Awaiting The G7 Response To The Virus Outbreak

Notes/Observations

• Markets await the potential emergency measures and economic packages to offset the rapid spread of the Covid-19 outbreak
• G7 Draft statement said not to include language calling for fresh fiscal spending or coordinated interest rate cuts by central banks
• ECB said to consider longer-term loans for SMEs impacted by coronavirus
• Super-Tuesday primaries in US sets the stage for Trump’s contende

Asia:

• South Korea Q4 Final GDP Q/Q: 1.3% v 1.2%e; Y/Y: 2.3% v 2.2%e
• South Korea CPI M/M: 0.0% v 0.0%e; Y/Y: 1.1% v 1.3%e
• RBA cut its Cash Rate Target by 25bps to 0.50% in response to coronavirus outbreak
• New Zealand Treasury: Virus is weighing on economic outlook, sees risk of substantial negative impact to last for several quarters

Coronavirus:

• Global cumulative cases 90.9K; Cumulative deaths 3,117
• Mainland China reports lowest number of new coronavirus cases since January but it is still spreading quickly outside of China. South Korea reported 600 new coronavirus cases and three more deaths from the virus, taking total infections towards 5,200

Europe:

• ECB President Lagarde statement: We stand ready to take appropriate and targeted measures as necessary and commensurate with underlying risks

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +2.86% at 386.92, FTSE +2.43% at 6,811.88, DAX +2.86% at 12,197.02, CAC-40 +2.54% at 5,469.11, IBEX-35 +2.72% at 8,979.00, FTSE MIB +2.76% at 22,255.16, SMI +2.86% at 10,235.00, S&P 500 Futures +1.09%]

Market Focal Points/Key Themes:

• European indices well in the green following Asia indices mostly higher and higher US futures. Lindt reported FY19 earnings with organic sales rising +6.1% y/y; also guided FY20 sales and profit to rise faster than average and affirmed mid to long term targets. Zumtobel and HelloFresh jump on strong earnings and FY20 guidance. Other notable risers on earnings include Beiersdorf, Kion, Oerlikon, Deutz, Travis Perkins, Keller Group, Rotork and Greggs. Greggs also hiked the diviend. Ashtead down on Q3 results; company announced share buyback program of £500M. UK grocers trading higher led by Sainsbury following 12 week Nielsen and Kantar UK grocery sales and market share data. Spanish banks trading up led by Caixabank and Bankia, following a European Court of Justice ruling on Spanish mortgage disputes, which should be handled on a case by case basis. On the M&A front, Qiagen rallying as Thermo Fisher made an acquisition offer at €39.00/shr in €10.4B deal. Huntsworth surging as Clayton Dubilier & Rice have made a takeover bid at 108p/shr. Notable earners today AutoZone, Kohl’s and Target.

Equities

• Consumer discretionary: Huntsworth [HNT.UK] +51% (to be acquired; earnings), Zumtobel [ZAG.AT] +17% (earnings), HelloFresh [HFG.DE] +9% (earnings)
• Materials: Fresnillo [FRES.UK] -4% (earnings)
• Healthcare: Qiagen [QIA.DE] +19% (to be acquired by Thermo Fisher), Novartis [NOVN.CH] +1% (charges)
• Industrials: VAT Group [VACN.CH] +1.5% (earnings), Deutz [DEZ.DE] +1.5% (prelim earnings)
• Technology: Logitech [LOGN.CH] +2% (adjusts outlook citing coronavirus)

Speakers

• ECB said to be working on possible longer-term loan scheme for small and medium size firms (SMEs) hit by coronavirus
• BOE Gov Carney Treasury Select testimony: Considering policy impact of coronacvirus outbreak; would take all necessary steps to help economy. BOE’s role in coronavirus was to help the economy through a shock that would be large but temporary. BOE was in contact with peers (G7, G20 and IMF). Should expect a timely and powerful global response to coronavirus that has a mix of fiscal and central bank elements Expansionary budget would affect the domestic economy. Interest rates to remain low for some time; had less policy room compare to history. BOE would not go into negative rates
• BOE Member Tenrero Treasury Select testimony:: Expansionary fiscal policy would ease pressure on BOE. An economic rebound was needed towards the top end of survey range to remove case for near-term stimulus
• France Fin Min Le Maire stated that it sought a strong and coordinated response to coronavirus at both the EU and G7 level. Had a very positive call with ECB chief Lagarde on coronavirus
• European Court of Justice (ECJ) binding ruling on Spanish mortgage disputes – Should be handled on a case-by-case basis
• Malaysia Central Bank (BNM) Policy Statement noted that Q1 GDP growth to be affected by Covid-19 outbreak but was expected to improve in H2 but risks remained. Saw 2020 inflation averaging higher but remaining modest
• India Central Bank (RBI): Stand ready to take steps if necessary; monitoring both global and domestic situation closely
• President Trump tweet: Fed should ease and cut rate big; Fed putting US at competitive disadvantage

Currencies/ Fixed Income

• Risk appetite picked up over the past 12-hours on word that the G7 members were crafting a statement for their finance and central bank officials to issue on countering the impact of the coronavirus. Some of the euphoria faded a tad in late Asia as word circulated that the initial draft did not specifically call for new government spending or coordinated interest rate cuts by central banks.
• EUR/USD little changed at 1.1130 area; USD/JPY lower by 0.4% to retest below the 108 area; GBP/USD higher by 0.45 at 1.2805

Economic Data

• (CH) Swiss Q4 GDP Q/Q: 0.3% v 0.2%e; Y/Y: 1.5% v 1.3%e
• (MY) Malaysia Central Bank (BNM) cut Overnight Policy Rate by 50bps to 2.50% (as expected)
  Q1 GDP growth to be affected by Covid-19 outbreak
• (TR) Turkey Feb CPI M/M: 0.4% v 0.7%e; Y/Y: 12.4% v 12.7%e; CPI Core Index Y/Y: 10.0% v 10.4%e
• (TR) Turkey Feb PPI M/M: 0.5 v 1.8% prior; Y/Y: 9.3% v 9.9%e
• (FR) France Jan YTD Budget Balance: -€20.0B v -€92.8B prior
• (ES) Spain Feb Net Unemployment Change: -7.8K v +5.8Ke
• (CZ) Czech Q4 Preliminary GDP (2nd reading) Q/Q: 0.3% v 0.2%e; Y/Y: 1.8% v 1.7%e
• (HU) Hungary Jan PPI M/M: +0.9% v -0.2% prior; Y/Y: 3.8% v 2.4% prior
• (HU) Hungary Dec Final Trade Balance: €0.1B v €0.1B prelim
• (IT) Italy Jan Preliminary Unemployment Rate: 9.8% v 9.8%e
• (UK) Feb Construction PMI: 52.6 v 49.0e (1st expansion in 10 months and highest since Dec 2018)
• (ZA) South Africa Q4 GDP Annualized Q/Q: -1.4% v -0.2%e; Y/Y: -0.5% v -0.2%e (confirms technical recession)
• (EU) Euro Zone Feb Advance CPI Estimate Y/Y: 1.2% v 1.2%e; CPI Core Y/Y: 1.2% v 1.2%e
• (EU) Euro Zone Jan Unemployment Rate: 7.4% v 7.4%e (matches lowest level since 2008)
• (EU) Euro Zone Jan PPI M/M: 0.4% v 0.5%e, Y/Y: -0.5% v -0.4%e
• (BE) Belgium Jan Unemployment Rate: 5.3% v 5.3% prior

Fixed Income Issuance

• (ID) Indonesia sold total IDR17.5T vs. IDR15T target in 3-month and 12-month Bills; 5-year, 10-year, 15-year, 20-year and 30-year Bonds
• (ES) Spain Debt Agency (Tesoro) sold total €4.5B vs. €4.0-5.0B indicated range in 6-month and 12-month bills (Feb 11th 2020)
• Sells € in 6-month Bills; Avg Yield: % v -0.476% prior; Bid-to-cover:x v 6.97x prior
• Sells € in 12-month Bills; Avg Yield: % v -0.454% prior; Bid-to-cover: x v 2.21x prior
• (ZA) South Africa sold total ZAR4.53B vs. ZAR4.53B indicated in 2030, 2037 and 2048 bond

Looking Ahead

• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (BE) Belgium Debt Agency (BDA) to sell 6-month and 12-month bills
• 05:30 (DE) Germany to sell €500M in 2026 and 2030 I/L Bonds (Bundei)
• 06:00 (IE) Ireland Feb Unemployment Rate: No est v 4.8% prior
• 06:00 (SE) Sweden Central Bank (Riksbank) Breman on Monetary Policy and Climate
• 06:30 (EU) ESM to sell €2.5B in 3-month bills
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Jan Leading Indicators M/M: No est v 0.16 prior
• 07:00 G7 Finance Ministers and Central bankers conference call
• 07:00 (RU) Russia announces upcoming OFZ Bond issuance
• 07:45 (US) Goldman Economist Chain Store Sales
• 08:00 (SG) Singapore Feb Purchasing Managers Index (PMI): 49.5e v 50.3 prior; Electronics Sector: No est v 50.1 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (NO) Norway Central bank (Norges) Gov Olsen
• 08:30 (DE) ECB’s Schnabel (Germany)
• 08:55 (US) Weekly Redbook LFL Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:45 (US) Feb ISM New York: No est v 45.8 prior
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
• 11:00 (DK) Denmark Feb Foreign Reserves (DKK): No est v 426.3B prior
• 11:00 (NZ) New Zealand Feb QV House Prices Y/Y: No est v 4.4% prior
• 12:00 (ES) ECB’s de Cos (Spain) in Geneva
• 14:50 (US) Fed’s Mester to address UK Society of Professional Economists
• 16:00 (KR) South Korea Feb Foreign Reserves: No est v $409.7B prior
• 16:30 (US) Weekly API Oil Inventories
• (AR) Argentina Feb Government Tax Revenue (ARS): No est v 527.3B prior
• 16:45 (NZ) New Zealand Jan Building Permits M/M: No est v 9.9% prior
• 17:00 (AU) Australia Feb Final PMI Services: No est v 48.4 prelim; PMI Composite: No est v 48.3 prelim
• 18:30 (US) Fed’s Evans participates in Q&A
• 19:00 (NZ) Zealand Feb ANZ Commodity Pric: N est v -0.9% prior
• 19:30 (AU) Australia Q4 GDP Q/Q: 0.4%e v 0.4% prior; Y/Y: 2.0%e v 1.7% prior
• 19:30 (HK) Hong Kong Feb PMI Composite: No est v 46.8 prior
• 19:30 (SG) Singapore PMI PMI Composite: No est v 51.4 prior
• 19:30 (JP) Japan Feb FinalPMI Services: No est v 46.7 prelim; PMI Composite: No est v 47.0 prelim
• 20:01 (IE) Ireland Feb PMI Services: No est v 56.9 prior; PMI Composite: No est v 54.7 prior
• 20:45 (CN) China Feb Caixin PMI Services: 48.0e v 51.8 prior; Composite PMI: No est v 51.9 prior
• 22:00 (CN) China to sell 3-year and 7-year Government Bond
• 23:00 (MY) Malaysia Jan Trade Balance (MYR): 10.7B v 12.6B prior; Exports Y/Y: -1.6%e v +2.7% prior; Imports Y/Y: -1.4%e v +0.9% prior
• 23:30 (TW) Taiwan to sell TWD30B in 20-year Bonds
• (US) Super Tuesday ( Alabama, Arkansas, California, Colorado, Maine, Massachusetts, Minnesota, North Carolina, Oklahoma, Tennessee, Texas, Virginia, Utah and Vermont Primaries