India Central Bank again keeps policy steady and switches to neutral stange
Notes/Observations
India Central Bank (RBI) surprises market with another pause opting to wait for more clarity on inflation trends and on how a radical crackdown on "black money" was impacting economic growth.
Overnight:
Asia:
PBOC again skipped OMOs for 4th consecutive trading day. PBoC stated that overall liquidity in banking system was staying at relatively high level
BOJ Jan 31st opinions noted that it should be prudent about changing policy hastily as concerns about its ability to control yield curve could grow. CPI likely to rise as output gap tightened but would take time to accelerate and very unlikely inflation expectations would pick up significantly
Japan 2016 Current Account surplus the highest since 2007
Europe:
BOE’s Forbes (hawk): UK economy might soon need a rate increase
IMF annual review of Greece that the country’s debt remains "highly unsustainable," with little prospect of growth picking up again without debt relief and major overhauls to the pension and tax systems
Energy:
Weekly API Oil Inventories: Crude: +14.2M v +5.8M prior (3rd straight build and largest since Feb 2015; 2nd largest build on record)
Economic data
(JP) Japan Jan Eco Watchers Current Survey: 49.8 v 51.8e; Outlook Survey: 49.4 v 51.5e
(TH) Thailand Central Bank (BOT) left its Benchmark Interest Rate unchanged at 1.50% (as expected)
(FR) Bank of France Business Sentiment: 101 v 103e
(CZ) Czech Jan Unemployment Rate: 5.3% v 5.4%e
(IS) Iceland Central Bank (Sedabanki) left its 7-Day Term Deposit Rate unchanged at 5.00%
(IN) India Central Bank (RBI) left its Repurchase Rate unchanged at 6.25% (not expected); changed its policy stance to neutral from accommodative
Fixed Income Issuance:
(IN) India sold total INR100B vs. INR100B indicated in 3-month and 6-month Bills
(FI) Finland opened its book to sell EUR-denominated 5-year and 30-year bonds
(DK) Denmark sold total DKK2.31B in 2021 and 2027 Bonds
(SE) Sweden sold total SEK3.0B vs. SEK3.0B indicated in 2022 and 2026 bonds
(GR) Greece Debt Agency (PDMA) sold €1.138B vs. €875M indicated in 13-Week Bills; Avg Yield: 2% v 2.70% prior; Bid-to-cover: x v 1.3x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
[Stoxx50 +0.5% at 3,251, FTSE flat at 7,184, DAX +0.3% at 11,586, CAC-40 +0.7% at 4,789, IBEX-35 +0.3% at 9,356, FTSE MIB +0.5% at 18,748, SMI +0.3% at 8,396, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes: European equity indices are trading mixed after a generally positive end to the Asian session overnight; Market participants cautious over political uncertainty over France’s upcoming presidential elections; Banking stocks once again trading notably lower across the board; Energy stocks also trading lower as oil trades near contract lows; shares of Vinci and Sanofi leading the gains in the Eurostoxx after releasing their respective year-end results; commodity and mining stocks trading notably higher in the FTSE 100 as copper trades sharply higher intraday.
Upcoming scheduled US earnings (pre-market) include Allergan, Alaska Air, ArcBest, Arch Coal, Axalta Coating, Brink’s Company, Broadridge Financial Solutions, Carlyle Group, Cognizant Technology, Euronet Worldwide, Exelon, Goodyear Tire, Genesee & Wyoming, Humana, Jacobs Engineering Group, Louisiana-Pacific, Owens Corning, Performance Food Group, Time Warner, Voya Financial, and Walker & Dunlop.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Air France AF.FR +4.3% (Jan metrics), Carlsberg CARLB.DK -2.7% (FY16 results), Hermes RMS.FR -1.5% (Q4 sales), Redrow RDW.UK +4.0% (H1 results), Schibsted SCH.NO -0.4% (Q4 results), Tomtom TOM2.NL -8.0% (Q4 results)]
Energy: [Gas Natural GAS.ES -0.6% (FY16 results), Tullow Oil TLW.UK -5.0% (FY16 results), Vestas VWS.DK +3.2% (FY16 results, share buyback)]
Financials: [Sampo SAMAS.FI +1.3% (Q4 results)]
Healthcare: [Lundbeck LUN.DK -2.2% (FY16 results), Sanofi SAN.FR +2.6% (Q4 results)]
Industrials: [ABB Ltd ABBN.CH -2.2% (Q4 results), Konecranes KCR1V.FI -7.3% (Q4 results), Maersk MAERSKB.DK -4.0% (FY16 results), Syngenta SYNN.CH +1.4% (FY16 results), Vinci DG.FR +3.7% (FY16 results)]
Materials: [Kemira KRA1V.FI +1.1% (Q4 results), Rio Tinto RIO.UK +1.1% (FY16 results)]
Technology: [OSRAM Licht OSR.DE flat (Q1 results), Sophos SOPH.UK +5.6% (To acquire the commercial software products business of Invincea; Q3 results)]
Telecom: [Swisscom SCMN.CH +1.4% (FY16 results)]
Speakers
BOE agents summary: Consumer spending has been resilient but expected to slow
German DIHK Chambers of Commerce raised Germany 2017 GDP growth forecast from 1.2% to 1.6%with Export growth forecast raised from 2.0% to 3.0%
Thailand Central Bank policy statement noted that today’s decision to keep policy steady was again unanimous. Reiterated that current rate remained accommodative for economy and that inflationary pressure remained low. Domestic economic recovery was doing better than expected (exports were clearly recovering) but recent THB currency (Baht) was not good. Economy may grow at a faster pace in 2017 but faces many uncertainties
India Central Bank (RBI) Statement changed its policy stance to neutral from accommodative. It remained committed to bring inflation closer to 4.0% in calibrated manner on a durable basis. Forecasted inflation between 4.0-4.5% range in Apr-Sept 2017 period and between 4.5-5.0% range in Oct ’17 thru Mar ’18 period
India Central Bank (RBI) Gov Patel post rate decision press conference reiterated MPC commitment to achieving the 4% inflation target while keeping growth in mind
RBI Dep Gov Acharya stated that change in policy stance premised on global inflation risks that are picking up
RBI Dep Gov Gandhi stated that govt remove limits on cash withdrawals from savings accounts in two stages with withdrawals to be increased to INR50K later in Feb and no limits after Mar 13th
Currencies
Recent commentary from Fed officials that the March FOMC meeting could be ‘live’ has continue to provide the USD with support. Some dealers noting that there was the potential for Yellen to surprise hawkish next week at her semi-annual testimony to Congress
EUR/USD was softer by 0.4% to test under 1.0650 level. Dealers were looking for more technical breakdown in the pair and cited the 50Day moving average at 1.0605 as key support for the time being.
The GBP/USD was consolidating its recent gains after BOE’s Forbes on Tuesday noted that the UK economy might soon need a rate hike. GBP/USD hovered around the 1.25 level. UK House of Commons expected to vote on Article 50 Bill later day (expected in evening local time).
EUR/CHF cross dipped below the 1.0640 level for a 7-Month low as risk aversion lent support as political risks continued to be a concern
Fixed Income:
Bund futures trade at 163.73 up 35 ticks taking out yesterday high as futures post another 3 week high. Continued upside targets 164.28 then 164.45. Support remains at 162.92 followed by 162.44 then 161.63.
Gilt futures trade at 125.52 up 29 tracking Bunds higher but off session highs. BoE agents summary did note that Gilt and Corporate Bond plans remain unchanged. Analysts see support moving to 124.378 then 124.38 followed by 123.81 , 123.17. Resistance lies just above highs at 125.73 followed by 126.00. Short Sterling futures trade flat to 1bp higher with Jun17Jun18 remaining steady at 18/19bp.
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.319T up €2B from €1.317T prior. Use of the marginal lending facility rose to €245M from €106M prior.
Corporate issuance saw $3.15B come to market via 3 issuers headlined by by Citigroup $750M offering. Week to date issuance stands at $9.35B with Feb issuance at $20.85B
Looking Ahead
(UK) House of Commons votes on Article 50 Bill (expected in UK evening)
05:30 (DE) Germany to sell €3.0B in 0.25% 2027 Bunds
05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.25B in 5-year and 7-year bonds
06:00 (PT) Portugal Q4 Unemployment Rate: No est v 10.5% prior
06:00 (BR) Brazil Jan IBGE Inflation IPCA M/M: 0.4%e v 0.3% prior; Y/Y: 5.4%e v 6.3% prior
06:00 (CL) Chile Jan CPI M/M: +0.2%e v -0.20% prior; Y/Y: 2.5%e v 2.7% prior, CPI Ex Food and Energy M/M: 0.2%e v 0.1% prior
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:00 (RU) Russia to sell combined RUB40B in 2022 and 2031 OFZ Bonds
06:00 (CZ) Czech Republic to sell Bond
06:30 (CL) Chile Central Bank’s Traders Survey
06:45 (US) Daily Libor Fixing
07:00 (US) MBA Mortgage Applications w/e Feb 3rd: No est v -3.2% prior
07:00 (UK) PM May weekly question time in House of Commons
08:00 (HU) Hungary Central Bank (NBH) Jan Minutes
08:15 (CA) Canada Jan Annualized Housing Starts: 200.0Ke v 207.0K prior
10:00 (PL) Poland Central Bank Gov Glapinski post rate decision press conference
10:00 (PT) Portugal PM at Debate in Parliament
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (CA) Canada to sell 30-Year Real Return Bonds
13:00 (US) Treasury to sell $23B in 10-Year Notes
15:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate unchanged at 1.75%
