Risk Aversion Remains The Theme, UK Publishes Its Negotiating Mandate

Notes/Observations

• UK published its negotiations mandate for EU trade talks which sought equivalence assessments done by end of June
• Safe-haven flows continue to dominate sentiment over continued concerns of the spread and global economic impact of the coronavirus
• President Trump’s press conference on outbreak failed to inspire confidence for the time being

Asia:

• Bank of Korea (BoK) left the 7-Day Repo Rate unchanged at 1.25% (not expected)
• BOJ’s Kataoka (dissenter, very dovish): BOJ was ready to ease without hesitation if needed. Believed price momentum had already been lost Might be good for BOJ to conduct a policy review
• Japan Ruling LDP party said to be considering extra budget to deal with coronavirus
• China Foreign Ministry: Made ‘stern’ representations to US embassy about Wall Street Journal if the US further harassed and restricted Chinese news agencies in the US. Stressed that China would take further action

Coronavirus:

• Global cumulative cases 82.2K; Cumulative deaths 2.8K; Cumulative cured 32.9K
• China’s National Health Commission reports 433 new cases and 29 new deaths across the mainland. Of those, 409 cases and 26 deaths are in Hubei province. However, the total number of cases does not match with the previous update
• World Health Organization (WHO) official: Coronavirus cases in Italy ‘inflated’, citing testing errors

Americas:

• President Trump: Coronavirus risk to American people remained very low, ready to do whatever we need to if virus spread, if Congress allocated more than $1.5B to coronvirus response “we’ll take it”; impact on GDP not known at this point. Virus vaccine was coming along well. Not inevitable virus would spread in the US, but probably would. No reason to panic over virus

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -1.76% at 397.48, FTSE -1.69% at 6,923.41, DAX -1.81% at 12,543.29, CAC-40 -1.70% at 5,588.01, IBEX-35 -1.54% at 9,173.00, FTSE MIB -1.73% at 23,016.89, SMI -1.36% at 10,369.00, S&P 500 Futures -0.54%]
• Market Focal Points/Key Themes: European indices in the red following Asia indices mostly lower and lower US futures. On a busy corporate earnings front, Ab Inbev down following Q4 earnings and warning of revenue impact from coronavirus. Aston Martin plunges following FY19 earnings, CEO stepping down and equity raise. Other decliners on earnings include WPP, Zalando, Bayer, Lafarge Holcim, Safran and Grifols. British American Tobacco up following FY19 earnings and guiding FY20 revenue growth of +3-5% y/y. Reckitt Beckinser up on FY19 earnings and guiding FY20 LFL revenue higher. Other notable risers on earnings include Hikma, Engie and Arkema. Notable earners today include Best Buy, CBRE, Gannett, JC Penney, L Brands and Universal Health Services.

Equities

• Consumer discretionary: Carrefour [CA.FR] +2% (earnings), AB InBev [ABI.BE] -8% (earnings; coronavirus impact), Aston Martin Lagonda [AML.UK[ -13% (earnings; CFO steps down; rights issue)
• Consumer staples: British American Tobacco [BATS.UK] +2% (earnings)
• Energy: Engie [ENGI.FR] +3% (earnings)
• Technology: WPP [WPP.UK] -15% (earnings)
• Healthcare: Bayer [BAYN.DE] -3% (earnings; lawsuits)
• Industrials: Safran [SAF.FR] +1% (earnings)
• Materials: LafargeHolcim [LHN.CH] +1% (earnings)
• Telecom: Nokia [NOKIA.FI] +1% (reportedly explores strategic options)

Speakers

• ECB’s Schnabel (Germany): Price pressures remained subdued; medium term horizon was longer compared to the past. Coronavirus raising the uncertainty of the outlook
• BOE’s Haldane (chief economist): Sees business investment picking up in 2020 as its gets a boost from budget and Brexit
• UK Govt published its negotiations mandate for EU trade talks which sought equivalence assessments done by end of June. Reiterates govt stance that wIll not extend Brexit transition period with EU beyond 2020. Trade deal should be based on Canada and Japan deals. Sought a broad outline of EU trade deal by mid-year, and will begin no deal preparation if this was not clear by end of June
• Italy Econ Min Gualtieri: Public finances in ‘good’ shape but reiterated EU Stability Pact provides room to deal with exceptional events
• Czech Fin Min Schillerova: Could borrow more to aid the economic growth front
• Malaysia interim PM Mahathir announced MYR20B stimulus package to stem impact from coronavirus
• China Commerce Ministry (MOFCOM) stated that it believed the ‘acute’ problems that foreign companies had faced in resuming work and production in China would soon be resolved
• Russia Energy Min Novak: Forecast on demand outlook to correlate with Virus spread. Russia had never had disagreement with Saudi on OPEC+

Currencies/Fixed Income

• USD was softer across the board over the past 24 hours as markets believed that the Fed could cut interest rates to temper the economic impact of the coronavirus
• The JPY and CHF firmed up on risk aversion flows. USD/JPY retesting the key 110 level several time. USD/CHF lower by 0.5% at 0.9720 at mid-session.

Economic Data

• (NL) Netherlands Feb Producer Confidence Index: 3.7 v 2.5 prior
• (FI) Finland Feb Consumer Confidence: -4.5 v -4.6 prior; Business Confidence: -3 v -8 prior
• (NO) Norway Jan Retail Sales (including auto/fuel) M/M: 0.5% v 1.2%e
• (TR) Turkey Feb Economic Confidence: 97.5 v 97.1 prior
• (ES) Spain Feb Preliminary CPI M/M: -0.1% v -0.1%e; Y/Y: 0.8% v 0.8%e
• (ES) Spain Feb Preliminary CPI EU Harmonized M/M: 0.0% v -0.1%e; Y/Y: 0.9% v 0.8%
• (ES) Spain Dec Total Mortgage Lending Y/Y: +16.8% v -3.5% prior; House Mortgage Approvals Y/Y: +43.0% v -0.5% prior
• (SE) Sweden Feb Consumer Confidence: 98.5 v 92.7 prior; Manufacturing Confidence: 104.7 v 102.3prior; Economic Tendency Survey: 99.1 v 97.3 prior
• (HU) Hungary Jan Unemployment Rate: 3.4% v 3.4%e
• (SE) Sweden Jan Trade Balance (SEK): +9.9 v -2.3B prior
• (SE) Sweden Jan PPI M/M: -1.0% v -0.5% prior; Y/Y: -0.4% v +1.3% prior
• (SE) Sweden Jan Household Lending Y/Y: 5.1% v 5.0% prior –
• (SE) Sweden Jan Retail Sales M/M: 0.9% v 0.0%e; Y/Y: 2.7% v 2.4%e
• (EU) Euro Zone Jan M3 Money Supply Y/Y: 5.2% v 5.3%e
• (IT) Italy Feb Consumer Confidence Index: 111.4 v 111.4e; Manufacturing Confidence: 100.6 v 99.4e; Economic Sentiment: 99.8 v 99.2 prior – (IS) Iceland Feb CPI M/M: +0.9% v -0.7% prior; Y/Y: 2.4% v 1.7% prior
• (PT) Portugal Feb Consumer Confidence Index: -8.1 v -7.8 prior; Economic Climate Indicator: 2.2 v 2.2 prior
• (ZA) South Africa Jan PPI M/M: 0.3% v 0.1%e; Y/Y: 4.6% v 4.4%e
• (EU) Euro Zone Feb Economic Confidence: 103.5 v 102.8e; Industrial Confidence: -6.1 v -7.3e; Services Confidence: 11.1 v 11.0e; Consumer Confidence (final): -6.6 v -6.6 advance

Fixed Income Issuance

• (DK) Denmark sells total DKK4.78 in 3-month and 6-month Bills
• (IT) Italy Debt Agency (Tesoro) sold total €6.5B vs. €5.5-6.5B indicated range in in 5-year and 10-year BTP bonds
• Sold €2.5B vs. €2.0-2.5B indicated range in 0.35% Feb 2025 BTP bonds; Avg Yield: 0.36% v 0.31% prior; Bid-to-cover: 1.36x v 1.36x prior
• Sells €4.0B vs. €3.5-4.0B indicated range in new 0.95% Aug 2030 BTP; Avg Yield: 1.00% v 0.94% prior; Bid-to-cover: 1.26x v 1.24x prior
• (IT) Italy Debt Agency (Tesoro) sold €1.0B v €0.75-1.0B indicated range in 0.00% Jan 2025 CCTeu (Floating Rate bonds); Avg Yield: 0.47% v 0.18% prior; Bid-to-cover: 1.66x v 1.32x prior

Looking Ahead

• (BE) Belgium Feb CPI M/M: No est v 0.6% prior; Y/Y: No est v 1.4% prior
• (BR) Brazil Jan Central Govt Budget Balance (BRL): No est v -14.6B prior
• (BR) Brazil Jan Total Federal Debt (BRL): No est v 4.248T prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)
• 05:30 (UK) DMO to sell £400M in 1.75% in July 2057 Gilts; Avg Yield: % v % prior; Bid-to-cover: x v x prior; Tail: bps v bps prior (Feb 21 2019)
• 05:30 (UK) BOE’s Cunliffe on Panel in London
• 06:00 (BR) Brazil Feb FGV Inflation IGPM M/M: -0.1%e v 0.5% prior; Y/Y: 6.8%e v 7.8% prior
• 07:00 (MX) Mexico Jan Unemployment Rate (Seasonally adj): 3.3%e v 3.1% prior; Unemployment Rate (unadj): 3.3%e v 2.9% prior
• 07:15 (IE) ECB’s Lane (Ireland, chief economist) in Paris
• 07:30 (BR) Brazil Jan Total Outstanding Loans (BRL): 3.485Te v 3.471T prior; M/M: 0.4%e v 1.6% prior; Personal Loan Default Rate: No est v 5.0% prior
• 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 21st: No est v $562.4B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Q4 Preliminary GDP Annualized (2nd reading) Q/Q: 2.1%e v 2.1% advance; Personal Consumption: 1.7%e v 1.8% prior
• 08:30 (US) Q4 Preliminary GDP Price Index: 1.4%e v 1.4% prior; Core PCE Q/Q: 1.3%e v 1.3% prior
• 08:30 (US) Jan Preliminary Durable Goods Orders: -1.5%e v +2.4% prior; Durables (ex-transportation): +0.1%e v -0.1% prior; Capital Goods Orders (non-defense/ex-aircraft): +0.2%e v -0.8% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.0%e v -0.3% prior
• 08:30 (US) Initial Jobless Claims: 212e v 210K prior; Continuing Claims: 1.72Me v 1.726M prior
• 08:30 (CA) Canada Q4 Current Account Balance: -$9.0Be v -$9.9B prior
• 08:30 (US) Weekly USDA Net Export Sales
• 10:00 (US) Jan Pending Home Sales M/M: +3.0%e v -4.9% prior; Y/Y: 2.3%e v 6.8% prior
• 10:00 (MX) Mexico Central Bank (Banxico) Feb Minutes
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 US) Feb Kansas City Fed Manufacturing Activity Index: -1e v -1 prior
• 11:00 (ES) ECB’s Guindos (Spain) in Sevilla
• 11:30 (US) Fed’s Evans in Mexico City
• 11:30 (US) Treasury to sell 4-week and 8-week bills
• 13:00 (US) Treasury to sell 7-year notes
• 14:30 (IE) ECB’s Lane (Ireland, chief economist) in London
• 16:00 (NZ) New Zealand Feb ANZ Consumer Confidence Index: No est v 122.7 prior
• 16:00 (NZ) New Zealand Government 7-Month Financial Statements
• 18:00 (KR) South Korea Jan Industrial Production M/M: -1.4%e v +3.5% prior; Y/Y: -0.8%e v +4.2% prior
• 18:30 (JP) Japan Feb Tokyo CPI Y/Y: 0.5%e v 0.6% prior; CPI (ex-fresh Food) Y/Y: 0.6%e v 0.7% prior; CPI (ex-fresh f/energy) Y/Y: 0.8%e v 0.9% prior
• 18:30 (JP) Japan Jan Jobless Rate: 2.2%e v 2.2% prior; Job-To-Applicant Ratio: 1.57e v 1.57 prior –
• 18:50 (JP) Japan Jan Retail Sales M/M: -0.1%e v +0.2% prior; Y/Y: -1.3%e v -2.6% prior
• 18:50 (JP) Japan Jan Dept. Store, Supermarket Sales Y/Y: -1.7%e v 2.8% prior (revised from -3.0%)
• 18:50 (JP) Japan Jan Preliminary Industrial Production M/M: 0.2%e v 1.2% prior; Y/Y: -3.1%e v -3.1% prior
• 19:01 (UK) Feb GfK Consumer Confidence: -8e v -9 prior
• 19:01 (UK) Feb Lloyds Business Barometer: No est v 23 prior
• 19:30 (AU) Australia Jan Private Sector Credit M/M: No est v 0.2% prior; Y/Y: No est v 2.4% prior
• 21:00 (SG) Singapore Jan M2 Money Supply Y/Y: No est v -9.3% prior; M1 Money Supply Y/Y: No est v 5.9% prior
• 23:00 (JP) Japan Dec Vehicle Production Y/Y: No est v -9.3% prior
• 22:00 (CN) China to sell 3-month Bills
• 22:30 (JP) Japan to sell 3-Month Bills
• 22:35 (JP) Japan to sell 2-Year JGB Bonds