Euro Area Confidence Reading Decline As Lockdown Measures Take Its Toll

Notes/Observations

• Number of syndicated government bond issues seen in session (Greece, Austria, Slovenia, Iceland)
• Italy President Mattarella to begin process to determine scope for potential new coalition government
• Focus on FOMC with any debate about tapering asset purchases seeming premature

Asia

• Australia Q4 CPI data beats expectations as recover builds but remains far from target level (Q/Q: 0.9% v 0.7%e; Y/Y: 0.9% v 0.7%e)
• BOJ Gov Kuroda reiterated stance that ETF Purchased aimed at lower risk premium, not buying to boost stock prices
• China repo rates rise as PBOC again drained liquidity; Chinese press reassures on liquidity during the Lunar New Year holiday (**Note: China Overnight Repo Rates hit 2.9%, highest since April of 2019)

Coronavirus

• Total global cases 100.2M (+0.5% d/d); total deaths: 2.16M (+0.8% d/d)

Europe

• ECB said to be studying the impact of their policy vs. Fed policy on strength of the Euro compared to the USD
• UK PM Johnson said to have rebuffed calls from Home Sec Patel for temporary closure of borders and hotel quarantine for all arrivals
• Italy caretaker PM Conte stated that he wanted a new pro-Europe govt to pass electoral and constitutional reforms

Americas

• House of Representatives would not have votes during the weeks of Feb 8th and Feb 15th for coronavirus relief plan; March Recess had been canceled for votes (including possibly on aid)
• White House aide: Pres Biden maintains that Nord Stream 2 project is a bad deal for Europe
• Schumer says budget vote possible next week, starting Capitol Hill economic stimulus push’

Energy

• Weekly API Crude Oil Inventories: -5.3M v +2.6M v prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.24% at 406.74, FTSE -0.23% at 6,638.78, DAX -0.46% at 13,807.40, CAC-40 -0.19% at 5,512.84, IBEX-35 -0.14% at 7,954.00, FTSE MIB % at #, SMI % at #, S&P 500 Futures -0.21%]
• Market Focal Points/Key Themes: European indices open broadly lower but moderated losses as the session wore on; issue over vaccine distribution has escalated, weighing on risk sentiment; better performing sectors include consumer discretionary and real estate; materials and technology sectors among those underperforming; luxury brands supported by LVMH’s earnings; Scapa to be acquired by Swiss consortium; earnings expected in upcoming US session include Nasdaq, Abbott Laboratories, AT&T and Boeing

Equities

• Energy: Tullow Oil [TLW.UK] -2% (trading update)
• Materials: Fresnillo [FRES.UK] -4% (production)
• Healthcare: Sanofi [SAN.FR] +1% (agreement with BioNTech), Ambu [AMBUB.DK] +15% (earnings)
• Industrials: Scapa Group [SCPA.UK] +25% (offer), Sartorius [SRT.DE] +4% (earnings)

Technology:

• Telecom: Royal KPN [KPN.NL] +3% (earnings)

Speakers

• ECB’s Knot (Netherlands) reiterated Council stance that was monitoring the Euro appreciation; added that they did have the tools to counter appreciation if necessary. Had room for lower rate if needed; had not reached the lower bound
• German DIW Institute commented that it saw Q4 German GDP flat q/q and contracting by 3.0%b in Q1
• South Korea President Moon stated that the country had managed to minimize economic damage from coronavirus, domestic growth to be highest among OECD. Believed Korean economy to recover to pre-pandemic levels in H1
• Taiwan Econ Min Wang Mei-hua stated that had met with 4 different chip makers on to discuss Auto Chip Supply; Companies to increase supply of Auto Chips

Currencies/ Fixed Income

• USD was holding onto it recent strength as some safe-haven flows aided the greenback in recent sessions. Dealers noted long road to herd immunity on the pandemic front as one catalyst despite the vaccination campaigns. Focus on FOMC rate decision later today. Some analysts note that the Fed might attempt to stem speculation over a reduction in asset purchases once the economic recovery got underway
• EUR/USD was softer in the session. ECB’s Knot (Netherlands) reiterated Council stance that was monitoring the Euro appreciation but added that the central bank did have the tools to counter appreciation if necessary. Pair was testing 1.2125 by mid-session with dealers seeing 1.2000 as key psychological support.
• Italian 10-year BTP yield was slightly lower. Italy President Mattarella to begin process to determine scope for potential new coalition government. Dealers note that if a decision to hold early elections is taken then it could push BTP yields higher due to the political uncertainty.

Economic data

• (FI) Finland Jan Consumer Confidence: -0.9 v -4.6 prior; Business Confidence: 0 v -5 prior
• (DE) Germany Feb GfK Consumer Confidence: -15.6 v -7.9e (11th straight negative reading)
• (FR) France Jan Consumer Confidence Index: 92 v 94e
• (ES) Spain Nov Total Mortgage Lending Y/Y: -3.0% v -11.3% prior; House Mortgage Approvals Y/Y: -2.4% v -5.9% prior
• (RO) Romania Dec M3 Money Supply Y/Y: 15.3 v 15.9% prior
• (TW) Taiwan Dec Monitoring (leading) Indicator: 34 v 30 prior
• (SE) Sweden Dec Trade Balance (SEK): 2.7B v 2.4B prior
• (CH) Swiss Jan Expectations Survey: 43.2 v 46.8 prior
• (AT) Austria Jan Manufacturing PMI: 54.2 v 53.5 prior (7th straight expansion and highest since Nov 2018)
• (PL) Poland Dec Unemployment Rate: 6.2% v 6.2%e

Fixed income Issuance

• (IN) India sold INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills
• (GR) Greece Debt Agency (PDMA) opened its book to sell 10-year bonds via syndicate in coming sessions; guidance seen +105bps to mid-swaps; order book over €22B
• (AT) Austria Debt Agency (AFFA) opened its book to sell EUR-denominated 10-year bonds via syndicate; guidance seen -11bps to mid-swaps; order book over €32B
• (SI) Slovenia opened its book to sell EUR-denominated 60-year bond via syndicate; guidance seen +78bps to mid-swaps
• (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2023 and 2031 Bonds
• (NO) Norway sold total NOK3.0B vs. NOK3.0B indicated in 3% Mar 2024 Bonds; Avg Yield: 0.48% v 0.64% prior; Bid-to-cover: 3.26x v 2.03x prior
• (IT) Italy Debt Agency (Tesoro) sold €7.0B vs. €7.0B indicated in 6-month bills; Avg Yield: -0.448% v -0.52% prior; Bid-to-cover: 1.53x v 1.71x prior
• (UK) DMO sold £1.0B in new 0.125% Aug 2031 inflation-linked Gilts; Real Yield: -2.820%; bid-to-cover: 3.05x

Looking Ahead

• (EU) Daily ECB Liquidity Stats
• 05:30 (DE) Germany to sell €4.0B in 0% Feb 2031 Bunds
• 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 26-week bills Bills
• 05:30 (EU) ECB allotment in 3-month LTRO tender (prior €478.0M with 6 bids recd)
• 06:00 (FR) France Q4 Total Jobseekers: No est v 3.673M prior
• 06:00 (RU) Russia to sell July 2030 OFZ inflation-linked bonds
• 06:00 (CZ) Czech Republic to sell 2027, 2028 and 2040 bonds
• To sell 2027 Bonds
• To sell 2.5% 2028 Bonds
• To sell 1.5% 2040 Bonds
• 07:00 (US) MBA Mortgage Applications w/e Jan 22nd: No est v -1.9% prior
• 07:00 (UK) Weekly PM Question time in House
• 07:30 (BR) Brazil Dec Current Account Balance: -$5.8Be v +$0.2B prior; Foreign Direct Investment (FDI): $2.9Be v $1.5B prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Dec Preliminary Durable Goods Orders: 1.0%e v 1.0% prior; Durables (ex-transportation): 0.5%e v 0.4% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.5%e v 0.5% prior; Goods Shipments (non-defense/ex-aircraft): 0.6%e v 0.5% prior
• 10:00 (IE) ECB’s Lane (Ireland, chief economist)
• 10:00 (SE) Sweden Central Bank (Riksbank) Breman
• 10:30 (US) Weekly DOE Oil Inventories
• 12:30 (BR) Brazil Dec Total Federal Debt (BRL): No est v 4.788T prior
• 13:00 (US) Treasury to sell 2-Year FRN
• 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rates unchanged between 0.00-0.25% range; Expected to leave Interest Rate on Excess Reserves (IOER) unchanged at 0.10%
• 14:00 (AR) Argentina Nov Shop Center Sales Y/Y: No est v -67.9% prior; Supermarket Sales Y/Y: No est v -2.2% prior
• 14:30 (US) Fed Chair Powell post rate decision press conference
• 16:00 (CH) Chile Central Bank (BCCh) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 0.50%
• 16:00 (KR) South Korea Feb Business Manufacturing Survey: No est v 77 prior; Non-Manufacturing Survey: No est v 64 prior
• 16:00 (NZ) New Zealand 5-Month Financial Statements
• (CO) Colombia Dec Retail Confidence: No est v 26.2 prior; Industrial Confidence: No est v -6.7 prior
• 16:45 (NZ) New Zealand Dec Trade Balance (NZD): 0.8Be v 0.3B prior; Exports: 5.7Be v 5.2B prior; Imports: 4.9Be v 5.0B prior
• 18:50 (JP) Japan Dec Retail Sales M/M: -0.7%e v -2.1% prior (revised from -2.0%; Y/Y: -0.5%e v +0.6% prior (revised from 0.7%)
• 18:50 (JP) Japan Dec Dept. Store, Supermarket Sales Y/Y: -3.7%e v -3.4% prior
• 19:30 (AU) Australia Q4 Export Price Index Q/Q: +5.3%e v -5.1% prior; Import Price Index Q/Q: -1.0%e v -3.5% prior
• 21:00(KR) South Korea Dec Department Store Sales Y/Y: No est v -4.3% prior; Discount Store Sales Y/Y: No est v -4.1% prior
• 21:00 (PH) Philippines Q4 GDP Q/Q: 6.0%e v 8.0% prior; Y/Y: -8.0%e v -11.5% prior; Overall 2020 GDP Annual Y/Y: -9.3%e v +6.0% prior
• 22:35 (JP) Japan to sell 2-Year JGB Bonds