Notes/Observations
New BOJ leadership likely seen as more dovish than the current leadership (Kuroda reappointed for another 5-year term which BoJ Exec Dir Amamiya and reflationist academic Wakatabe to be nominated BoJ Deputy Governors)
UK Retail Sales data disappoints for the 2nd straight month
Asia:
Japan government confirmed submission of nomination for Kuroda for another 5-year term as BoJ Gov (as speculated). BoJ Exec Dir Amamiya and reflationist academic Wakatabe to be nominated for positions as BoJ Deputy Governors.
BoJ Gov Kuroda reiterated domestic economy expanding moderately, but price growth remained low thus must maintain powerful easing
Japan Fin Min Aso reiterates G7 stance that sudden FX moves have big effects on economy, watching foreign exchange moves ‘carefully’
RBA Gov Lowe: Did not see a strong case for a near-term adjustment of monetary policy but at some point it would be appropriate to have less monetary stimulus. Labor market is noticeably stronger than RBA expected; reiterates more likely that next interest rate move will be rate hike
Europe:
Germany EU budget contribution may rise €3.0-3.5B
Institute of Directors (trade body) leaders propose ‘hybrid’ Brexit deal
Kantar poll showed that two-thirds of SPD members supported the German grand coalition
Final polls ahead of Italy Mar 4th election shows no parties or coalitions able to form a majority
Americas:
Dec Total Net TIC Flows: -$119.3B v $33.5B prior; Net Long-term Tic Flows: $27.6B v $57.5B prior; China Treasury holdings steady in month but its holdings of US Debt rose in 2017 by most since 2010
Bank of Canada (BOC) Dep Gov Schembri: higher debt levels pose a challenge to BOC framework
Economic Data:
(DE) Germany Jan Wholesale Price Index M/M: +0.9 v -0.3% prior; Y/Y: 2.0% v 1.8% prior
(CZ) Czech Q4 Advance GDP Q/Q: 0.5% v 0.7%e; Y/Y: 5.1% v 5.3%e
(CZ) Czech Dec Export Price Index Y/Y: -2.8% v -2.7% prior; Import Price Index Y/Y: -4.2% v -3.3% prior
(PL) Poland Jan Employment M/M: 2.0% v 1.6%e; Y/Y: 3.8% v 3.4%e
(PL) Poland Jan Average Gross wages M/M: -7.7% v -7.9%e; Y/Y: 7.3% v 6.9%e
(UK) Jan Retail Sales Ex Auto Fuel M/M: 0.1% v 0.6%e; Y/Y: 1.5% v 2.4%e
(UK) Jan Retail Sales Inc Auto Fuel M/M: 0.1 v 0.5%e; Y/Y: 1.6% v 2.5%e
Fixed Income Issuance:
(ZA) South Africa sold total ZAR900M vs. ZAR900M indicated in I/L 2029, 2033 and 2050 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 +0.9% at 380.0, FTSE +0.9% at 7296, DAX +1.1% at 12480, CAC-40 +1.0% at 5274 , IBEX-35 +1.1% at 9821, FTSE MIB +1.2% at 22764 , SMI +0.7% at 8978, S&P 500 Futures +0.4%]
Market Focal Points/Key Themes: European Indices continue to rally, following yet another strong close in Wallstreet overnight, with futures pointing to another higher open in the US. French large caps continued to dominated earnings with positive earnings from Renault, EDF, and Danone, while Air France and Faurecia trades lower. In Germany Insurance giant Allianz trades little changed after Q4 results. In Scandanavia Norsk Hydro reported a Rev beat, with Saab trading sharply lower after earnings. Looking ahead notable earners include Coca-Cola, Newell Brands, American Axle and Campbell Soup.
Movers
Consumer Discretionary [ Air France [AF.FR] -6% (Earnings)]
Consumer Staples [ Danone [BN.FR} +1.5% (Earnings)]
Industrials [Faurecia [EO.FR] -3.5% (Earnings), Renualt [RNO.FR] +3.0% (Earnings), Saab [SAABB.SE] -8.2% (Earnings)]
Financials [Segro [SGR.UK] +6.5% (Earnings)]
Energy [EDF [EDF.FR] +5% (Earnings), Norsk Hydro [NHY.NO] +3.1% (Earnings)]
Speakers
ECB’s Coeure (France): Rebound in trade mainly reflects cyclical factors
EU chief Brexit negotiator Barnier: On the way to an orderly UK withdrawal; not heading toward a disorderly exit. Secured citizens’ rights until Brexit Day
UK Govt said to be prepared to set out its vision for financial services in the post Brexit environment which favors an ambitious mutual recognition of regulations to preserve the City’s access to the EU
Germany Chancellor Merkel reiterated optimism that CDU ad SPD parties will approve the coalition agreement
Russia Central Bank: Inflation seen moving closer to 4% target in 2019. Forecasts 2018 inflation to be below 4.0%
Turkey Foreign Minister Cavusoglu: Agreed to normalize relations with US after establishing mechanisms on issues US Secretary of State Tillerson stated that lots of work yet to be done on relationship with Turkey and found ourselves a bit at a crisis poin. Called on Turkey to release NASA scientist Golge, paster Brunson and others
Turkey President Chief Adviser Ertem: An overvalued Euro currency is a positive for Turkey’s exports
Japan Chief Cabinet Sec Suga reiterated view that carefully watch FX market moves to determine if price action is one-sided
Japan Currency Head Asakawa: Have been excessive and one-sided moves in FX; will take appropriate action in line with G7
Currencies
USD remained on soft footing and hit fresh cycle lows against key pairs. One analyst noted that the higher US yields was working against the greenback as it led to less investor demand for fixed income products (aka less flows into the US). Interest rates have risen sharply in recent months as fiscal stimulus has boosted growth expectations
EUR/USD was back above the 1.25 level with market pricing remaining consistent with Q2-19 ECB lift-off. Despite expectations of a steady and gradual tightening cycle, there remains scope to price a faster initial pace of hikes
GBP/USD saw its session gains drift away after – UK Retail Sales data disappointed for the 2nd straight month. Pair holding above the 1.41 level
USD/JPY stayed below the 106 level despite a ‘dovish’ reappointment of BoJ Gov Kuroda for another five year term with Amamiya and Wakatabe for the deputy posts. Japanese official note that they continue to watch the markets for one-sided moves but dealers pointing out that despite the JPY rally the Japanese equity markets has been rising (contrary to its historical relationship). Overall the market believes that JPY currency was not strong enough to warrant intervention at this time
Fixed Income
Bund Futures trades up 27 ticks at 158.03 amid a quiet end to the week .Upside targets 158.85, while a continued move lower targets the157.25 level.
Gilt futures trade at 120.98 up 38 ticks following disappointing UK retail sales and as the bearish trend takes a break. Support continues to stand at 120.75 then 120.15, with upside resistance at 121.75 then 122.25.
Friday’s liquidity report showed Thursday’s excess liquidity rose to €1.895T from €1.890T prior. Use of the marginal lending facility rose to €53M from €15M prior.
Corporate issuance saw 3 issuers raise $4.6B in the primary market
Looking Ahead
(ZA) South Africa President Ramaphosa State of the Nation speech
06:00 (BR) Brazil Dec IBGE Services Sector Volume Y/Y: No est v -0.7% prior
06:00 (UK) DMO to sell combined £3.0B in 1-month, 3-month and 6-month Bills (£0.5, £0.5B and £2.0B respectively)
06:30 (CL) Chile Central Bank Meeting Minutes
06:30 (IN) India Weekly Forex Reserves
06:45 (US) Daily Libor Fixing – 08:00 (IN) India announces upcoming Bill auction (held on Wed)
08:05 (UK) Baltic Dry Bulk Index
08:30 (US) Jan Housing Starts: 1.225Me v 1.192M prior; Building Permits: 1.300Me v 1.300M prior (revised from 1.302M)
08:30 (US) Jan Import Price Index M/M: 0.6%e v 0.1% prior; Y/Y: 3.0%e v 3.0% prior; Import Price Index ex Petroleum M/M: +0.1%e v -0.2% prior
08:30 (US) Jan Export Price Index M/M: +0.3%e v -0.1% prior; Y/Y: No est v 2.6% prior
08:30 (CA) Canada Dec Int’l Securities Transactions (CAD): No est v 19.6B prior
08:30 (CA) Canada Dec Manufacturing Sales M/M: 0.3%e v 3.4% prior
10:00 (US) Feb Preliminary University of Michigan Confidence: 95.3e v 95.7 prior
11:00 (EU) Potential sovereign ratings after European close (Egypt Sovereign Debt to Be Rated by Moody’s; Greece Sovereign Debt to be rated by Fitch and Hungary Sovereign Debt to be rated by S&P)
13:00 (US) Weekly Baker Hughes Rig Count data
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