Notes/Observations
German IFO sentiment moves off record highs – UK Q4 GDP revised lower in its 2nd reading for its slowest annual pace since 2012 (YoY: 1.4% v 1.5%e)
Asia:
Shanghai Composite reopens after 1-week Lunar New Year break; ends +2.0%
PBoC injected cash in its Open Market Operation (OMO) for its 1st injection after 16 consecutive skips
Europe:
German Finance Ministry Feb Report: No end in sight for German economic expansion; forecasts 2018 GDP growth of 2.4%
German SPD party said to support nomination of Bundesbank’s Weidmann as next ECB President (later refuted)
PM May’s Cabinet did not agree to her negotiating strategy for the Brexit transition period before it was sent to the EU. The proposal sent to EU nations "prompted a furious backlash after raising the prospect of an open-ended transition period after Brexit." Cabinet ministers were told about the position paper less than 24 hours before it was published. UK PM May and her senior Cabinet minister to meet at Chequers on Thursday, Feb 22nd to try and hammer out a deal over the Govt’s approach to Brexit
Moody’s raised Greece sovereign rating two notches to B3 from Caa2; outlook Positive
Americas:
FOMC Jan Minutes saw the majority members view that stronger economic growth would raise the likelihood of further rate hikes. Saw appreciable risk inflation to lag target with almost all Fed officials seeing inflation rising to 2% goal. Number of Fed officials saw upside risks to growth from tax cut – Fed’s Quarles (hawk, FOMC voter): Economy was performing well; current policy remained accommodative, gradual rate increases were appropriate
Fed’s Kashkari (dove, non-voter): Want to see clear signs of inflation rising to 2% before supporting more rate hikes
Treasury undersecretary Malpass accused China of “patently non-market behavior”; US needs a stronger response to counter it
Energy:
Weekly API Oil Inventories: Crude: -0.9M v +3.9M prior
Economic Data:
(FR) France Jan Final CPI M/M: -0.1% v -0.1%e; Y/Y: 1.3% v 1.4%e
(FR) France Jan Final CPI EU Harmonized M/M: -0.1% v -0.1%e; Y/Y: 1.5% v 1.5%e
(FR) France Feb Business Confidence: 109 v 110e, Manufacturing Confidence: 112 v 113e, Production Outlook Indicator: 30 v 33e, Own-Company Production Outlook: 16 v 15e
(CH) Swiss Q4 Industrial Output WDA Y/Y: 8.7 v 9.2% prior, Industry & Construction Output WDA Y/Y: 8.5% v 8.0% prior
(HK) Hong Kong Jan CPI Composite Y/Y: 1.7% v 1.8%e
(HK) Hong Kong Jan Unemployment Rate: 2.9% v 2.9%e (matched lowest level since Feb 1998)
(SE) Sweden Q4 Total Number of Employees Y/Y: 2.4% v 3.0% prior
(DE) German Feb IFO Business Climate: 115.4 v 117.0e; Current Assessment: 126.3 v 127.0e, Expectations Survey: 105.4 v 107.9
(IT) Italy Dec Industrial Orders M/M: 2.5 v 0.4% prior; Y/Y: 7.2 v 8.9% prior
(IT) Italy Dec Industrial Sales M/M: 6.5 v 1.4% prior; Y/Y: 6.9 v 5.1% prior
(UK) Q4 Preliminary GDP (2nd reading) Q/Q: 0.4% v 0.5%e; Y/Y: 1.4% v 1.5%e (slowest annual pace since 2012)
(UK) Q4 Preliminary Private Consumption Q/Q: 0.3% v 0.4%e, Government Spending Q/Q: 0.6% v 0.3%e, Gross Fixed Capital Formation Q/Q: 1.1% v 0.5%e, Exports Q/Q: -0.2% v +0.5%e, Imports Q/Q: 1.5% v 1.0%e
(UK) Q4 Preliminary Total Business Investment Q/Q: 0.0% v 0.4%e; Y/Y: 2.1% v 2.4%e
(UK) Dec Index of Services M/M: 0.0% v 0.0%e; 3M/3M: 0.6% v 0.5%e
(IT) Italy Jan Final CPI M/M: 0.3% v 0.2% prelim; Y/Y: 0.9% v 0.8% prelim
(IT) Italy Jan Final CPI EU Harmonized M/M: -1.5% v -1.6% prelim; Y/Y: 1.2% v 1.1%e
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.8% at 378.0, FTSE -1.0% at 7207, DAX -1.0% at 12349, CAC-40 -0.5% at 5276 , IBEX-35 -0.1% at 9814, FTSE MIB -0.6% at 22526 , SMI -0.7% at 8930, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes: European Indices trade lower across the board following on from a lower close in Wallstreet overnight and weaker futures this morning following the FOMC minutes yesterday. This morning also saw another swath of earnings with Barclays bucking the oveall market following results with shares higher by over 5%. Positive results from French names Axa, Veolia and Arkema and Bouygues help the CAC marginally outperform, with positive results from Telefonica helping the Spanish Ibex. To the downisde, BATS, Anglo American, Kaz minerals and BAE systems weigh on the FTSE, while Deutsche Telekom trades lower in Germany following earnings miss. Looking ahead notable earners include Sprouts, Hormel and Orbital ATK.
Movers
Consumer Discretionary [BATs [BATS.UK] -5.1% (Earnings)]
Utilities [Veolia [VIE.FR] +0.6% (Earnings)]
Materials [ Anglo American [AAL.UK] -3.8% (Earnings), Kaz Minerals [KAZ.UK] -2.4% (Earnings), Arkema [AKE.FR] +2.8% (Earnings)]
Industrials [BAE Systems [BA.UK] -2.5% (Earnings)]
Telecom [ Bouygues [EN.FR] +2.6% (Earnings), Deutsche Telekom [DTE.DE] -2.9% (Earnings), Telefonica [TEF.ES] +2.6% (Earnings)]
Financial [ Barclays [BARC.UK] +5.2% (Earnings), Axa [CS.FR] +1.0% (Earnings), RSA [RSA.UK] +3.4% (Earnings)]
Speakers
German Chancellor Merkel commented in Bundestag Parliament ahead of Friday’s EU Leader Summit that Each Euro member must undertake ambitious reforms. Must remain competitive; embrace digitization. Stability-growth pact remained the compass of Euro policy
EU official expressed doubts that Brexit transition would hit the March deadline
IFO Economists: Domestic economy and exports were slightly less euphoric. Coalition deal not a cause for jubilation but rather sobriety
Japan Currency Head Asakawa reiterated govt view that BOJ easing was not aimed at weakening the JPY currency (Yen)
Indonesia Finance Ministry: Maintaining planned issuance for 2018; viewed rise in yields as temporary
Currencies
USD maintaining its firm tone in the aftermath of the release of Jan FOMC minutes which help to push Treasury yield higher. Greenback rallied after Jan Minutes saw the majority members of FOMC view that stronger economic growth would raise the likelihood of further rate hikes
GBP/USD continued its soft tone for the 5th straight session as UK Q4 GDP was revised lower in its 2nd reading for its slowest annual pace since 2012 (YoY: 1.4% v 1.5%e). Dealers noted that overall Brexit headlines the past few session were not showing any meaningful progress yet in the transition phase
EUR/USD steady by holding below the 1.23 level but in the middle part of its 2018 400 pip trading range. Focus on ECB Jan minutes for clarity and timeline on potential forward language change. On Wednesday reports circulated that ECB would look to gradually amend its forward guidance before it ended its asset purchase program
Fixed Income
Bund Futures trades up 32 ticks at 158.54 extending its gains after German IFO disappoints across the board. Upside targets159.25, while a return lower targets the157.75 level.
Gilt futures trade at 121.66 up 6 ticks after Q4 UK GDP is revised lower. Support continues to stand at 120.75 then 120.15, with upside resistance at 121.75 then 122.25.
Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.827T from €1.835T prior. Use of the marginal lending facility rose to €119M from €76M prior.
Corporate issuance saw 5 issuers raise $4.5B in the primary market
Looking Ahead
(CA) Canada Feb CFIB Business Barometer: No est v 62.7 prior
(BR) Brazil Feb CNI Industrial Confidence: No est v 59.0 prior
(AR) Argentina Feb Consumer Confidence index: No est v 45.2 prior
05:30 (HU) Hungary Debt Agency (AKK) to sell in 12-month Bills
05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds
05:30 (UK) DMO to sell £950M in 0.125% I/L Nov 2036 Gilts
05:30 (PL) Poland to sell Bonds
06:00 (UK) Feb CBI Retailing Reports Sales: 14e v 12 prior; Total Distribution: No est v 14 prior
06:00 (IE) Ireland Jan PPI M/M: No est v 0.4% prior; Y/Y: No est v -3.6% prior
06:00 (CZ) Czech Republic to sell 3-month Bills
06:00 (RO) Romania to sell Bonds
06:30 (IS) Iceland to sell 6-month Bills – 06:45 (US) Daily Libor Fixing
06:30 (TR) Turkey Feb Capacity Utilization: No est v 78.2 prior
06:30 (TR) Turkey Feb Real Sector Confidence (Seasonally Adj): No est v 110.9 prior; Real Sector Confidence (unadj): No est v 108.3 prior
07:30 (EU) ECB account of Jan 24-25th policy meeting (Jan Minutes)
08:00 (PL) Poland Jan M3 Money Supply M/M: -1.1%e v +2.2% prior; Y/Y: 4.9%e v 4.6% prior
08:00 (RU) Russia Gold and Forex Reserve w/e Feb 16th: No est v $447.4B prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 230Ke v 230K prior; Continuing Claims: 1.94Me v 1.942M prior
08:30 (CA) Canada Dec Retail Sales M/M: 0.0%e v +0.2% prior Retail Sales Ex Auto M/M: 0.3%e v 1.6% prior
09:00 (BE) Belgium Feb Business Confidence: 1.5e v 1.8 prior
10:00 (US) Leading Index: 0.7%e v 0.6% prior
10:00 (MX) Mexico Central Bank (Banxico) Feb Minutes
10:00 (US) Fed’s Dudley (dove, FOMC voter) to speak at New York Fed Briefing on Puerto Rico
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (US) Weekly DOE Crude Oil Inventories
11:00 (US) Feb Kansas City Fed Manufacturing Activity: 18e v 16 prior
(IT) Italy Debt Agency (Tesoro) announcement for BTP and Floating Rate Note (CCTeu)
12:10 (US) Fed’s Bostic (2018 voter, dove) speaks at Banking Conference in Atlanta
13:00 (US) Treasury to sell 7-Year Notes
15:30 (US) Fed’s Kaplan (non-voter, dove) on panel
