Notes/Observations
UK Jan CPI of 3.0% was slightly above forecasts and above the BOE inflation target for the 14th straight month but off the six-year highs registered in the Nov data
Asia:
Japan PM Abe: Undecided on next appointment of the next BoJ Governor (Kuroda’s first term is set to end on April 8, 2018)
Bank of Japan (BOJ) Gov Kuroda reiterated in parliament that must maintain ‘powerful’ easing for economy as was still distant to price target
Europe:
BOE’s McCafferty reiterated MPC view that interest rates will likely have rise earlier and gradually. Need to bring inflation back to target in the next 2 or 3 years
ECB’s Stournaras (Greece) reiterated view that Greece economy forecast to grow 2.4% in 2018 and 2.5% in 2019
PM May stated that she asked political parties in Northern Ireland to make final push to restore devolved government. Possible to see devolved government in N. Ireland very soon
Ireland PM Varadkar: Irish and UK govt’s agreed the December Brexit deal on the Irish border still stood; wanted comprehensive free trade agreement with the UK post Brexit. Hopeful that N Irish parties Sinn Fein and the DUP could agree on the resumption of a power sharing govt this week
Americas:
President Trump proposed a $4.4T federal budget for 2019. White House 2019 budget plan sought $1.7T of cuts to mandatory spending and receipts. Raises GDP growth forecasts for 2018 thru 2020 period while trimming its inflation forecast for 2018 and 2019
Economic Data:
(NO) Norway Q1 Consumer Confidence: 20.3 v 18.3 prior
(NL) Netherlands Dec Retail Sales Y/Y: 1.5 v 6.1% prior
(JP) Japan Jan Preliminary Machine Tool Orders Y/Y: 48.8% v 48.3% prior
(FR) France Q4 Preliminary Private Sector Payrolls Q/Q: 0.3% v 0.3%e; Wages Q/Q: 0.1% v 0.2%e
(HU) Hungary Jan CPI M/M: 0.3% v 0.4%e; Y/Y: 2.1% v 2.0%e
(CH) Swiss Jan Producer & Import Prices M/M: 0.3% v 0.2% prior; Y/Y: 1.8% v 1.8% prior
(UK) Jan CPI M/M: -0.5% v -0.6%e; Y/Y: 3.0% v 2.9%e; CPI Core Y/Y: 2.7% v 2.6%e; CPIH Y/Y: 2.7% v 2.8%e
(UK) Jan RPI M/M: -0.8% v -0.7%e; Y/Y: 4.0% v 4.1%e, RPI-X (ex-mortgage interest payment) Y/Y: 4.0% v 4.1%e, Retail Price Index: 276.0 v 276.2e
(UK) Jan PPI Input M/M: 0.7% v 0.6%e; Y/Y: 4.7% v 4.1%e
(UK) Jan PPI Output M/M: 0.1% v 0.2%e; Y/Y: 2.8% v 3.0%e
(UK) Jan PPI Output Core M/M: 0.3% v 0.2%e; Y/Y: 2.2% v 2.3%e
(UK) Jan ONS House Price Index Y/Y: 5.2% v 4.9%e
(ZA) South Africa Q4 Unemployment Rate: 26.7% v 27.2%e (moves off 15 year high)
Fixed Income Issuance:
(ID) Indonesia sold total IDR20T vs. IDR8T target in 3-month and 12-month, 10-year,15-year and 20-year bonds
(ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2037, 2040, 2044 and 2048 bonds
(ES) Spain Debt Agency (Tesoro) sold total €4.005B vs. €3.5-4.5B indicated range in 6-month and 12-month Bills
(CH) Switzerland sold CHF523.5 in 6-month Bills; Yield: -0.851% v -0.929% prior
(IT) Italy Debt Agency (Tesoro) sold total €7.677B vs. €6.25-7.75B indicated range in 2020, 2024 and 2048 BTP Bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.1% at 372.7, FTSE flat at 7173, DAX -0.1% at 12266, CAC-40 -0.1% at 5133 , IBEX-35 -0.6% at 9708, FTSE MIB -0.5% at 22215 , SMI -0.3% at 8799, S&P 500 Futures -0.6%]
Market Focal Points/Key Themes:
European Indices trade mostly lower taking the lead from weaker US futures. The FTSE trades little changed following a slightly hotter CPI reading, as Gilt Yields pare declines.
Earnings picked up this morning with weakness in shares of Michelin and Kering following results, while TUI, Randstad and Pendragon outperform.
Elsewhere Bourbon trades lower after announcing a new strategic plan, while Cegedim trades sharply lower after BPO France sells stake in the company.
Looking ahead notable earners include PepsiCo, Under Armour, HCA and Tower International.
Movers
Consumer Discretionary [Kering [KER.FR] -2.3% (Earnings), TUI [TUI.UK] +4.4% (Earnings), Pendragon [PDG.UK] +15% (Earnings), RWS Holding [RWS.UK]
1.3% (AGM Statement), Metro [B4B.DE] +1.6% (Earnings)]
Industrials [ Michelin [ML.FR] -1.2% (Earnings)]
Telecom [Telenet [TNET.BE] -7% (Earnings)]
Financials [Randstad [RAND.NL] +2.3% (Earnings)]
Energy [Bourbon [GBB.FR] -4% (new strategic plan)]
Speakers
Ireland Min D’Arcy: March Brexit deadline might not be met
South Africa govt said to have declared a nation disaster on drought
Japan Currency Head Asakawa: Watching to see if speculation was behind the recent JPY currency (Yen) price movements
China FX Regulator SAFE: reiterated its stance to prevent forex risks and to deepen the market opening
China PBoC Gov Zhou reiterated policy stance to maintain prudent monetary policy and appropriate growth in credit and social financing
IEA Monthly Report raised its 2018 global oil demand growth forecast from 1.3M bpd to 1.4M bpd. OPEC had almost cleared oil glut but faces shale danger. Saw US oil production overtaking Saudi soon and top Russia by end-2018
Currencies
USD was modestly lower as the Trump budget brings into focus the US twin deficits
GBP/USD was little fazed by the slight beat of the Jan CPI data to 3.0%. The BOE was more hawkish in its commentary last week and Carney noted that inflation could climb back to 3% in the short-term. Brexit concerns continued to be a headwind as an Irish minister express some doubt of deadlines being met by next month on negotiations.
EUR/USD was higher by 0.2% just ahead of the NY morning at 1.2315 area.
USD/JPY was lower by 0.9% to test under 107.70 area as dealers pondered the limits of an expansionary policy. Japan PM Abe noted that he was still undecided on next appointment of the next BoJ Governor (**Note: News reports over the possible reappointment of BOJ Gov Kuroda came out late last Friday , but USD/JPY did not recover to above 109). Japan Currency Head Asakawa noted that they were watching to see if speculation was behind the recent JPY currency (Yen) price movements
Fixed Income
Bund Futures trades up 37 ticks at 158.35 as futures maintain defensive conditions. Upside targets 158.85, while a continued move lower targets the157.25 level.
Gilt futures trade at 121.05 up 9 ticks, following mixed UK CPI data. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.75 then 123.25.
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.891T from €1.899T prior. Use of the marginal lending facility falls to €M from €3M prior.
Corporate issuance saw 2 issuers raise $2.4B in the primary market
Looking Ahead
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
05:30 (EU) ECB allotment in 7-day Main Financing Tender (MRO) tender
06:00 (US) Jan NFIB Small Business Optimism: 105.7e v 104.9 prior
06:00 (IL) Israel Jan Trade Balance: No est v -$1.8B prior
06:00 (TR) Turkey to sell 2019 and 2027 bonds
To sell Zero Coupon 2019 Bonds; Yield: % v 13.53% prior, bid-to-cover: x v 6.66x prior
To sell 2027 Bonds; Avg Yield: % v 12.19% prior; Bid-to-cover: x v 2.76x prior
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia announces weekly OFZ bond auction
07:00 (IS) Iceland Jan Unemployment Rate: No est v 2.2% prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:00 (PL) Poland Dec Current Account: -€0.4Be v +€0.2B prior; Trade Balance: -€0.4Be v +€0.1B prior
08:00 (US) Fed’s Mester (voter, hawk) on monetary policy and economic outlook
08:05 (UK) Baltic Dry Bulk Index
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves: € v € prior
11:30 (US) Treasury to sell 4-Week Bills
16:30 (US) Weekly API Oil Inventories
