Volatility Erupts In Global Markets, Bond Yields Plummet As Markets Re-Calibrate Potential Central Bank Rate Cuts

Notes/Observations

• Re-calibration of potential central bank expectations due to concerns over weakening global growth from coroniavirus pummels bond yields
• US 10-year yields have slumped over 30bps during the week to hit a fresh record low
• German 10-year Bunds at lowest level since Oct with the yield at -0.60%

Asia:

• South Korea Jan Industrial Production M/M: -1.3% v -1.7%e; Y/Y: -2.1$ v +0.1%e
• Japan Feb Tokyo CPI Y/Y: 0.4% v 0.5%e; CPI (ex-fresh Food) Y/Y: 0.5% v 0.6%e
• Japan Jan Jobless Rate: 2.4% v 2.2%e
• Japan Jan Retail Sales M/M: +0.6% v -0.1%e; Y/Y: -0.4% v -1.3%e v
• Japan Jan Preliminary Industrial Production M/M: 0.8% v 0.2%e; Y/Y: -2.5% v -3.1%e

Coronavirus:

• Global cumulative cases 83.4K; Cumulative deaths 2,858
• Chinese cumulative cases 78959 (+329); Cumulative death toll 2791 (+44)
• China’s Hubei province reported 318 new cases and 41 new deaths d/d
• South Korea confirmed 256 additional coronavirus cases; total cases 2,022
• California monitoring 8400 people for coronavirus; 33 confirmed cases
• NY State health Dept: 700 people been asked to self-isolate for 2 weeks

Mid-East/Energy:

• Almost 3 dozen Turkish soldiers said to have been killed in an airstrike near the Syria/Turkey border”
• Saudi Arabia said to be seeking bigger production cuts at next week’s OPEC meeting

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -3.82% at 374.58, FTSE -3.72% at 6,543.45, DAX -4.34% at 11,837.60, CAC-40 -3.66% at 5,294.24, IBEX-35 -3.84% at 8,643.00, FTSE MIB -3.34% at 22,036.16, SMI -3.73% at 9,828.50, S&P 500 Futures -1.79%]
• Market Focal Points/Key Themes: European indices well in the red following Asia indices meaningfully lower and lower US futures. Rolls Royce up after reporting solid FY19 earnings results and guiding FY20 operating profit growth of 15% y/y. International Consolidated Airlines (IAG) down following FY19 earnings results and Easyjet down following warning of potential negative impact from coronavirus. Peer European airlines Lufthansa and Air-France KLM shares also falling on fears of coronavirus spread impact on travel demand. Other notable decliners on earnings include BASF, Veolia, Eni, Amadeus, Munich Re and London Stock Exchange. ThyssenKrupp trading lower after confirming sale of elevator technology business for €17.2B to a consortium of private equity investors. Novacyt rallying on announcement of signing major distribution agreement in Asia for COVID-19 test. Notable earners today include Foot Locker, Range Resources and AES Corp.

Equities

• Consumer discretionary: EasyJet [EZJ.UK] -2% (coronavirus update), IAG [IAG.UK] -9% (earnings)
• Financials: London Stock Exchange [LSE.UK] -3.5% (earnings)
• Industrials: Rolls-Royce [RR.UK] +4% (earnings), Thyssenkrupp [TKA.DE] -5% (confirms sale of unit), BASF [BAS.DE] -5% (earnings), Renold [RNO.UK] -21% (trading update on coronavirus)

Speakers

• BOE Gov Carney noted that BoE had already detected an activity fall that could imply a downgrade, but it’s too early to tell how badly the UK would be affected. Supply chains were getting tight and fewer tourists on UK streets. Saw no risk that coronavirus to trigger a financial crisis as banking sector remained in good health
• ECB’s Weidmann (Germany): noted that economic growth in Germany could be somewhat lower than estimated in December. ECB must not lose sight of the exit from loose monetary policy
• ECB’s Vasiliauskas (Lithuania): coronavirus is very important risk. Believed that ECB would not respond in March on Coronavirus as it wanted to see first how it’s affecting the real economy.
• Swiss government said to ban events with over 1000 people until Mar 15th
• Thailand Central Bank raised amount that exporters can hold overseas from $0.2M to $1.0M (**Note: move seen to ease THB currency (Baht) pressure)

Currencies/Fixed Income

• Various re-calibration of potential central bank expectations due to concerns over weakening global growth from coroniavirus have roiled bond markets. US 10-year yields have slumped over 30bps during the week to hit a fresh record low; German 10-year Bunds at lowest level since Oct with the yield at -0.60%. Markets now pricing in approx 70% chance of a 25bps Fed rate cut in March, a potential BOE rate cut of 25bps by Jun and fully prricing in a 10bps ECB rate cut by Jun
• USD was weaker across the board as the re-thinking of a potential Fed move in March has taken. EUR/USD tested 1.1050
• Safe-haven flows benefited the JPY and CHF as continued concerns of the coronavirus heightened risk aversion

Economic Data

• (FI) Finland Q4 GDP Q/Q: -0.7% v +0.4% prior; Y/Y: 0.4 v 1.9% prior
• (ZA) South Africa Jan M3 Money Supply Y/Y: 7.0% v 6.5%e; Private Sector Credit Y/Y: 5.0% v 5.9%e
• (DE) Germany Jan Import Price Index M/M: -0.4% v +0.1%e; Y/Y: -0.9% v -0.3%e
• (UK) Feb Nationwide House Price Index M/M: 0.2% v 0.4%e; Y/Y: 2.3% v 2.3%e
• (FI) Finland Dec Final Trade Balance: €0.3B v €0.3B prelim
• (NO) Norway Jan Credit Indicator Growth Y/Y: 5.0% v 5.1% prior
• (DK) Denmark Q4 Preliminary GDP Q/Q: 0.2% v 0.3%e; Y/Y: 1.8% v 2.6% prior
• (DK) Denmark Jan Unemployment Rate: 3.1% v 3.1% prior; Gross Unemployment Rate: 3.7% v 3.7% prior
• (TR) Turkey Jan Trade Balance: -$4.5B v -$4.6Be
• (TR) Turkey Q4 GDP Q/Q: 1.9% v 1.5%e; Y/Y: 6.0% v 5.0%e
• (CH) Swiss Jan Real Retail Sales Y/Y: -0.1% v +0.8% prior
• (TH) Thailand Jan Current Account Balance: $3.4B v $3.0Be; Overall Balance of Payments (BOP): $5.9B v -$0.8B prior; Trade Account Balance: $0.4B v $1.9B prior; Exports Y/Y: +3.5% v -1.7% prior; Imports Y/Y: -0.1% v 1.8% prior
• (FR) France Q4 Final GDP Q/Q: -0.1% v -0.1%e; Y/Y: 0.9% v 0.8%e
• (FR) France Feb Preliminary CPI M/M: 0.0% v 0.0%e; Y/Y: 1.4% v 1.5%e
• (FR) France Feb Preliminary CPI EU Harmonized M/M: 0.0% v 0.1%e; Y/Y: 1.6% v 1.6%e
• (FR) France Jan PPI M/M: -0.1% v 0.0% prior; Y/Y: 0.2% v 0.3% prior
• (FR) France Jan Consumer Spending M/M: -1.1% v 0.0%e; Y/Y: -0.9% v +0.3%e
• (CN) Weekly Shanghai copper inventories (SHFE): 310.8K v 298.6K tons prior
• (DE) Germany Feb CPI Saxony M/M: +0.5% v -0.6% prior; Y/Y: 2.0% v 1.8% prior
• (CH) Swiss Feb KOF Leading Indicator: 100.9 v 97.8e
• (AT) Austria Q4 Final GDP Q/Q: 0.2% v 0.3% prelim; Y/Y: 1.0% v 1.1% prelim
• (AT) Austria Jan PPI M/M: 0.2% v 0.0% prior; Y/Y: -0.3% v -0.4% prior
• (HU) Hungary Q4 Final GDP Q/Q: 1.0% v 1.0%e; Y/Y: 4.5% v 4.5%e
• (RU) Russia Narrow Money Supply (RUB) w/e Feb 21st: 10.86T v 10.85T prior
• (SE) Sweden Q4 GDP Q/Q: 0.2% v 0.2%e; Y/Y: 0.8% v 0.7%e
• (DE) Germany Feb CPI Baden Wuerttemberg M/M: +0.4% v -0.7% prior; Y/Y: 1.6% v 1.7% prior
• (DE) Germany Feb Net Unemployment Change: -10.0K v +4.5Ke; Unemployment Claims Rate: 5.0% v 5.0%e
• (DE) Germany Feb CPI Brandenburg M/M: +0.5% v -0.6% prior; Y/Y: 1.6% v 1.7% prior
• (DE) Germany Feb CPI Hesse M/M: +0.6% v -0.7% prior; Y/Y: 1.9% v 1.9% prior
• (DE) Germany Feb CPI Bavaria M/M: +0.7% v -0.8% prior; Y/Y: 1.7% v 1.5% prior
• (NO) Norway Feb Unemployment Rate: 2.3% v 2.3%e
• (NO) Norway Central Bank (Norges) Mar Daily FX Purchases (NOK): -500M v -500M prior
• (CZ) Czech Jan M2 Money Supply Y/Y: 8.0% v 7.1% prior
• (PL) Poland Q4 Final GDP Q/Q: 0.3% v 0.2% prelim; Y/Y: 3.2% v 3.1% prelim
• (IS) Iceland Q4 GDP Q/Q: +4.8% v -1.0% prior; Y/Y: 4.7% v 0.4% prior
• (IS) Iceland Jan Final Trade Balance (ISK): 1.3B v 2.5B prior
• (ES) Spain Dec Current Account Balance: €2.2B v €3.4B prior
• (DE) Germany Feb CPI North Rhine Westphalia M/M: +0.5% v -0.6% prior; Y/Y: 1.8% v 1.8% prior
• (PT) Portugal Feb Preliminary CPI M/M: -0.6% v -0.8% prior; Y/Y: 0.4% v 0.8% prior
• (PT) Portugal Feb Preliminary CPI EU Harmonized M/M: -0.5% v -0.8% prior; Y/Y: 0.6% v 0.8% prior
• (GR) Greece Dec Retail Sales Value Y/Y:-1.5% v +3.7% prior; Retail Sales Volume Y/Y: 0.2% v 4.7% prior
• (IT) Italy Feb Preliminary CPI M/M: 0.0% v 0.1%e; Y/Y: 0.4% v 0.6%e
• (IT) Italy Feb Preliminary CPI EU Harmonized M/M: -0.4% v -0.3%e; Y/Y: 0.3% v 0.4%e

Fixed Income Issuance

• (ZA) South Africa sold total ZAR1.04B vs. ZAR1.04B indicated in I/L 2025, 2038 and 2046 Bonds

Looking Ahead

• 06:00 (IE) Ireland Jan Retail Sales Volume M/M: No est v 3.6% prior; Y/Y: No est v 5.8% prior
• 06:00 (PT) Portugal Q4 Final GDP Q/Q: 0.6%e v 0.6% prelim; Y/Y: No est v 2.2% prelim
• 06:00 (CA) Canada Feb CFIB Business Barometer: No est v 55.3 prior
• 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£2.0B, £1.5B and £2.5B respectively)
• 06:15 (UK) BOE Haldane (Chief Economist) in Oxford
• 06:30 (IN) India Weekly Forex Reserve w/e Feb 21st: No est v $476.1B prior
• 07:00 (IN) India Q4 GDP Y/Y: 4.7%e v 4.5% prior; GVA Y/Y: 4.5%e v 4.3% prior; 2020 GDP Annual Estimate Y/Y: 5.0% v 6.1% prior
• 07:00 (ZA) South Africa Jan Trade Balance (ZAR): -13.7Be v +14.9B prior
• 07:00 (ZA) South Africa Jan Budget Balance (ZAR): -49.5Be v -2.2B prior
• 07:00 (MX) Mexico Jan Trade Balance: -$3.3Be v +$3.1B prior
• 07:00 (BR) Brazil Jan National Unemployment Rate: 11.3%e v 11.0% prior
• 07:00 (CL) Chile Jan Manufacturing Production Y/Y: 1.6%e v 4.2% prior; Industrial Production Y/Y: 2.6%e v 3.2% prior; Total Copper Production: No est v 555.0K tons prior
• 07:00 (CL) Chile Jan Unemployment Rate: 7.2%e v 7.0% prior
• 07:00 (CL) Chile Jan Retail Sales Y/Y: -1.5%e v -2.8% prior; Commercial Activity Y/Y: No est v 0.6% prior
• 07:00 (MX) Mexico Dec Gold Production: No est v 6.6K kilograms; Silver Production: No est v 300.3K kilograms prior; Copper Production: No est v 40.6K tons
• 07:30 (BR) Brazil Jan Primary Budget Balance (BRL): +51.3Be v -13.5B prior; Nominal Budget Balance: +21.9Be v -38.4B prior; Net Debt to GDP Ratio: 55.2%e v 55.7% prior
• 08:00 (DE) Germany Feb Preliminary CPI M/M: +0.3%e v -0.6% prior; Y/Y: 1.7%e v 1.7% prior
• 08:00 (DE) Germany Feb Preliminary CPI EU Harmonized M/M: +0.4%e v -0.8% prior; Y/Y: 1.6%e v 1.6% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:30 (US) Jan Personal Income: 0.4%e v 0.2% prior; Personal Spending: 0.3%e v 0.3% prior; Real Personal Spending (PCE): 0.2%e v 0.1% prior
• 08:30 (US) Jan PCE Deflator M/M: 0.2%e v 0.3% prior; Y/Y: 1.8%e v 1.6% prior
• 08:30 (US) Jan PCE Core Deflator M/M: 0.2%e v 0.2% prior; Y/Y: 1.7%e v 1.6% prior
• 08:30 (US) Jan Advance Goods Trade Balance: -$68.5Be v -$68.3B prior
• 08:30 (US) Jan Preliminary Wholesale Inventories M/M: +0.1%e v -0.2% prior; Retail Inventories M/M: 0.2%e v 0.0% prior
• 08:30 (CA) Canada Dec GDP M/M: 0.1%e v 0.1% prior; Y/Y: 1.6%e v 1.5% prior; Quarterly GDP Annualized: 0.3%e v 1.3% prior
• 08:30 (CA) Canada Jan Industrial Product Price M/M: No est v 0.1% prior; Raw Materials Price Index M/M: No est v 2.8% prior
• 09:00 (BE) Belgium Q4 Final GDP Q/Q: No est v 0.4% prelim; Y/Y: No est v 1.2% prelim
• 09:15 (US) Fed’s Bullard on economy and monetary policy
• 09:45 (US) Feb Chicago Purchase Managers Index (PMI): 46.0e v 42.9 prior
• 10:00 (US) Feb Final University of Michigan Confidence: 100.7e v 100.9 prelim
• 10:00 (MX) Mexico Jan Net Outstanding Loans (MXN): No est v 4.673T prior
• 10:00 (CO) Colombia Jan National Unemployment Rate: No est v 9.5% prior; Urban Unemployment Rate: 13.8%e v 10.5% prior
• 11:00 (EU) Potential sovereign ratings after European close (Denmark, Estonia and Nigeria Sovereign Debt to be rated by S&P; Iceland, Ireland, Norway and Switzerland Sovereign Debt to be rated by Fitch
• 13:00 (US) Weekly Baker Hughes Rig Count
• 20:00 (CN) China Feb Manufacturing PMI (Govt official): 45.0e v 50.0 prior; Non-Manufacturing PMI: 51.0e v 54.1 prior; Composite PMI: No est v 53.0 prior