Awaiting The Meaning Ful Vote In UK Parliament

Notes/Observations

• UK PM May said to have won an ‘improved’ Brexit deal but it may not be enough for MP; parliament waiting for details to make sure of legal assurances on Irish backstop; meaning vote still scheduled for later today
• UK Jan data in session mixed; Jan GDP and production data beats consensus while trade balances were wider than expectations
• Some risk-on sentiment in global markets as some relief in the Brexit saga overtook growth fears for the time being

Asia:

• Japan Fin Min Aso stated that felt that the BoJ could be somewhat more flexible in defining its price target.

Europe:

• UK Cabinet Office Minister Lidington (de facto Dep PM): PM May had secured legally binding changes that strengthen and improve withdrawal agreement
• UK PM May claimed to have secured legally binding changes to the Brexit deal where the UK could not be trapped in the Irish backstop. PM presented 2 documents, one stating the EU could not trap the UK in the backstop with the other document stating that if they attempted to, the UK could use these actions to lodge a formal dispute through an independent arbitration. Backstop did not predetermine UK future relationship with the EU
• EU Juncker/PM May joint statement: UK committed to finding an alternative arrangement to the backstop by the end of 2020. Agreement provided meaningful clarifications and legal guarantees to the Withdrawal Agreement and clear this was the deal or might not happen at all

Americas:

• Trump administration released $4.7T budget proposal for FY20, +5% higher than FY19 budget. Raised defense spending 4% to $750B; Cut $1.9T to mandatory spending; cuts $845B from Medicare

Macro

• (SK) South Korea: In February foreign investors remained net sellers in the South Korean bond market for second consecutive month selling $190M v the record $3.2B that was sold in January. South Korea is sensitive to global growth. In good times it can be a magnet for speculative capital, which is why foreign investment has poured into the market in recent years. It has the highest level of foreign debt relative to reserves in Asia so is a good barometer for risk appetite. In bad times specs tap those gains to cover losses elsewhere so it pays to monitor these moves to see if they do smooth out.
• (UK) United Kingdom: Reportedly Prime Minister May won some legally-binding concessions on the Irish backstop issue after meeting with EU’s Junker and Barnier overnight, which has appeared to have given the Withdrawal Agreement a slightly better chance at today’s vote(if it goes ahead), although the Brussels concessions still leaves the UK without the option of unilaterally revoking the Irish backstop. Labour and other opposition parties will still vote against it, so it will depend on Northern Ireland’s DUP and how many of the 60+ Brexiteer MPs within the Conservative party vote for it. The newsflow from members of these groups have been mixed, and given the wafer thin majority of the Conservative-DUP government, it’s not clear that there will sufficient votes for the deal to pass.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.90% at 373.92, FTSE -0.22% at 7,115.25, DAX -0.03% at 11,540.37, CAC-40 +0.17% at 5,274.98, IBEX-35 +0.03% at 9,174.30, FTSE MIB -0.21% at 20,594.50, SMI +0.81% at 9,336.20, S&P 500 Futures +0.21%]
• Market Focal Points/Key Themes: European Indices trade mostly flat to higher across the board consolidating gains seen yesterday, with the FTSE 100 underperfoming on continued strength in Cable. US futures edge higher following on from stronger Asian Indices overnight. On the corporate front German Car giant Volkswagen trades fractionally lower following inline results and affirmed outlook. Aryzta trades sharply higher on earnings with Kloeckner another notable gainer following results and upbeat guidance. Other notable gainers include, SHL Telemedicine, Domino’s Pizza, Galenica, 888 Holdings and Spie. Meanwhile shares of Uniper declines slightly on earning with G4S, John Menzies, Geberit, Torm and Tamedia among other decliners. In other news Wacker Neuson climbs after the company proposes a special dividend; Mothercare gains on updates to its transformation plan, while Adyen declines after investors to sell €1.5B worth of shares. Looking ahead notable earners include Dick’s Sporting good, Del Frisco’s restaurants and Roadrunner Transportation among others.

Equities

• Consumer discretionary: Aryzta [ARYN.CH] +12% (earnings), G4S [GFS.UK] -7% (earnings), Domino’s Pizza [DOM.UK] +6% (earnings), 888 Holdings [888.UK] +5% (earnings), Pendragon [PDG.UK] -2.5% (earnings), Equiniti [EQN.UK] -12% (earnings)
• Energy: Uniper [UN01.DE] -1.5% (earnings)
• Financials: Close Brothers Group [CBG.UK] +1% (earnings)
• Industrials: Volkswagen [VOW3.DE] -1% (final earnings; discloses regulatory probe), Torm [TORM.DK] -1.5% (earnings), Manz Automation [M5Z.DE] +1% (earnings)
• Technology: WPP [WPP.UK] +0.5% (appointment)

Speakers

• Northern Irish DUP Leader Foster: Did not want to be rushed into decision; sympatric to demands calling for delay in meaningful vote
• Northern Ireland DUP Brexit Spokesman Wilson: Yet to see new Brexit documents; needed to see how legally binding the changes were. PM May’s assurances fell short of what she herself promised but will due diligence to what has been said
• Northern Irish DUP party official Donaldson: Had not yet come to a final decision on the new EU-UK agreement; lawmaker were still studying Brexit assurances. Have greater clarity, but we need to hear what the attorney general Cox has to say. What AG Cox says would be very important, but party would make its own decision
• UK MP David Davis (former Brexit Sec): PM May’s Brexit deal would be acceptable if Attorney General stated that the assurances had legal force
• UK Tory parliament member Rees-Mogg (Euro-sceptic): Waiting to see what lawyers have to say on PM May’s deal; want assurances that UK can leave the backstop. Not sure that EU promises were a major change. Northern Irish DUP party view will heavily influence many lawmakers
• Ireland PM Varadkar: Outcome of recent May/Juncker meeting is positive; assurances are now on legal footing. Brexit agreement did not reopen Withdrawal Agreement or undermine the Irish backstop. Documents complement Withdrawal Agreement. Committed to exploring backstop alternatives; deal did not call into question the backstop
• Austria Chancellor Kurz: EU had taken a step towards Britain to reach a compromise deal on Brexit; move to help PM May get a majority in her parliament
• German Chemical Association VCI: Cut its 2019 Production volumes from +1.5% to -3.5%; Cut its sales forecast from +2.5% to -2.5%. Problem persisted in the Car industry and Brexit process already had impact on investment and trade
• RBA’s Debelle stated that was assessing impact of climate change on economy as it presented significant economic risks and opportunities
• IMF maintained South Korea 2019 GDP growth forecast at 2.6%, risks to domestic economy were tilted towards the downside

Currencies/Fixed Income

• The USD was on softer footing in the session against the major European pairs. Some risk on sentiment keeping the greenback on the defensive – The GBP remained in focus ahead of the planned meaningful vote on PM May’s Brexit withdrawal deal with the EU. The recent developments have aided the GBP currency in that the pending vote would either pass or fail by a small enough margin to keep the deal alive. Various Tory Brexiteers and Northern Irish officials were awaiting the details of PM May claims to has secured legally binding changes to the Brexit deal where the UK could not be trapped in the Irish backstop. The key factors to watch out for at this time would be UK Attorney General Cox’s legal interpretation of the significance of the changes and whether they eased the risk of the backstop becoming permanent. Secondly, the reaction of the DUP party and whether their MPs would support the bill. A plethora of UK data for Jan saw the trade deficit come in wider than expected and knock the GBP currency off its best levels of the session.
• USD/JPY was higher by 0.2% around the 111.50 area as some momentarily relief in the Brexit saga overtook growth fear.

Economic Data

• (SE) Sweden Feb PES Unemployment Rate: 3.7 v 3.7% prior
• (NL) Netherlands Jan Manufacturing Production M/M: +2.8% v -3.3% prior; Y/Y: +0.1% v -3.2% prior; Industrial Sales Y/Y: -7.8% v -1.8% prior
• (FR) France Q4 Total Payroll: 0.2% v 0.1%e; Private Sector Payrolls Q/Q: 0.3% v 0.1%e
• (RO) Romania Feb CPI M/M: 0.8% v 0.4%e; Y/Y: 3.8% v 3.4%e
• (SE) Sweden Feb CPI M/M: 0.7% v 0.8%e; Y/Y: 1.9% v 2.0%e; CPI Level: 331.02 v 331.31e
• (SE) Sweden Feb CPIF M/M: 0.7% v 0.7%e; Y/Y: 1.9% v 2.0%e
• (NO) Norway Jan Region Output Survey (Past 3-months): 1.43 v 1.35e; Output Survey (Past 6-months): 1.46 v 1.44e
• (UK) Jan Visible Trade Balance: -£13.1B v -£12.2Be; Overall Trade Balance: -£3.8B v -£3.5Be; Trade Balance Non EU: -£5.0B v -£3.8Be
• (UK) Jan GDP M/M: 0.5% v 0.2%e; GDP 3M/3M: 0.5% v 0.4% prior
• (UK) Jan Industrial Production M/M: 0.6% v 0.2%e; Y/Y: -0.9% v -1.3%e
• (UK) Jan Manufacturing Production M/M: 0.8% v 0.2%e; Y/Y: -1.1% v -1.9%e
• (UK) Jan Construction Output M/M: 2.8% v 0.8%e; Y/Y: +1.8% v -0.2%e
• (UK) Jan Index of Services M/M: 0.3% v 0.2%e; 3M/3M: 0.5% v 0.5%e

Fixed Income Issuance

• (ID) Indonesia sold total IDR18.5T vs. IDR15.0T target in 3-month and 12-month Bills and 5-year, 10-year,15-year, 20-year and 30-year bonds
• (ZA) South Africa sold total ZAR2.85B vs. ZAR2.85B indicated in 2030, 2035 and 2048 bonds
• (ES) Spain Debt Agency (Tesoro) sold total €1.35B vs. €1.0-2.0B indicated range in 3-month and 9-month

Looking Ahead

• (UK) Parliament holds meaningful vote (likely after 15:00 ET/19:00 GMT)
• (PT) Bank of Portugal Jan ECB financing to Portuguese Banks: No est v €18.7B prior
• (PE) Peru Jan Trade Balance: No est v €1.1B prior (revised from €1.0B)
• 06:00 (US) Feb NFIB Small Business Optimism Index: 102.0e v 101.2 prior
• 06:00 (GR) Greece Feb CPI Y/Y: No est v 0.4% prior; CPI EU Harmonized Y/Y: No est v 0.5% prior
• 06:00 (CY) Cyprus Q4 Final GDP Q/Q: No est v 1.1% prelim; Y/Y: No est v 4.0% prelim
• 06:00 (EU) Daily Euribor Fixing
• 06:00 (IT) Italy Debt Agency (Tesoro) to sell €6.5B in 12-month Bills
• 06:15 (CH) Switzerland to sell 3-month Bills
• 06:30 (UK) Weekly John Lewis LFL Sales data
• 06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 06:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 06:30 (BE) Belgium Debt Agency (BDA) to sell €3.4-3.8B in 3-month and 12-month Bills
• 06:30 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
• 06:30 (SL) Slovenia Debt Agency to sell 3-month and 6-month bills
• 06:45 (DE) ECB’s Lautenschlaeger (SSM member) in Basel
• 07:00 (IL) Israel Feb Consumer Confidence: No est v 122 prior
• 07:00 (BR) Brazil Mar IGP-M Inflation (1st Preview): 1.0%e v 0.2% prior
• 07:00 (PT) Portugal Jan Trade Balance: No est v -€1.6B prior
• 07:00 (PT) Portugal Feb Final CPI M/M: No est v -0.2% prelim; Y/Y: No est v 0.9% prelim
• 07:00 (PT) Portugal Feb Final CPI EU Harmonized M/M: No est v -0.3% prelim; Y/Y: No est v 0.9% prelim
• 07:45 (US) Weekly Chain Store Sales data
• 07:45 (US) Daily Libor Fixing
• 08:00 (IN) India Feb CPI Y/Y: 2.4%e v 2.1% prior
• 08:00 (IN) India Industrial Production Y/Y: 2.0%e v 2.4% prior
• 08:00 (BR) Brazil Feb IBGE Inflation IPCA M/M: 0.4%e v 0.3% prior; Y/Y: 3.8%e v 3.8% prior
• 08:00 (BR) Brazil CONAB Crop report
• 08:30 (US) Feb CPI M/M: 0.2%e v 0.0% prior; Y/Y: 1.6%e v 1.6% prior
• 08:30 (US) Feb CPI (Ex-Food/Energy) M/M: 0.2%e v 0.2% prior; Y/Y: 2.2%e v 2.2% prior
• 08:30 (US) Feb CPI Index NSA: 252.812e v 251.712 prior; CPI Core Index SA: 261.165e v 260.701 prior
• 08:30 (US) Feb Real Avg Weekly Earnings Y/Y: No est v 1.9% prior; Real Avg Hourly Earning Y/Y: No est v 1.7% prior
• 08:30 (DE) German Chancellor Merkel with Belgium PM Michel
• 08:55 (US) Weekly Redbook Retail Sales data
• 09:00 (UK) Baltic Dry Bulk Index
• 09:00 (RU) Russia announces upcoming OFZ Bond issuance
• 10:00 (EU) Weekly ECB Forex Reserves
• 13:00 (US) Treasury to sell 10-Year Notes Reopening
• 15:00 (AR) Argentina Jan Capacity Utilization: No est v 56.6% prior
• 16:30 (US) Weekly API Oil Inventory data