German GDP registers a slight miss but start of 2017 touted as a solid in a key election year
EU Mid-Market Update: Slight miss in UK CPI sends GBP currency lower; German GDP registers a slight miss but start of 2017 touted as a solid in a key election year
Notes/Observations
Focus on Fed’s Yellen with her appearance before the Senate Banking Committee; Should she divert from the moderate projection of the interest rate path as currently priced into the market, the USD may rally
Germany Q4 GDP registers a slight miss but itd domestic economy enters 2017 (a key election year) on solid footing and provides cushion in light of uncertain future trade relations with the UK and the US
UK Jan CPI data comes in below expectations but still registers its highest annual pace since Jun 2014 (Y/Y: 1.8% v 1.9%e)
China Jan New Yuan Loans miss expectations but still its 2nd highest reading on record (CNY): 2.03T v 2.44Te
Overnight:
Asia:
China inflation data continues to improve. Jan CPI hits 32-month high (2.5% v 2.4%e); PPI registered its 5th straight increase and highest since Aug 2011 (6.9% v 6.5%e); with rising commodity prices and a strong January base effect providing the main catalysts
Europe:
Greece Fin Min Tsakalotos stated that it aimed to get political agreement on all issues around the Greek bailout review talks by the Feb 20th Eurogroup meeting – IMF’s Lagarde: IMF was doing best it could on Greece bailout, but could not cut a special deal for any country
German CSU Parliamentary Floor Leader Friedrich said to have told Greece Conservative Leader that Greece would not receive any further financial support if it fails to fully implement economic reform obligations
Americas:
US National Security Advisor Michael Flynn resigns after he is alleged to have discussed US sanctions with Russian Ambassador before Trump was elected; Lt Gen Joseph Kellogg as acting National Security Advisor
Fed’s Kaplan (Dallas, moderate, voter): Fed could raise rates in a gradual and patient manner; should act soon to raise rates, or risk having to abandon its plan to do so slowly
Economic data
(IN) India Jan Wholesale Prices (beat) Y/Y: 5.3% v 4.3%e (31-month high)
(DE) Germany Q4 Preliminary GDP (miss) Q/Q: 0.4% v 0.5%e; Y/Y: 1.7% v 1.8%e; GDP NSA Y/Y: 1.2% v 1.4%e
(DE) Germany Jan Final CPI M/M: -0.6% v -0.6%e; Y/Y: 1.9% v 1.9%e; highest annual pace in 3 1/2 years
(HU) Hungary Q4 Preliminary GDP (miss) Q/Q: 0.4% v 0.7%e; Y/Y: 1.6% v 2.0%e
(HU) Hungary Jan CPI M/M: 0.4% v 0.3%e; Y /Y: 2.3% v 2.2%e
(CZ) Czech Q4 Advance GDP (miss) Q/Q: 0.2% v 0.7%e; Y/Y: 1.7% v 2.3%e
(CH) Swiss Jan CPI M/M (beat): 0.0% v -0.1%e; Y/Y: 0.3% v 0.3%e
(CH) Swiss Jan CPI EU Harmonized M/M: -0.2% v -0.1% prior; Y/Y: +0.3%e v -0.2% prior
(CH) Swiss Jan Producer & Import Prices (beat) M/M: 0.4% v 0.2%e; Y/Y: 0.8% v 0.5%e
(NL) Netherlands Q4 Preliminary GDP (miss) Q/Q: 0.5% v 0.6%e; Y/Y: 2.3% v 2.8%e
(ZA) South Africa Q4 Unemployment Rate: 26.5% v 27.0%e
(IT) Italy Q4 Preliminary GDP Q/Q: 0.2% v 0.3%e; Y/Y: 1.1% v 1.0%e
(PL) Poland Q4 Preliminary GDP Q/Q: 1.7% v 1.2%e; Y/Y: 2.7% v 2.5%e
(CN) China Jan M2 Money Supply Y/Y: 11.3% v 11.3%e, M1 Money Supply Y/Y: % v 20.2%e, M0 Money Supply Y/Y: % v 8.9%e
(CN) China Jan New Yuan Loans (CNY): 2.03T v 2.44Te (2nd highest on record)
(CN) China Jan Aggregate Financing (CNY): 3.74T v 3.00Te
(UK) Jan CPI M/M: -0.5% v -0.5%e; Y/Y: 1.8% v 1.9%e; CPI Core Y/Y: 1.6% v 1.7%e (highest annual pace since Jun 2014)
(UK) Jan RPI M/M: -0.6% v -0.4%e; Y/Y: 2.6% v 2.8%e; RPIX Y/Y: 2.9% v 3.1%e
(UK) Jan PPI Input M/M: 1.7% v 1.0%e; Y/Y: 20.5% v 18.5%e
(UK) Jan PPI Output M/M: 0.6% v 0.3%e; Y/Y: 3.5% v 3.2%e
(UK) Jan PPI Output Core M/M: 0.5% v 0.3%e; Y/Y: 2.4% v 2.2%e
(PT) Portugal Q4 Preliminary GDP (beat) Q/Q: 0.6% v 0.3%e; Y/Y: 1.9% v 1.6%e
(GR) Greece Q4 Advance GDP (miss) Q/Q: -0.4% v +0.4%e; Y/Y: 0.3% v 2.2% prior
(DE) Germany Feb ZEW Current Situation Survey: 76.4 v 77.0e; Expectations Survey: 10.4 v 15.0e
(EU) Euro Zone Feb ZEW Survey Expectations: 17.1 v 23.2 prior
(EU) Euro Zone Q4 Preliminary GDP (miss) Q/Q: 0.4% v 0.5%e; Y/Y: 1.7% v 1.8%e (2nd reading)
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) sold total €5.01B v €4.5-5.5B indicated range in 6-month and 12-month Bills
(ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2026, 2035 and 2040 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.1% at 3306, FTSE +0.1% at 7286, DAX -0.1% at 11768, CAC-40 flat at 4889, IBEX-35 +0.1% at 9494, FTSE MIB +0.3% at 19111, SMI -0.3% at 8442, S&P 500 Futures -0.1%]
Equities
Consumer discretionary [Aryzta [ARYN.CJ] +11% (CEO and CFO to step down)]
Industrials: [Michelin ML.FR +2% (Earnings), Rolls Royce RR.UK -4.1% (earnings)]
Financials: [Randstad RAND.NL +3.7% (Earnings), Credit Suisse CSGN.CH +3% (Earnings), HeidelburgCement HEI.DE -1.7% (Earnings)]
Energy: [EDF EDF.FR -0.5% (Earnings)]
Speakers
Germany Econ Min Gabriel: Economy off to a solid start for 2017 with Business climate being good while employment was growing
ZEW Economists noted that political uncertainty on Brexit and US economic policy and European elections were depressing expectations
Turkey PM Yildirim reiterated view that FX volatility is temporary with its impact seen limited
White House said to be exploring a new tactic to discourage China from undervaluing its currency to boost exports. Under the plan, the commerce secretary would designate the practice of currency manipulation as an unfair subsidy when employed by any country, instead of singling out China
UN Nuclear Agency (IAEA): Iran missile test was unrelated to nuclear agreement commitments
Currencies
The USD was keeping within recent ranges and a touch softer heading into the NY morning. Traders were positioning for potential dovish language from US Fed chair Janet Yellen. Dealers noted that the Fed chief would have to present the Fed’s view which at times has differed from her more dovish attitude. The greenback was also weighing the resignation of National Security Advisor Michael Flynn.
EUR/USD was back above the 1.06 level after a quick flush below the handle to gun for stops loitering below the 50-day moving average
A slight miss in UK CPI sent the GBP currency softer. GBP/USD moved from 1.2510 to test below 1.2450 as the inflation remained below the BOE 2.0% target for the 35th straight month. The 10-year Gilt yield dipped lower as well to test 1.29%
Fixed Income:
Bund futures trade at 163.82 up 6 ticks retracing from highs after futures failed to hold above 164. A move back higher targets 164.17 followed by 164.46, 164.94. Support remains at 163.44 followed by 162.92.
Gilt futures trade at 125.35 down 2 ticks retracing off lows on slightly weaker then expected UK inflation data however did mark the highest annual reading since June 2014. Resistance moves to 125.90 then 126.28 followed by 126.70. A move back below 125.20 low targets 124.91 followed by 124.46. Short Sterling futures trade flat with Jun17Jun18 trading 19bp choice.
Tuesday’s liquidity report showed Monday’s excess liquidity falls to €1.3215T down €15B from €1.330T prior. Use of the marginal lending facility falls to €353M from €590M prior.
Corporate issuance saw $6.7B come to market via 5 issuers headlined by American Honda finance $1.75B 3 part offering and Goldman Sachs $3B 3 part offering. This puts Monthly issuace at $31.6B.
Looking Ahead
(PT) Bank of Portugal reports Dec ECB financing to Portuguese Banks: €B v €22.4B prior
(AR) Argentina Central Bank: 7-Day Repo Reference Rate
05:30 (UK) Weekly John Lewis LFL sales data
05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
06:00 (US) Jan NFIB Small Business Optimism: 104.9e v 105.8 prior
06:00 (PT) Portugal Q4 Labour Costs Y/Y: No est v 3.6% prior
06:00 (BR) Brazil Dec Retail Sales M/M: -2.0%e v +2.0% prior; Y/Y: -4.6%e v -3.5% prior
06:00 (BR) Brazil Dec Broad Retail Sales M/M: -0.4%e v +0.6% prior; Y/Y: -6.6%e v -4.5% prior
06:00 (TR) Turkey to sell 10.6% 2026 Bonds
06:45 (US) Daily Libor Fixing
07:00 (IS) Iceland Jan Unemployment Rate: No est v 2.3% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (RO) Romania Central Bank (NBR) Feb Minutes
08:00 (PL) Poland Jan M3 Money Supply M/M: -0.6%e v 2.1% prior; Y/Y: 9.2%e v 9.6% prior
08:00 (RU) Russia announces weekly OFZ bond auction
08:15 (UK) Baltic Dry Index
08:30 (US) Jan PPI Final Demand M/M: 0.3%e v 0.3% prior; Y/Y: 1.5%e v 1.6% prior
08:30 (US) Jan PPI Ex Food and Energy M/M: 0.2%e v 0.2% prior; Y/Y: 1.1%e v 1.6% prior
08:30 (US) Jan PPI Ex Food, Energy, Trade M/M: 0.1%e v 0.1% prior; Y/Y: No est v 1.7% prior
08:30 (CA) Canada Jan Teranet/National Bank HPI M/M: No est v 0.3% prior; Y/Y: No est v 12.3% prior
08:50 (US) Fed’s Lacker to speak at University of Delaware
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves: € v €280.3B prior
09:50 (UK) Bank of England (BOE) Bond Buying Operation (over 15 years)
10:00 (US) Fed Chair Yellen semi-annual testimony before Senate Banking Panel
11:00 (IS) Iceland Jan International Reserves (ISK): No est v 815B prior
11:00 (UR) Ukraine to sell Bonds – 11:30 (US) Treasury to sell 4-Week Bills
13:15 (US) Fed’s Lockhart to speak on Economy in Huntsville, Alabama
16:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 3.25%
16:30 (US) Weekly API Oil Inventories
