Notes/Observations
German Jan Unemployment Rate hits fresh post-unification low of 5.4%; Euro Zone matches Dec 2008 lows of 8.7%
European inflation data mixed (France, Euro Zone beat, Spain miss;
German Dec Retail Sales miss expectations
Trump’s State of the Union touched on many issues but was short on details on his policy proposals.
Fed is expected to send an upbeat message in its statement today as market based inflation expectations and the growth outlook have improved since the last meeting
Asia:
Australia Q4 CPI Q/Q: 0.6% v 0.7%e; Y/Y: 1.9% v 2.0%e v 1.8% prior; Trimmed
China Jan Govt Official Manufacturing PMI at a 8-month low (51.3 v 51.6e)
China PBoC skipped its OMO operation for the 5th straight session citing appropriate and stable liquidity in banking system
Bank of Japan (BOJ) Summary of Opinions from Jan 22-23rd meeting noted that it must continue powerful monetary easing as inflation remained weak. Still had a long way to go until 2% inflation target is reached. If cut in BOJ super long JGB buying gave unintended signal on monetary policy, BOJ must correct that
Bank of Japan (BoJ) Gov Kuroda: taking time to change Japan deflationary mindset; will persistently continue easing for price goal. Reiterated high chance of meeting 2% inflation target around FY2019.
BOJ increased its purchases in 3-5 year JGBs by ¥30B to ¥33)B (1st increase since July)
Europe:
BOE Gov Carney: UK economy’s outperformance versus BOE’s Aug outlook is because of a stronger world economy and looser fiscal stance than expected. Inflation pass through due to the exchange rate shock had further to go and saw inflation remaining above 2% target in near future
UK PM May: leaked Brexit analysis were preliminary, selective and not signed off by ministers (reply to Unreleased, internal UK govt Brexit analysis: UK would be worse off outside the EU under every scenario modeled
ECB’s Weidmann (Germany): German surplus will shrink as investment rises. Reiterates view that cheap oil and loose monetary policy helped to explain German current account surplus
Americas:
US President Trump State of the Union Address: Will work to fix bad trade deals and negotiate new ones; Will protect American workers and intellectual property through strong enforcement of our trade rules. Wants Congress to produce legislation that generates at least $1.5T for new infrastructure investment
Treasury Sec Mnuchin: strong dollar is in the long-term interests of the US; supported free FX markets with no intervention
Energy:
Weekly API Oil Inventories: Crude: +3.2M v +4.8M prior
Economic Data:
(DE) Germany Dec Retail Sales M/M: -1.9% v -0.4%e; Y/Y: -1.9% v +2.8%e
(CH) Swiss Dec UBS Consumption Indicator: 1.69 v 1.73 prior
(DK) Denmark Dec Gross Unemployment Rate: 4.3% v 4.3%e; Unemployment Rate (Seasonally Adj): 3.3% v 3.4%e
(TR) Turkey Dec Trade Balance: -$9.2B v -$9.6Be
02:30 (TH) Thailand Dec Current Account: $3.1Be v $5.3B prior; Overall Balance of Payments (BOP): No est v $2.3B prior; Trade Balance: No est v $3.3B prior; Exports Y/Y: No est v 12.3% prior; Imports Y/Y: No est v 11.9% prior
(FR) France Jan Preliminary CPI M/M: -0.1% v -0.3%e; Y/Y: 1.4% v 1.2%e
(FR) France Jan CPI EU Harmonized M/M: -0.1% v -0.5%e; Y/Y: 1.5% v 1.1%e
(FR) France Dec PPI M/M: 0.0 v 1.5% prior; Y/Y: 1.7% v 2.6% prior- 03:00 (TW) Taiwan Q4 Preliminary GDP Y/Y: % v 2.5%e; Overall annual 2017 GDP: % v 2.7%e
(ES) Spain Jan Preliminary CPI M/M: -1.1% v -1.0%e; Y/Y: 0.5% v 0.9%e
(ES) Spain Jan CPI EU Harmonized M/M: -1.5% v -1.4%e; Y/Y: 0.7% v 0.8%e
(HU) Hungary Dec PPI M/M: 0.0% v 1.0% prior; Y/Y: 3.9% v 4.5% prior
(DE) Germany Jan Unemployment Change: -25K v -17Ke; Unemployment Claims Rate: 5.4% v 5.4%e record low)
(IT) Italy Dec Preliminary Unemployment Rate: 10.8% v 10.9%e (lowest since Aug 2012)
(CH) Swiss Jan Credit Suisse Survey Expectations: 34.5 v 52.0 prior
(PT) Portugal Preliminary Jan CPI Y/Y: M/M: -0.1% v 0.0% prior; Y/Y: 1.1% v 1.5% prior
(PT) Portugal Preliminary Jan CPI EU Harmonized M/M: -1.2% v -0.2% prior; Y/Y: 1.1% v 1.6% prior
(EU) Euro Zone Jan Advance CPI Estimate Y/Y: 1.3% v 1.2%e; CPI Core Y/Y: 1.0% v 1.0%e
(EU) Euro Zone Dec Unemployment Rate: 8.7% v 8.7%e (matches lowest reading since Dec 2008)
Fixed Income Issuance:
(IN) India sold total INR140B vs. INR140B indicated in 3-month, 6-month and 12-month bills
(SE) Sweden sold SEK5.0B in 3-month bills; Avg Yield: -0.7221% v -0.7251% prior; bid-to-cover: 3.17x v 2.45x prior
(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 1.75% Feb 2027 bonds; Avg Yield: 1.81% v 1.52% prior; Bid-to-cover: 2.48x v 2.00x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.1% at 396.6, FTSE +0.1% at 7592, DAX +0.3% at 13235, CAC-40 +0.2% at 5483 , IBEX-35 +0.2% at 10452, FTSE MIB flat at 23874 , SMI flat at 9433, S&P 500 Futures +0.3%]
Market Focal Points/Key Themes:
European Indices trade mostly higher rebounding from steep falls yesterday on the back of upbeat earnings and a small retreat in bond yields.
Notable earners this morning included Siemens which reported stronger profits, although Revenue slightly missed forecasts; Infineon slightly missed forecasts and lowered guidance largely on the back of the stronger Euro, while in the UK Capita trades sharply lower after a profit warning, and suspension of dividend along with the proposal of a rights issue. In Sweden Electrolux trades higher after earnings, while Ericsson trades sharply lower after worse than expected loss.
Looking ahead notable earners include Dow component Boeing, alongside Eli Lily, Textron and Anthem among others.
Movers
Consumer Discretionary [H&M [HMB.SE] -7.4% (Earnings), Capita [CPI.UK] -45% (Profit warning, suspends dividend)]
Industrials [Siemens [SIE.DE] +1.2% (Earnings), Volvo [VOLVB.SE] +3.6% (Earnings), Electrolux [ELUXB.SE] +6.6% (Earnings)
Financials [ Julius Baer [BAER.CH] -2.5% (Earnings), Santander [SAN.ES]+0.6% (Earnings), SEBA [SEBA.SE] +2.6% (Earnings), ING [INGA.NL] -1.8% (Earnings)]
Ericsson [Ericsson [ERICB.SE] -9% (Earnings)]
Materials [ArcelorMittal [MT.NL]-1.4% (Earnings)]
Technology [ Infineon [IFX.DE] -1.1% (Earnings)]
Speakers
Sweden Central Bank (Riksbank) Gov Ingves: Now on target with inflation and inflationary expectations are back
European Commission officials said to have rejected the City of London’s proposal to strike a post-Brexit free trade deal on financial services
Czech Central Bank: Financial sector maintains high resilience to adverse shocks. Ready to raise counter-cyclical capital buffer further in case of continued fast credit growth, bank vulnerability and higher risks of real estate financing
South Africa ANC party said to discuss change of power with Zuma this week
BoJ Iwata: Not at the point where can change interest rates soon. there was a misunderstanding in the market that BoJ would exit easy policy soon. The 2% inflation target remained far away so current YCC was appropriate; no need to change YCC for some time. Important for BOJ to be ready to change yield control if economy, price and financial conditions change
Thailand Central Bank official Nakornthab: Could raise 2018 GDP growth forecast from 3.9% due to improving exports and govt spending
Currencies
USD remained on the defensive against the major pairs as the greenback was poised to have its worst monthly performance in two years
EUR/USD edged back towards the 1.25 area as participants discounted recent inflation data out of Europe and seemed to believe that ECB would tighten policy aggressively down the road. Dealers noted that 1.25 level could be tough to breech in the short-term
The GBP was slightly lower in the session. Cable weighed down by report the EU Commission officials had rejected the City of London’s proposal to strike a post-Brexit free trade deal on financial services. Pair near 1-week lows at 1.4135
USD/JPY little changed at 108.75 just ahead of the NY morning.
Fixed Income
Bund Futures trades up 30 ticks at 159.14 as Euro Zone inflation slows in January. Continued upside targets 160.50, while a move lower targets the158.75 low.
Gilt futures trade at 122.48 up 13 ticks, but still near the lows for the month of January. Support continues to stand at 122.25 then 121.75, with upside resistance at 123.75 then 124.33.
Wednesday’s liquidity report showed Tuesday’s excess liquidity fell to €1.869T from €1.885T prior. Use of the marginal lending facility fell to €56M from €65M prior.
Corporate issuance saw 1 issuer raise $0.4B in the primary market.
Looking Ahead
05:30 (EU) ECB allotment in 3-month LTRO
05:30 (DE) Germany to sell €4.0B in 2023 BOBL
06:00 (BR) Brazil Dec National Unemployment Rate: 11.9%e v 12.0% prior
06:00 (IL) Israel Dec Unemployment Rate: No est v 4.3% prior
06:00 (RU) Russia to sell combined RUB30B in 2024 and 2033 OFZ bonds
06:45 (US) Daily Libor Fixing
07:00 (IN) India FY16/17 Annual GDP Estimate Y/Y: No est v 8.0% prior
07:00 (IN) India Dec Eight Infrastructure (Key) Industries: No est v 6.8% prior
07:00 (CL) Chile Dec Total Copper Production: No est v 505.7K prior
07:00 (CL) Chile Dec Industrial Production Y/Y: 1.0%e v 2.3% prior; Manufacturing Production Y/Y: 0.5%e v 1.9% prior
07:00 (CL) Chile Dec Unemployment Rate: 6.3%e v 6.5% prior
07:00 (ZA) South Africa Dec Trade Balance (ZAR): 10.1Be v 13.0B prior
07:00 (US) MBA Mortgage Applications w/e Jan 26th: No est v 4.5% prior
07:30 (BR) Brazil Dec Primary Budget Balance (BRL): -30.8Be v -0.9B prior; Nominal Budget Balance: -59.6Be v -30.0B prior; Net Debt to GDP: 51.6%e v 51.1% prior
08:05 (UK) Baltic Dry Bulk Index
08:15 (US) Jan ADP Employment Change: +185Ke v +250K prior
08:30 (US) Q4 Employment Cost Index (ECI): 0.6%e v 0.7% prior
08:30 (CA) Canada Nov GDP M/M: 0.4%e v 0.0% prior; Y/Y: 3.4%e v 3.4% prior
08:30 (CA) Canada Dec Industrial Product Price M/M: 0.0%e v 1.4% prior; Raw Materials Price Index M/M: -2.5%e v +5.5% prior
08:30 (US) Treasury quarterly refunding announcement for 3-year, 10-year and 30-year bonds
09:45 (US) Jan Chicago Purchasing Manager: 64.0e v 67.6 prior
10:00 (US) Dec Pending Home Sales M/M: 0.5%e v 0.2% prior; Y/Y: 1.7%e v 0.6% prior
10:00 (CO) Colombia Dec National Unemployment Rate: No est v 8.4% prior; Urban Unemployment Rate: 10.3%e v 9.6% prior
10:00 (MX) Mexico Dec Net Outstanding Loans (MXN): No est v 3.991T prior
10:30 (US) Weekly DOE Crude Oil Inventories
14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged
14:00 (AR) Argentina Dec Industrial Production Y/Y: No est v 3.5% prior
16:00 (NZ) New Zealand Jan ANZ Job Advertisements M/M: No est v -0.3% prior
17:00 (AU) Australia Jan CBA Australia PMI Manufacturing: No est v 57.1 prior
17:30 (AU) Australia Jan AiG Manufacturing PMI: No est v 56.2 prior
18:00 (AU) Australia Jan CoreLogic House Px M/M: No est v -0.4% prior
18:00 (KR) South Korea Jan CPI M/M: 0.6%e v 0.3% prior; Y/Y: 1.3%e v 1.5% prior
19:00 (KR) South Korea Jan Trade Balance: $4.0Be v $5.8B prior
