -2.6% v +3.1% prior; Y/Y: 4.7% v 10.3% prior
(FI) Finland Jan Industrial Production M/M: 0.1% v 1.8% prior; Y/Y: 4.8% v 4.2% prior
(FI) Finland Jan Preliminary Trade Balance: -€0.2B v -€0.4B prior
(CN) Weekly Shanghai copper inventories (SHFE): 268.1K v 260.3K tons prior
(FR) France Jan Industrial Production M/M: -2.0% v -0.3%e; Y/Y: 1.2% v 3.8%e
(FR) France Jan Manufacturing Production M/M: -1.1% v +0.3%e; Y/Y: 3.3% v 4.8%e
(FR) France Jan YTD Budget Balance: -€10.8B v -€67.8B prior
(ES) Spain Jan Industrial Output NSA Y/Y: 4.0% v 3.1% prior; Industrial Output SA Y/Y: 1.2% v 5.1%e, Industrial Production M/M: -2.6% v 0.0%e
(CZ) Czech Jan National Trade Balance (CZK): 11.9B v 20.3Be
(CZ) Czech Feb CPI M/M: 0.2% v 0.2%e; Y/Y: 1.8% v 2.0%e (back with target range for 1st time in 15 months)
(CZ) Czech Q4 Average Real Monthly Wage Y/Y: 5.3% v 5.2%e
(HU) Hungary Jan Preliminary Trade Balance: €0.7B v €0.5Be
(SE) Sweden Feb Average House Prices (SEK): 3.114M v 3.188M prior
(SE) Sweden Jan Household Consumption M/M: -0.1% v -0.4% prior; Y/Y: 0.8% v 2.1% prior
(IS) Iceland Q4 GDP Q/Q: 0.6% v 3.1% prior; Y/Y: 1.5% v 3.4% prior
(IT) Italy Jan PPI M/M: 0.8% v 0.0% prior; Y/Y: 1.8% v 2.2% prior
(UK) Jan Visible Trade Balance: -£12.2B v -£11.9Be, Overall Trade Balance: -£3.1B v -£3.3Be, Trade Balance Non EU: -£3.9B v -£4.5Be
(UK) Jan Industrial Production M/M: 1.3% v 1.5%e; Y/Y: 1.6% v 1.9%e
(UK) Jan Manufacturing Production M/M: 0.1% v 0.2%e; Y/Y: 2.7% v 2.8%e
(UK) Jan Construction Output M/M: -3.4% v -0.5%e; Y/Y: -3.9% v -1.0%e
(IT) Bank of Italy (BOI) Jan Monthly Report `Money and Banks’: Bad loans at €166.5B v €167.4B m/m
(GR) Greece Feb CPI Y/Y: +0.1% v -0.2% prior; CPI EU Harmonized Y/Y: 0.4% v 0.2% prior
Fixed Income Issuance:
(ZA) South Africa sold total ZAR900M vs. ZAR900M indicated in I/L 2033, 2038 and 2050 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at 376.4, FTSE flat at 7201, DAX -0.5% at 12293, CAC-40 -0.2% at 5244, IBEX-35 flat at 9655, FTSE MIB -0.3% at 22662 , SMI -0.1% at 8892, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes: European Indices trade little changed in a quiet session this morning ahead of today Feb Non Farm Payroll report, in what has been a quiet morning on the corporate front. Notable earners related movers include French name CGG, trading higher on earnings; Lagadere trades ~7% lower on a subdued outlook and poor FCF. In the UK Inmarsat trades sharply lower after a decline in profits and cut dividend, with SIG also lower on earnings. Looking ahead notable earners include Big lots and American Woodwork.
Movers
Consumer Discretionary [ Lagadere [MMB.FR] -7.0% (Earnings), GVC [GVC.UK]+2.9% (Earnings)]
Consumer Staples [-Schouw {SCHO.DK] +1.2% (Earnings)]
Industrials [ Schweiter Tech [SWTQ.CH] +1.7% (Earnings), SFS [SFSN.CH] +2.6% (Earnings)]
Materials [SIG Plc [SHI.UK]+1.0% (Earnings)]
Financial [ UBS [UBSG.CH] -0.9% (Annual report) ]
Telecom [Inmarsat [ISAT.UK] -5.1% (Earnings)]
Energy [PCGG [CGG.FR] +9.1% (Earnings)]
Speakers
ECB’s Vasiliauskas (Lithuania): Now a good time to make commun ication steps; dropping easing bias was a very logical step
German SPD party confirmed speculation that Scholz to become Finance Minister in the new government
Italy 5-star leader Di Maio: Prepared to talk to all parties about issues and program points but not about ministerial positions at this time
EU Trade Min Malmstrom: To seek exemption from US tariffs; reiterates EU threat to retaliate against US tariffs and file WTO case. Trump tariffs were the wrong policy
BOJ Gov Kuroda post rate decision press conference reiterated view that expected inflation to move towards the 2% target; to make adjustments as needed. Reiterated to make any adjustments to keep momentum as takes time to overcome the deflation mindset. Reiterated high chance of achieving the 2% inflation target in FY19/20 period but did not suggest any immediate exit (**Note clarified his comment from last Friday in Parliament). Would persistently continue with monetary easing
Indonesia Central Bank reiterated view that monetary policy stance to remain neutral; to consider development in economy and global in next rate meeting
Currencies
USD has held on to recent gains as markets perceived Trump had created loopholes in his tariff plan.
EUR/USD was little changed as dealers reassessed the recent tweak in the ECB language that it would drop explicit pledge to increase size of QE if needed. The move was generally viewed as the minimum necessary towards the overall path towards policy normalization. Some analysts remained positive of the Euro’s outlook with 1.28 seen in the cards before the end of the year. The 1.2550 remains the key resistance for now. German Jan Industrial Production missed expectations; hinting that momentum might have peaked for the time being (Factory orders recent missed)
USD/JPY was higher as safe-haven flows ebbed. JPY currency (Yen) was weaker on hopes for easing U.S.
North Korea tensions. President Trump accepted an offer to meet North Korea leader Kim Jong Un; North Korea offered to suspend nuclear missile testing. Analysts believe the USD/JPY pair could retest the 108 level quite soon.
GBP/USD was little changed as the economic releases in the session were mixed (IP miss while trade data was better than expected). Pair steady just above the 1.38 level just ahead of the NY morning
Fixed Income
Bund Futures trade 20 ticks lower at 157.02 with the focus on US nonfarm payroll report. Upside targets 157.50, while a return lower targets the155.75 level.
Gilt futures trade at 122.26 down 25 ticks with little reaction to UK Trade and production data. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.85 then 123.35.
Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.886T from €1.884T prior. Use of the marginal lending facility stayed steady €0M.
Corporate issuance saw 10 issuers raise $9.3B in the primary market
Looking Ahead
(MX) Mexico Feb Nominal Wages: No est v 4.7% prior
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 (BR) Brazil Mar IGP-M Inflation (1st Preview): 0.2%e v 0.0% prior
06:00 (UK) DMO to sell combined £5.0B in 1-month, 3-month and 6-month Bills (£2.0B, £1.0B and £2.0B respectively)
06:30 (IS) Iceland to sell 2028 RIKB Bonds
06:30 (IN) India Weekly Forex Reserves
06:45 (US) Daily Libor Fixing
07:00 (UK) Feb NIESR GDP Estimate: 0.4%e v 0.5% prior
07:00 (BR) Brazil Feb IBGE Inflation IPCA M/M: 0.3%e v 0.3% prior; Y/Y: 2.8%e v 2.9% prior
07:00 (CZ) Czech Central Bank comments on inflation data
08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond auction (held on Thurs)
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Feb Change in Nonfarm Payrolls: +205ke v +200K prior, Change in Private Payrolls: +205Ke v +196K prior, Change in Manufacturing Payrolls: +15Ke v +15K prior
08:30 (US) Feb Unemployment Rate: 4.0%e v 4.1% prior, Underemployment Rate: No est v 8.2% prior
08:30 (US) Feb Average Hourly Earnings M/M: 0.2%e v 0.3% prior; Y/Y: 2.8%e v 2.9% prior; Average Weekly Hours: 34.4e v 34.3 prior
08:30 (CA) Canada Feb Net Change in Employment: +21.0Ke v -88.0K prior; Unemployment Rate: 5.9%e v 5.9% prior
08:30 (CA) Canada Q4 Capacity Utilization Rate: 85.2%e v 85.0% prior
10:00 (US) Jan Final Wholesale Inventories M/M: 0.7%e v 0.7% prelim; Wholesale Trade Sales M/M: No est v 1.2% prior
11:00 (EU) Potential Sovereign ratings after European close: Hungary Sovereign Debt to be rated by Fitch
12:40 (US) Fed’s Rosengren (moderate, non-voter) on outlook
12:45 (US) Fed’s Evans (non-voter, dove) on monetary policy
13:00 (US) Weekly Baker Hughes Rig Count data
