Notes/Observations
Euro Zone PMI Services data remains solid; (Beats: Euro Zone, Germany, Italy, Russia; Miss: France, UK)
Germany political parties said to seek a grand coalition by tomorrow (Feb 6th)
Asia:
China Jan Caixin PMI Services hits its highest since May 2012 (54.7 v 53.5e)
China PBoC skipped its OMO operation for the 8th straight session
China Ministry of Commerce (MOFCOM): to launch anti-dumping investigation into US sorghum imports
Japan Jan PMI Services: 51.9 v 51.1 prior
Bank of Japan (BOJ) Gov Kuroda: No change in approach to QE; maintaining 2% inflation target is very important
Japan PM Abe expected to ask the US and South Korea to conduct a planned joint military drill after the Olympics without scaling it down so as to keep pressuring North Korea to give up its nuclear and missile development
Europe:
Germany suspended coalition talks after failing to meet self-imposed Sunday deadline but would resume Monday
Chancellor Merkel: Not yet possible to say how long talks would last but did have good groundwork. There were still important issues that need to be resolved; optimistic but difficult negotiations ahead
SPD Sec Gen: Merkel/SPD failed to conclude coalition negotiations in time to meet self-imposed Sunday deadline but progress had been made
UK Official: PM May has ruled out staying in customs union (**Note: Comments come after reports that Tory MPs warned that PM May would face a coup if she persisted with plans to keep Britain in a customs union with the EU
Americas:
Outgoing Fed Chair Yellen: Asset valuations were generally elevated, but didn’t want to call what we were seeing was a bubble. Saw solid growth and would expect more gradual rate hikes if conditions persist
Fed’s Williams (moderate, voter): need to continue raising interest rates; hikes will keep the economy on track and avoid overheating
Larry Lindsey said to withdraw from being considered for the Fed Vice Chairman position
Energy:
US Sec of State Tillerson: Considering restricting imports of Venezuelan crude oil and exports of US refined products to Venezuela to put pressure on President Maduro to “return to the constitution”
Economic Data:
(IN) India Jan PMI Services: 51.7 v 50.9 prior (2nd month of expansion); Composite PMI: 52.5 v 53.0 prior
(IE) Ireland Jan Services PMI: 59.8 v 60.4 prior, Composite PMI: 59.0 v 60.2 prior
(RU) Russia Jan PMI Services: 55.1. V 56.9e (24th month of expansion), Composite PMI: 54.8 v 56.0 prior
(TR) Turkey Jan CPI M/M: 1.0% v 1.2%e; Y/Y: 10.4% v 10.6%e; CPI Core Index Y/Y: 12.2% v 12.2%e
(TR) Turkey Jan PPI M/M: 1.0% v 1.4% prior; Y/Y: 12.1% v 15.5% prior
(ZA) South Africa Jan PMI (Whole Economy): 49.0 v 48.4 prior (6th month of contraction)
(SE) Sweden Jan PMI Services: 61.3 v 64.6 prior
(CZ) Czech Dec National Trade Balance (CZK): -2.2B v -6.7Be
(HU) Hungary Dec Retail Sales Y/Y: 5.9% v 6.4%e
(ES) Spain Jan Services PMI: 56.9 v 55.0e (51st month of expansion and highest since July); Composite PMI:56.7 v 55.6e
(IT) Italy Jan Services PMI: 57.7 v 55.9e (20th month of expansion and highest since July), Composite PMI: 59.0 v 57.4e
(FR) France Jan Final Services PMI: # v 59.3e confirms 19th month of expansion), Composite PMI: # v 59.7e
(DE) Germany Jan Final Services PMI: 57.3 v 57.0e (confirms 55th month of expansion), Composite PMI: 59.0 v 58.8e
(EU) Euro Zone Jan Final Services PMI: 58.0 v 57.6e (confirms 55th month of expansion),, Composite PMI: 58.8 v 58.6e
(EU) Euro Zone Feb Sentix Investor Confidence: 31.9 v 33.2e
(UK) Jan Services PMI: 53.0 v 54.1e (18th month of expansion but lowest since Aug 2016), Composite PMI: 53.5 v 54.6e
(EU) Euro Zone Dec Retail Sales M/M: -1.1% v -1.0%e; Y/Y: 1.9% v 1.9%e
(NO) Norway Jan House Price Index M/M: -2.0% v -1.1% prior; Y/Y: -2.2% v -2.1% prior
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -1.0% at 384.1, FTSE -1.0% at 7366, DAX -0.5% at 12715, CAC-40 -0.9% at 5317 , IBEX-35 -0.6% at 10145, FTSE MIB -0.7% at 23048 , SMI -1.0% at 9132, S&P 500 Futures flat]
Market Focal Points/Key Themes: European Indices trade lower across the board, but off the session lows as markets have faded a large part of the earlier move lower, on the back of a slight pullback in European Bond yields as well as a bounce in US futures. Shares of Ryanair trade lower after reporting Q3 results, with a cautious tone on fares hitting the stock. Tesco shares trade little changed after tweaking higher their guidance, whilst in Italy Fiat Chrysler trades lower after talk of sizable fines in the US related to the Diesel emissions probe. Looking ahead notable earners include Bristol Myers and Sysco.
Movers
Consumer Discretionary [Tesco [TSCO.UK] -0.7% (Trading update), Ryanair [RYA.UK] -2.9% (Earnings), Wizz Air [WIZZ.UK] -2.0% (Jan Metrics) ]
Industrials [Fiat Chrysler [FCA.IT] -1.9% (Reports of substantial fines in Diesel emission case)]
Healthcare [Shield Therapeutics [STX.UK] -50% (Feraccru study failed to meet primary endpoint)]
Materials [ Randgold Res [RRS.UK] -1.1% (Earnings)]
Speakers
Hungary Central Bank’s Nagy: Not planning on expanding the Interest Rate Swap program; might keep Base Rate steady at 0.9% through 2020. Might offer HUF1.2T in Interest Rate Swaps (IRS) in 2018
Turkey Dep PM Simsek: taking steps to reduce inflation to single digits. Core inflation expected to gradually decline
Polls in Italy could be downplaying the chance that center-right coalition back by Berlusconi could be closer to a majority in the Mar 2nd election
German CDU, CSU and SPD parties said to want to present a final grand coalition agreement on Tuesday, Feb 6th
S&P: Disorderly Brexit process could pressure the UK sovereign ratings (**Note: S&P currently has UK at AA with a negative outlook)
Currencies
The USD continue to face selling pressures despite the better payroll and wage data from last week.
EUR/USD managed to eeked out gains as optimism continued to flow about a grand coalition in Germany. The pair fought off cross-related pressures to hold above the 1.2460 area just ahead of the NY morning
GBP/USD was little changed around 1.4130 despite the Jan UK PMI Services reading missed expectations.
JPY/USD’s correlation with US interest yields seemed to have broken down as the pair tested 109.80 in the session today despite BoJ rhetoric that it would continue advocating an easy monetary policy
Fixed Income
Bund Futures trades up 20 ticks at 158.16 as futures are underpinned as small dovish repricing supports. Upside targets 159.85, while a continued move lower targets the157.75 level.
Gilt futures trade at 121.36 down 5 ticks, tentatively rebounding from Friday’s low. Support continues to stand at 121.25 then 120.75, with upside resistance at 122.75 then 123.25.
Monday’s liquidity report showed Friday’s excess liquidity fell to €1.897T from €1.900T prior. Use of the marginal lending facility fell to €39M from €65M prior.
Corporate issuance last week saw high-grade volumes reach $25B in the primary market.
Looking Ahead
05:25 (BR) Brazil Central Bank Weekly Economists Survey
05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month Bills
06:00 (IL) Israel to sell Bonds
06:30 (CL) Chile Dec Economic Activity Index (Monthly GDP) M/M: -0.1%e v 0.7% prior; Y/Y: 2.4%e v 3.2% prior
06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil Jan PMI Services: No est v 47.4 prior, PMI Composite: No est v 48.8 prior
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week (if any)
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 4.9-6.1B in 3-month, 6-month and 12-month BTF Bills
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
09:45 (US) Jan Final Markit Services PMI: 53.3e v 53.3 prelim; Composite PMI: No est v 53.8 prelim
10:00 (US) Jan ISM Non-Manufacturing Composite: 56.7e v 55.9 prior
10:00 (CO) Colombia Dec Exports: $3.7Be v $3.0B prior
11:00 (EU) ECB Draghi in EU Parliament – 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index
19:00 (CO) Colombia Jan CPI M/M: 0.7%e v 0.4% prior; Y/Y: 3.7%e v 4.1% prior, Core M/M: No est v 0.5% prior; Y/Y: No est v 5.0% prior
19:01 (UK) Jan BRC Sales LFL Y/Y: 0.7%e v 0.6% prior
19:30 (AU) Australia Q4 Retail Sales Ex Inflation Q/Q: 1.0%e v 0.1% prior
19:30 (AU) Australia Dec Retail Sales M/M: -0.2%e v +1.2% prior
19:30 (AU) Australia Dec Trade Balance (A$): +0.2Be v -628M prior
20:00 (PH) Philippines Jan CPI M/M: 0.6%e v 0.3% prior; Y/Y: 3.5%e v 3.3% prior; CPI Core Y/Y: 3.2%e v 3.0% prior
22:30 (AU) Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 1.50%
22:30 (AU) Reserve Bank of Australia (RBA) Interest Rate Decision: Expected to leave Cash Rate Target unchanged at 1.50%
