Notes/Observations
- Focus on Fed policy decision with expectations for an accommodative Fed given recent soft US data
- UK CPI remained below BOE target for the 2nd straight month
- PM May sends letter to EU asking for a ‘short’ Brexit delay
Asia:
- China PBOC might cut RRR in Q2 to response to liquidity pressures from large number of maturing medium term lending facility (MLF) loans and tax payments. Expectations for substantial easing of monetary policy were impractical right now
- BOJ Monetary Policy Meeting Minutes for Jan 22-23 meeting (2 meetings ago): Reiterated that most members noted it would take time to reach inflation target of 2% thus appropriate to continue easing persistently
Europe:
- EU Brexit negotiator Barnier stated that were in a key moment in Brexit negotiations; Longer Brexit extension needed to be linked to something new; everyone should finalize preparations for no deal Brexit. If the UK asked for a Brexit delay before the EU Summit on Thurs, leaders would assess the reasons given and usefulness of an extension; Article 50 extension had to be useful for it to be granted. Reiterated the current Brexit deal was the only possible basis for an orderly UK exit
- PM May’s office said to have indicated that the Brexit extension letter would be sent to the EU on Wed, Mar 20th
- EU reportedly saw a mid-April deadline for the UK to decide on delay; EU won’t use an extension to reopen the Brexit withdrawal agreement
- PM May spokesperson: if there was an Article 50 extension, PM May believed it should be as short as possible. PM determined to find a way to deliver on the will of the British people as quick as possible. PM did not believe that a general election was in the national interest
- Northern Ireland’s DUP party said not to support PM May’s Brexit deal unless they’re convinced it could pass House of Commons vote
Americas:
- China-US trade talks said to be in final stages; Trade Rep Lighthizer and Treasury Sec Mnuchin to fly to Beijing week of March 25th. Lighthizer reportedly seeking details about China’s revised intellectual property offers . Some US officials reportedly saw China walking back trade offers; some officials said to see China moves as normal part of the process
Energy:
- Weekly API Oil Inventories: Crude: -2.1M v -2.6M prior
- SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.34% at 382.98, FTSE -0.01% at 7,322.97, DAX -1.02% at 11,669.32, CAC-40 -0.13% at 5,418.75, IBEX-35 -0.17% at 9,476.05, FTSE MIB -0.02% at 21,425.50, SMI -0.40% at 9,487.50, S&P 500 Futures +0.07%]
Market Focal Points/Key Themes:
Equities
- European Indices trade lower across the board following on from a mixed session in Asia and slightly higher US futures this morning. The Dax under performs being led lower by shares of Bayer which trades over 10% lower after losing the first phase of Glyphosate trial.
- In M&A news Inmarsat trades sharply higher after Apax Partners confirmed a $7.21/shr bid for the company; Maersk trades little changed after placing over 17M shares in Total, while Glencore trades lower following the divestiture of its CSA Mine for $575M.
- On the earnings front, Bpost rises despite cutting its outlook; Kier Group falls over 8% after a decline in profits; Hermes gains on earnings and outlook, while Kingfisher trades 3% lower on earnings and guidance. Notably BMW falls sharply after warning 2019 profits well be well below the prior year as well as targeting €12B in cost cutting and efficiency gains by 2022.
- Looking ahead notable earners include General Mills, Pintec Tech and Bio-Path Holdings.
- Consumer discretionary: Kingfisher [KGF.UK] -3% (earnings; CEO to leave; appoints CFO), Hermes [RMS.FR] +1.5% (earnings), Moncler [MONC.IT] -2% (placement), Puma [PUM.DE] +3% (analyst action), zooplus [ZO1.DE] -10% (earnings)
- Consumer staples: British American Tobacco [BATS.UK] n/c, Imperial Brands [IMB.UK] -1% (FDA comments)
- Healthcare: Bayer [BAYN.DE] -12% (statement on Jury’s decision), Motif Bio [MTFB.UK] +11% (granted FDA meeting)
- Industrials: BMW [BMW.DE] -4% (outlook), MAN [MAN.DE] +1% (earnings), Kier [KIE.DE] -7% (earnings), Ti Fluid Systems [TIFS.UK] +10% (earnings)
- Technology: Basware [BAS1V.FI] -16% (strategic investment)
- Telecom: Inmarsat [ISAT.UK] +20% (confirms cash offer), Elior [ELIOR.FR] -2% (sale price envisaged by PAI Partners for Elior’s concession catering brand ‘Areas’ below forecasts)
Speakers
- EU Official: Leaders might discuss an extra Brexit Summit, EU will not ask UK for a 2nd Brexit Referendum. Have yet to receive PM May’s Brexit letter or received a request for any extension of Article 50; Leaders to discuss no-deal Brexit planning at Summit
- Germany said to plan to pass laws by end of 2019 to create state fund to acquire stakes in key companies
- Iceland Central Bank (Sedlabanki) Policy Statement noted that inflation would likely to rise somewhat over most of 2019 but actual developments to depend on outcome of wage negotiations. Long-term inflation expectations remained above target by all measures. Near-term monetary policy stance to depend on interaction between a narrower output gap, wage-setting decisions and developments in inflation. Reiterated that has both the will and the tools to keep inflation and inflationary expectations at target over the long term
- Thailand Central Bank (BoT) Policy Statement noted that the vote was unanimous to keep policy steady. Reiterated that monetary policy remained accommodative. Domestic economy continued to expand and reiterated that THD currency (Baht) was moving in-line with regional peers . Staff Forecasts cut 2019 GDP from 4.0% to 3.8%, cut exports from 3.8% to 3.0% while maintaining 2019 Headline Inflation at 1.0%
- BOJ Gov Kuroda: Central bank said to be on the dovish side; to continue it persistent large scale easing
- Japan Fin Min Aso stated that he had no difference with PM Abe on BoJ’s 2% price target. Oil price decline made it tough to hit price goal. Had discussed numerous times with BoJ Gov Kuroda that it was becoming very difficult to achieve price goal when plunging oil prices weighed on inflation.
- Japan Cabinet Office (Govt) Mar Monthly Economic Report cut its overall economic assessment citing recent weakness in exports and industrial production (1st cut in 3 years)
Currencies/ Fixed Income
- USD was little changed against most major pairs as focus remained on the upcoming Fed policy decision later today. Overall market expectations would be for an accommodative Fed given recent soft US data. EUR/USD little changed at 1.1345 area, USD/JPY at 111.55 just ahead of the US morning.
- GBP currency was softer ahead of the EU Leader Summit as PM May was prepared to send a letter to officials seeking a short Brexit delay. Dealers noted that the current environment suggested no-deal risk could be back around end-June. Dealers noted of some possible maneuvering with the UK political circuit to try to wrestle away the Brexit extension control from the PM into the hands of Parliament
Economic Data
- (DE) Germany Feb PPI M/M: -0.1% v +0.2%e; Y/Y: 2.6% v 2.9%e
- (TH) Thailand Central Bank (BoT) left its Benchmark Interest Rate unchanged at 1.75% (as expected)
- (ZA) South Africa Feb CPI M/M: 0.8% v 0.9%e; Y/Y: 4.1% v 4.1%e (**Note: 2nd straight month annual inflation was below the mid-point of SARB target range of 3.0-6.0%)
- (ZA) South Africa Feb CPI Core M/M: 1.1% v 1.1%e; Y/Y: 4.4% v 4.4%e
- (TW) Taiwan Feb Export Orders Y/Y: -10.9% v -5.6%e v
- (IS) Iceland Central Bank (Sedlabanki) left the 7-Day Term Deposit Rate stands at 4.50%
- (PL) Poland Feb Sold Industrial Output M/M: -1.5% v -3.5%e; Y/Y: 6.9% v 4.8%e
- (PL) Poland Feb PPI M/M: 0.5% v 0.3%e; Y/Y: 2.9% v 2.7%e
- (UK) Feb CPI M/M: 0.5% v 0.4%e; Y/Y: 1.9% v 1.8%e (2nd straight month below BOE target); CPI Core Y/Y: 1.8% v 1.9%e; CPIH Y/Y: 1.8% v 1.8%e
- (UK) Feb RPI M/M: 0.7% v 0.7%e; Y/Y: 2.5% v 2.5%e; RPI Ex- Mortgage Interest Payments (RPI-X) Y/Y: 2.4% v 2.5%e; Retail Price Index: 285.0 v 285.1e
- (UK) Feb PPI Input M/M: 0.6% v 0.6%e; Y/Y: 3.7% v 4.1%e
- (UK) Feb PPI Output M/M: 0.1% v 0.1%e; Y/Y: 2.2% v 2.2%e
- (UK) Feb PPI Output Core M/M: 0.1% v 0.2%e;; Y/Y: 2.2% v 2.3%e
- (UK) Jan ONS House Price Index Y/Y: 1.7% v 2.4%e
Fixed Income Issuance
- (IN) India sold total INR100B vs. INR100B indicated in 3-month, 6-month and 12-month bills
- (DK) Denmark sold total DKK2.68B in 2023 and 2029 Bonds
Looking Ahead
- (PT) Portugal Jan Current Account Balance: no est v -€0.2B prior
- 06:00 (EU) Daily Euribor Fixing
- 06:30 (DE) Germany to sell €4.0B in 0% Apr 2024 BOBL
- 06:30 (PT) Portugal to sell €1.25-1.5B in 6-month and 12-month Bills
- 07:00 (US) MBA Mortgage Applications w/e Mar 8th: No est v +2.3% prior
- 07:00 (UK) Mar CBI Industrial Trends Total Orders: 5e v 6 prior; Selling Prices: No est v 22 prior
- 07:00 (ZA) South Africa Jan Retail Sales M/M: +0.4%e v -4.8% prior; Y/Y: +1.4%e v -1.4% prior
- 07:00 (IL) Israel Jan Manufacturing Production M/M: No est v -0.4% prior
- 07:00 (CZ) Czech Republic to sell Bonds
- 07:00 (RU) Russia to sell 2026, 2028 and 2034 OFZ Bonds
- 07:45 (US) Daily Libor Fixing
- 09:00 (RU) Russia Feb Unemployment Rate: 4.9%e v 4.9% prior; Real Wages Y/Y: 0.0%e v 0.2% prior; Real Disposable Income: -1.6%e v -1.3% prior
- 09:00 (RU) Russia Feb Real Retail Sales Y/Y: 1.5%e v 1.6% prior
- 09:00 (UK) Baltic Dry Bulk Index
- 10:00 (BE) Belgium Mar Consumer Confidence Index: No est v -7 prior
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 10:45 (UK) BOE to buy £1.15B in APF Gilt purchase operation (7-10 year maturities)
- 11:00 (MX) Mexico Weekly International Reserve data
- 11:00 (CO) Colombia Jan Trade Balance: -$1.0Be v -$0.6b prior; Total Imports: No est v $4.2B prior
- 14:00 (US) FOMC Interest Rate Decision: expected to leave rates unchanged between 2.25-2.50%; leave Interest Rate on Excess Reserves unchanged at 2.40%
- 14:30 (US) Fed Chair Powell post rate decision press conference
- 15:00 (MX) Citibanamex Survey of Economists
- 17:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: expected to leave Selic Target Rate unchanged at 6.50%
