Notes/Observations
- PM May ‘plan B’ for Brexit looks a lot like plan A; Key importance would be what amendments get tabled ahead of Tuesday’s vote and whether or not they get a majority when voted on
- German Jan ZEW survey mixed; data suggested that markets experts had already considerably lowered growth expectations
- UK Nov ILO Unemployment Rate beats expectations and matches the lowest level since 1975 (4.0% v 4.1%e)
- IMF updates its World economic Outlook (WEO) and again cuts its 2019 Global GDP growth forecast from 3.7% to 3.5% (three-year low) citing no-deal Brexit and trade concerns – US Govt partial shutdown enters its 32nd day with no end in sight
Asia:
- South Korea Q4 Preliminary GDP Q/Q: 1.0% v 0.6%e; Y/Y: 3.1% v 2.7%e; Overall 2018 GDP Y/Y: 2.7% (slowest growth in 6 years)
- Canada Ambassador to US MacNaughton confirmed US to ‘formally’ seek extradition of CFO Meng
- Japan Fin Min Aso: Important that exchange rates were stable in Golden week holiday, do not expect any crisis situation
Europe:
- (UK) PM May to present ‘plan B’ on Brexit which highlighted that the right way to rule out no-deal was to approve deal. Extending Article 50 wouldn’t rule out no-deal Brexit; EU was very unlikely to extend Article 50 without a plan for a deal. A 2nd referendum would set difficult precedent and undermine faith in democracy. Confirmed next Tuesday’s (January 29th) vote and added that ot would NOT a 2nd meaningful vote but the completion of this particular procedure. To give Parliament more say in future EU trade deal.
- “Dozens” of UK ministers said to be close to resigning over Brexit. Up to 40 members of the government to resign next week if Conservative MPs were banned from voting for a plan to stop a no-deal Brexit. work and pensions secretary Amber Rudd said to have demanded that all Tory MPs are allowed a free vote on plans that would clear the path for extending Article 50
- Italy Fin Min Tria stated that economic policies recommended by the IMF posed a risk to the global economy; defended deficit-spending. EU Commission said to cut Italy’s growth forecast for 2019 to 0.6% or slightly below (Note: 2019 2019 GDP seen at 1.0%)
Americas:
- President Trump: China’s latest economic numbers show need for trade. China should stop ‘playing around’ and do ‘real deal’ (Note: China Overall 2018 GDP growth of 6.6% was the slowest annual pace since 1990)
- United States nformed the Canadian government that it planned to proceed with a formal request to extradite Huawei chief financial officer Meng Wanzhou on allegations of banking fraud related to violations of US sanctions against Iran
Macro
- (UK) United Kingdom: Parliament will vote on a modified version of Prime Minister May’s Withdrawal Agreement next Tuesday, January 29. May has pledged to try and win concessions from the EU on the Irish backstop but provided little detail while Irish and EU officials yesterday reaffirmed that there can be no renegotiation.
- (US) Global: Yesterday the IMF trimmed global growth amid trade war concerns, following downgrades in October, noting “the expansion is weakening and at a rate that is somewhat faster than expected.” And risks for a more “significant downward corrections are rising.” The Fund now projects 2019 GDP growth at 3.5% and 2020 at 3.6%, respectively, versus forecasts of 3.7% previously. The potential for a hard Brexit was the biggest threat, though trade frictions, tighter financial conditions, and slowing in China and the Eurozone. And in the U.S., a protracted government shutdown poses risks.
- (EU) ECB: The latest ECB bank lending survey reported pretty much unchanged credit standards for loans to firms as well as housing loans. Loan demand also held up, although banks are expecting a slowdown ahead. Notably though the ECB highlighted that banks’ non-performing loan ratios had a tightening impact on their credit standards over the past six months. Banks clearly haven’t used the period of relative calm to improve their NPL situations and the legacy from the last financial crisis continues to be a headache for many institutions at a time when growth is already slowing again.
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.12% at 355.92, FTSE -0.46% at 6,938.73, DAX -0.22% at 11,111.49, CAC-40 -0.30% at 4,853.01, IBEX-35 -0.14% at 9,041.00, FTSE MIB -0.51% at 19,538.50, SMI -0.28% at 8,994.20, S&P 500 Futures -0.60%]
- Market Focal Points/Key Themes: European Indices trade mostly lower this morning following a negative session in Asia and negative US futures. Macro developments remain in focus as the IMF cut its global growth forecasts, while macro commentary was in focus on the first day of the World Economic Forum in Davos. On the corporate front UBS set the negative tone after reporting earnings which missed forecasts, with IG Group, Zoo Digital, Connect Group, Close Brothers and Remy Cointreau among other names dropping after earnings and trading updates. BHP Group also falls after a fall in Iron ore production. Meanwhile Easyjet rises over 5% after in line earnings relieving some investor fears following Ryanair’s profit warning on Friday. Elsewhere Hugo Boss rises after beating consensus, Dixons Carphone, Pets At Home, Midwich Group were among the other risers on earnings. Looking ahead notable earners include DOw components Johnson & Johnson and Travelers, as well as earnings from Haliburton, Stanley Black and Decker, Prologis and Steel Dynamics among others.
Equities
- Consumer discretionary: EasyJet [EZJ.UK] +2% (earnings), Dixons Carphone [DC.UK] +3.5% (trading update; Elliott reportedly could take a stake in company), Tomtom [TOM2.NL] -3% (divestment), Remy Cointreau [RCO.FR] -1.5% (earnings), Hugo Boss [BOSS.DE] +5% (earnings), Pets at Home [PETS.UK] +9% (earnings)
- Financials: UBS [UBSG.CH] -4% (earnings; CEO comments), IG Group [IGG.UK] -6% (earnings)
- Materials: K+S [SDF.DE] -3% (analyst action)
- Industrials: Getlink [GET.FR] +1% (earnings), SGS SA [SGSN.CH] +1% (earnings)
- Technology: Logitech International [LOGN.CH] +1% (earnings)
- Telecom: Orange [ORA.FR] n/c (reportedly faces fines), Elior [ELIOR.FR] +0.5%, Autogrill [AGL.IT] +1% (potential deal)
Speakers
- ECB Q4 Bank Lending Survey: Net demand increased in all loan categorizes in Q4 but expected some moderation in the coming quarter
- UK Brexit Sec Barclay: In both UK and EU interest to have a Brexit deal
- German ZEW Economists: Markets experts have already considerably lowered growth expectations. Negative factors like the rejection of the Brexit deal by the UK Parliament and weak growth from China had already been anticipated
- Belgium Foreign Min Reynders: Belgium was prepared for a no-deal Brexit but hopes it was possible to reach a deal
- Italy Deputy PM Salvini: France has no interest in stabilizing Libya (**Reminder on Jan 21st the French foreign minister was said to have summoned Italian ambassador after Deputy PM Di Maio’s made an “unacceptable” comment on France’s role in Africa
- OECD chief Gurria commented from Davos that Brexit was one fo the big elements of uncertainty
- China Foreign Ministry Spokeswoman Hua: Will respond in accordance with further action taken by US side if Huawei exec Meng is extradited
- China Securities Regulator (CSRC) Vice Chairman Fang Xinghai did not see China significantly cutting its US bond holdings
- IEA chief Birol: To pay special attention to US shale production in 2019
Currencies/Fixed Income
- Some risk aversion crept back into the markets that helped the USD stay near 3-week highs. Some jitters on the trade front surfaced after China noted it would respond in accordance with further action taken by US side if Huawei exec Meng was extradited. Also the IMF again cut its 2019 global growth forecast citing Brexit and trace concerns.
- GBP/USD was initially softer as dealers noted that PM May’s plan B looked a lot like the failed plan A and did little to clarify the govt future Brexit plan. The pair continued to find support in the lower part of the 1.28 handle for the time being (tested 1.2830 on Monday and 1.2855 today). Better ILO employment data also aided the GBP currency sentiment with the pair above the 1.29 level ahead of the NY morning.
- EUR/USD was steady at 1.1363 and continued to remain locked within a 1.13-1.5 trading range. German Jan ZEW survey was mixed but suggested that markets experts had already considerably lowered growth expectations
- USD/JPY was lower by 0.2% on some safe-haven flows at 109.45 area. Focus on tomorrow BOJ rate decision but no changes were expected in its policy.
Economic Data
- (NL) Netherlands Jan Consumer Confidence Index : 1 v 9 prior
- (NL) Netherlands Nov Consumer Spending Y/Y: 2.0% v 1.7% prior
- (ZA) South Africa Nov Leading Indicator: 105.5 v 105.5e
- (MA) Malaysia Mid-Jan Foreign Reserves: $101.7B v $101.4B prior end-Dec
- (TW) Taiwan Dec Unemployment Rate: 3.7% v 3.7%e
- (HU) Hungary Nov Average Gross Wages Y/Y: 10.4% v10.2%e
- (HK) Hong Kong Dec CPI Composite Y/Y: 2.5% v 2.5%e
- (PL) Poland Dec Retail Sales M/M: 12.9% v 16.5%e; Y/Y: 4.7% v 8.1%e; Real Retail Sales Y/Y: 3.9% v 7.0%e
- (ES) Spain Nov Trade Balance: -€2.6B v -€3.8B prior
- (UK) Dec Jobless Claims Change: +20.8K v +24.8K prior; Claimant Count Rate: 2.8% v 2.8% prior
- (UK) Nov Average Weekly Earnings 3M/Y: 3.4% v 3.3%e; Weekly Earnings (ex Bonus) 3M/Y: 3.3% v 3.3%e
- (UK) Nov ILO Unemployment Rate: 4.0% v 4.1%e (matches low from 1975); Employment Change 3M/3M: +141K v +87Ke
- (UK) Nov Public Finances (PSNCR): £21.3B v £2.7B prior; Public Sector Net Borrowing: £2.1B v £1.1Be; Central Government NCR: £18.2B v £6.7B prior; PSNB ex Banking Groups: £3.0B v £1.9Be
- (DE) Germany Jan ZEW Current Situation Survey: 27.6 v 43.0e; Expectations Survey: -15.0 v -18.5e
- (EU) Euro Zone Jan ZEW Survey Expectations: -20.9 v -21.0 prior
Fixed Income Issuance
- (ES) Spain Debt Agency (Tesoro) opened its book to sell EUR-denominated Apr 2029 bond via syndicate; guidance seen +65bps to mid-swaps; order book over €50.0B – (ZA) South Africa sold total ZAR2.85B vs. ZAR2.85B indicated in 2023, 2035 and 2040 bonds
- (ES) Spain Debt Agency (Tesoro) sold total €1.46B vs. €1.0-2.0B indicated range in 3-month and 9-month bills
- (ID) Indonesia sold total IDR7.64T vs. IDR8.0T target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
- (CH) Switzerland sold CHF74.1M in 3-month Bills; Avg Yield: -0.281% v -0.837% prior
Looking Ahead
- (NG) Nigeria Central Bank Interest Rate Decision: expected to leave Interest Rate unchanged at 14.00%
- 05:30 (UK) Weekly John Lewis LFL sates data
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 05:30 (UK) DMO to sell £1.75B in Sept 2037 Gilts
- 06:00 (IE) Ireland Dec PPI M/M: No est v 3.9% prior; Y/Y: No est v -4.2% prior
- 06:30 (EU) ESM to sell €2.0B in 6-month bills
- 06:45 (US) Daily Libor Fixing
- 08:00 (UK) Baltic Dry Bulk Index
- 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
- 08:30 (CA) Canada Nov Wholesale Trade Sales M/M: -0.3%e v +1.0% prior; Manufacturing Sales M/M: -0.8%e v -0.1% prior
- 09:00 (MX) Mexico Dec Unemployment Rate (Seasonally Adj): 3.4%e v 3.3% prior; Unemployment Rate NSA (unadj): 3.2%e v 3.3% prior
- 09:00 (EU) Weekly ECB Forex Reserves: No est v €273.8B prior
- 10:00 (US) Dec Existing Home Sales: 5.24Me v 5.32M prior
- 10:00 (MX) Mexico weekly International Reserves
- 10:00 (CO) Colombia Nov Trade Balance: -$1.1Be v -$1.2B prior; Total Imports: $4.4Be v $5.2B prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- (IT) Italy Debt Agency (Tesoro) announcement for CTZ and BTPei auctions for Friday, Jan 25th
- 14:00 (AR) Argentina Dec Trade Balance: $1.2Be v $1.0B prior
- 14:00 (CO) Colombia Nov Economic Activity Index (Monthly GDP) Y/Y: 2.9%e v 2.3% prior
