Notes/Observations
US markets are closed Monday for a holiday
Euro currency at its highest level since before the ECB began its QE bond buying program back in 2015
Asia:
China PBOC Vice Gov Yin Yong: China will remove policy barriers for cross-border payments and enhance financial infrastructural construction in foreign countries as part of efforts to further promote internationalization of the yuan
China Banking Regulatory Commission (CBRC) will step up oversight in the banking sector this year to reduce financial risks, stressing that long-term efforts would be needed to control banking sector chaos
PBOC lent CNY398B in its Medium-Term Lending Facility (MLF) but maintained the interest rate in 1-year operation at 3.25%. It noted that there had been a relatively big drop in total liquidity in banking system
Bank of Japan (BOJ) January Regional Economic Report: raised economic assessment in 3 of 9 regions and kept its economic assessment in 6 of 9 regions
Bank of Japan (BOJ) Gov Kuroda: Economy was expanding moderately and expected to continue expanding moderately. Reiterated to maintain QQE with YCC for as long as needed to reach 2% inflation in stable manner
Europe:
Germany SPD Party’s general secretary Nahles: Achieved good result in coalition talks, optimistic of convincing majority of coalition. To try to achieve more successes in the coalition negotiations but added it was a different ball game compared to exploratory talks
Senior SPD Official Schaefer-Guembel: Exploratory talks laid a foundation, not more, not less. Must be more substance in the coalition agreement so that the distinction was more evident that we are co-governing
Germany Social Democrats in Saxony-Anhalt state said to reject proposed German coalition with Merkel’s party. voted 52-51 to oppose joining a coalition (**Insight: Saxony-Anhalt state only sends 7 out of 600 delegates to SPD congress)
Netherlands Finance Ministry Official: No new agreement between Netherlands and Spain about how Britain should leave EU. Confirmed that Finance Ministers held meeting (on Friday) but no deal was reached, exchanged well known positions
UK Foreign Minister Boris Johnson said to have warned allies that Brexit is far from certain; privately shares ex-UKIP boss Nigel Farage’s worries that the referendum result could yet be reversed
Euro Working Group chief Wieser: Any agreement to lighten Greek debt load after bailout program ends in August would mean it having to make additional commitments
Energy:
Russia Energy Minister Novak: oil market balancing was continuing and will monitor further
Iraq Oil Min: Near oil production capacity of 5M bpd; Remained committed to OPEC output target
UAE Energy Min: Expected high compliance with supply cuts in Dec from OPEC/non-OPEC. Did not see prices going down to $50 due to oversupply from shale
Economic Data:
(NL) Netherlands Nov Retail Sales Y/Y: 6.1%e v 0.2% prior
(JP) Japan Dec Preliminary Machine Tool Orders Y/Y: 48.3% v 46.9% prior
(IN) India Dec Wholesale Prices (WPI) Y/Y: 3.6% v 4.0%e
(FI) Finland Dec CPI M/M: 0.0% v 0.2% prior; Y/Y: 0.5% v 0.8% prior
(NO) Norway Q4 House Price Index Q/Q: +0.9% v -1.0% prior
(NO) Norway Dec Trade Balance (NOK): +24.7B v -4.2B prior
(EU) Euro Zone Nov Trade Balance (Seasonally Adj): €22.5B v €22.3Be; Trade Balance NSA (unadj): €26.3B v €18.9B prior
Fixed Income Issuance:
(NO) Norway sold NOK4.0B vs. NOK4.0B indicated in 6-month Bills; Avg Yield: 0.43% v 0.32% prior; Bid-to-cover: 1.93x v 2.55x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.2% at 397.80 , FTSE flat at 7776 , DAX -0.3% at 13208, CAC-40 -0.2% at 5504 , IBEX-35 flat at 10466, FTSE MIB -0.2% at 23397 , SMI -0.1 at 9542, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes: European Indices trade mostly lower in quieter trade as US cash markets are closed in observance of MLK day. News flow has been relatively quiet ahead of a busier corporate schedule for the week ahead. Shares of GKN trade higher once again after press reports of further interest from Carlyle; Bell Ag announced the majority acquisition in Huegli; on the earnings front Metro trades lower after prelim Q1 results, while Metro is a steep decliner after profitability in its minerals sector came in weaker than expected. AkerBp trades higher on Q4 production and outlook and Gem Diamonds is an outperformer after the recovery of a 910ct stone.
Movers
Consumer Discretionary [ Metro Ag [B4B.DE] -3.3% (Q1 results), Premier Foods [PFD.UK] +3.8% (In exploratory stages of sale of Batchelor to Nissin Foods], Bell Ag [BELL.CH] +4.4% (Acquisition, capital raise), Class Ohlson [CLASB.SE] +3.8% (Dec sales)]
Industrials [ GKN [GKN.UK] +3.4% (Carlyle looking to make counterbid), Metso [METSO.FI] -9.1% (Prelim Q4)]
Energy [Akerbp [AKERBP.NO] +3.7% (Production)]
Speakers
Moody’s: euro area economic recovery supports stable outlook in 2018 with GDP growth forecasted to be 2.0% with 2019 GDP seen at 1.7%. European sovereigns to continue to benefit from low interest rate environment
Currencies
USD Index hot fresh 3-year lows in the session as dealers note that its weakness was increasingly being driven by events outside of the US
EUR/USD has been aided by more-hawkish-than-expected ECB Minutes as well as exceptionally strong Euro Zone economic data. With the pair firmly above the 1.21 level, dealers now target the 1.24-1/25 neighborhood before any fresh concerns over the level of the Euro and its inflationary implications. Euro currency was at its highest level since before the ECB began its QE bond buying program back in 2015 with the pair approaching the 1.2250 area just ahead of the mid-session.
A stronger Euro currency could finally help push the EUR/CHF cross to retest the former floor of 1.2000 in coming weeks. The level was last tested on Jan 15th 2015 just before the SNB abandoned its floor.
GBP/USD tested the 1.38 level as cable’s correction continued in the weak dollar environment
USD/JPY approaching 110.50
Fixed Income
Bund Futures trades up 6 ticks at 160.61 following the move higher with the euro. Continued upside targets 162.00, while a move lower targets the159.56 low.
Gilt futures trade at 123.82 up 13 ticks trading in sympathy with Bunds and US treasuries. Support continues to stand at 123.55 then 122.83, with upside resistance at 124.25 then 124.96.
Monday’s liquidity report showed Friday’s excess liquidity rose to €1.871T from €1.869T prior. Use of the marginal lending facility fell to €98M from €154M prior.
Corporate issuance saw high grade issuers raise $32B last week.
Looking Ahead
05:25 (BR) Brazil Central Bank Weekly Economists Survey
05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills
05:30 (BR) Brazil Nov Economic Activity Index (Monthly GDP) M/M: 0.4%e v 0.3% prior; Y/Y: 2.6%e v 2.9% prior
06:00 (IE) Ireland Nov Trade Balance: No est v €3.9B prior
06:45 (US) Daily Libor Fixing
08:00 (PL) Poland Nov Current Account Balance: €0.7Be v €0.6B prior; Trade Balance: €0.6Be v €0.6B prior
08:00 (PL) Poland Dec Final CPI M/M: No est v 0.2% prelim; Y/Y: No est v 2.0% prelim
08:00 (RO) Romania Central Bank (NBR) Dec Minutes
08:00 (RU) Russia Dec Official Reserve Assets: No est v $431.6B prior
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
08:05 (UK) Baltic Dry Bulk Index
08:55 (FR) France Debt Agency (AFT) to sell combined €4.5-5.7B in 3-month, 6-month BTF Bills
09:00 (CA) Canada Dec Existing Home Sales M/M: No est v 3.9% prior
09:00 (BE) Belgium Nov Trade Balance: No est v -€3.8B prior
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
11:30 (IL) Israel Dec CPI M/M: 0.0%e v -0.3% prior; Y/Y: 0.3%e v 0.3% prior
13:15 (UK) BOE’s Tenreyro at event in London
16:00 (NZ) New Zealand Q4 NZIER Business Confidence: No est v 5 prior
16:45 (NZ) New Zealand Dec Retail Card Spending M/M: 0.5%e v 1.2% prior; Total Card Spending M/M: No est v 1.4% prior
18:50 (JP) Japan Dec PPI M/M: 0.4%e v 0.4% prior; Y/Y: 3.2%e v 3.5% prior
19:30 (AU) Australia Dec New Motor Vehicle Sales M/M: No est v 0.1% prior; Y/Y: No est v 2.1% prior
21:00 (NZ) New Zealand Dec Non Resident Bond Holdings: No est v 60.4% prior
22:45 (JP) Japan to sell 5-Year JGB Bonds
23:30 (JP) Japan Dec Bankruptcies Y/Y: No est v -2.3% prior
23:30 (JP) Japan Nov Tertiary Industry Index M/M: 0.3%e v 0.3% prior
