BOE Dep Gov nominee Hogg resigns
EU Mid-Market Update: European inflation at multi-year highs; BOE Dep Gov nominee Hogg resigns
Notes/Observations
German Final CPI reading confirms highest annual pace since August 2012 (2.2% v 2.2%e)
Sweden CPIF inflation annual reading at highest level since Dec 2010
BOE Dep Gov nominee Hogg resigns after failing to disclose her brother worked at Barclays
Overnight:
Asia:
China Feb Industrial Production hits a 6-month high (YoY: 6.3% v 6.2%e) while retail sales missed due to slower auto sales (YoY: 9.5% V 10.6%e)
China Stats Bureau (NBS): Fundamentals of real economy were improving, business environment much better than this time last year; PPI might have peaked in Feb
Japan Fin Min Aso: Financial regulations and taxation will be topics at G20; plan to explain Japan’s economy and listen to others opinions
Europe:
(UK) Parliament approved PM May to start Brexit process. Brexit bill has now made it through parliament and is set to receive Royal Assent before becoming law. Once the bill became law, PM May would have the authority to trigger the Article 50 exit process.
UK Brexit Min Davis reiterated that govt would trigger A50 by end of month as planned; to deliver an outcome that works in interests of whole UK
UK would need to pass 7 new Bills in key areas to prepare for Brexit; including areas covering immigration, tax, agriculture, trade/customs, fisheries, data protection and sanctions
PM May said to be preparing to reject Scotland 1st Min Sturgeon’s demand for 2nd referendum on Scottish independence
Americas:
Treasury official: G20 needed to abide by existing currency views; affirmed commitments to not target FX rates to gain competitive trade advantage
Energy:
EIA forecasts April total shale regions oil production at 4.962M bpd, +109K bbd m/m
Economic data
(IN) India Feb Wholesale Prices (WPI) Y/Y: 6.6% v 6.1%e
(DE) Germany Feb Final CPI M/M: 0.6% v 0.6%e; Y/Y: 2.2% v 2.2%e (highest annual pace since August 2012)
(DE) Germany Feb Final CPI EU Harmonized M/M: 0.7% v 0.7%e; Y/Y: 2.2% v 2.2%e
(ES) Spain Feb Final CPI M/M: -0.4% v -0.3%e; Y/Y: 3% v 3.0%e
(ES) Spain Feb Final CPI EU Harmonized M/M: -0.3% v -0.3%e; Y/Y: 3.0% v 3.0%e
(SE) Sweden Feb CPI M/M: 0.7% v 0.6%e; Y/Y: 1.8% v 1.7%e
(SE) Sweden Feb CPI CPIF M/M: 0.7% v 0.6%e; Y/Y: 2.0% v 1.9%e
(ES) Bank of Spain (BOS): Feb Spanish Banks ECB borrowings at €145.0B v €144.9B prior
Fixed Income Issuance:
(ID) Indonesia sold total IDR11.35T in 5-year,15-year and 20-year Bonds
(NL) Netherlands Debt Agency (DSTA) sold €2.275B vs. €2.0-3.0B indicated range in 0% 2022 DSL Bonds; Yield: -0.197% v -0.283% prior
(ES) Spain Debt Agency (Tesoro) sold total €3.02B vs. €2.5-3.5B indicated range in 3-month and 9-month Bills
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 09:40 GMT)
Indices [Stoxx50 -0.4% at 3,404, FTSE +0.1% at 7,375, DAX -0.1% at 11,980, CAC-40 -0.3% at 4,986, IBEX-35 -0.6% at 9,932, FTSE MIB -0.4% at 19,628, SMI -0.1% at 8,672, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes: European equity indices are trading mixed but generally lower after a mixed end to the Asian session overnight; Banking stocks generally lower across the board with the IBEX-35 underperforming, weighed down by the Spanish peripheral lenders; shares of Engie leading the losses in the Eurostoxx after it was reported to be mulling a bid for recently IPO’ed Innogy, shares of Innogy conversely higher; FTSE 100 outperforming, with shares of Prudential leading the gains in the index after releasing its FY16 results.
Upcoming scheduled US earnings (pre-market) include DSW, HD Supply, Radnet, Veritiv, Walter Investment Management, and YY Inc.
Equities (as of 09:35 GMT)
Consumer Discretionary: [Ocado OCDO.UK +4.6% (Q1 sales)]
Energy: [Innogy IGY.DE +5.1% (Engie reportedly mulling a bid, said to be valued at ~$20B), RWE RWE.DE +8.7% (FY16 results)]
Financials: [Amundi AMUN.FR -0.4% (€1.4B rights offering), Prudential PRU.UK +3.0% (FY16 results, raises div)]
Healthcare: [Galenica GALN.CH -2.9% (FY16 results), Stratec Biomedical SBS.DE +9.3% (FY16 results)]
Industrials: [Aker Solutions AKSO.NO +14.2% (Halliburton said to be in advanced talks for acquisition), Antofagasta ANTO.UK +0.1% (FY16 results), Geberit GEBN.CH -1.0% (FY16 results, share buyback, div increase), Huber & Suhner HUBN.CH -0.2% (final FY16 results, div increase), Symrise SY1.DE -0.7% (FY16 results)]
Materials: [SIG Plc SHI.UK +9.5% (FY16 results, rebases div, names new CE), Wacker Chemie WCH.DE -1.5% (FY16 results)]
Utilities: [Engie ENGI.FR -1.7% (Reportedly mulling a bid for Innogy)]
Speakers
Sweden Central Bank (Riksbank) Gov Ingvesstated that it had reversed the trend in inflation but was not out of the woods just yet; needed continuous stimulus to stabilize inflation. Inflation remain low when excluding energy prices. Reiterated that inflation to stabilize around 2% in 2018 and that the exchange rate was important for its development
UK Treasury committee report on Charlotte Hogg expressed concerned that she misled (inadvertently) the committee and thus had concerns over her competence to serve as Dep Gov. They concluded that she fallen short of standards (**Note: she did not declare that brother worked at Barclays back in 2013 when she joined the central bank
BOE’s Dep Gov nominee Charlotte Hogg resigned (voluntary)
Italy Government to hold labor legislation referendum on May 28th
Germany 2018 budget draft said to assume economic growth of 1.6% led by domestic demand
France former PM Valls refutes reports that he sought to endorse Macron for President
Bank of Korea (BOK) Feb Minutes saw various members state that CPI rise to be in-line with Jan forecast and no big necessity to adjust interest rates. Steady policy provided policy space if needed
China NDRC to cut fuel prices (gasoline prices by CNY85/ton and diesel prices by CNY85/ton)
Currencies
EUR/USD hovering around the mid-1.06 area. German Final CPI reading confirmed highest annual pace since August 2012 (2.2% v 2.2%e). Despite the pickup in headline inflation in Germany and elsewhere in the eurozone, there may be no change in the European Central Bank’s loose monetary policy given that it is volatile energy and food prices which are pushing the inflation rate up
USD/JPY pair held above the 115 level aided by yield differentials. 30-Year Treasury Yield Touches Highest Since July 2015
The GBP/USD was weaker in the session after UK PM May was given the go-ahead to trigger Brexit by her Parliament with no amendment attached. The response was a bit of delay for the currency.Market participants were said to be reluctant to sell the GBP currency during Tokyo trading hours as markets were quiet before the Fed mid-week rate decision.
Fixed Income:
Bund futures trade at 159.10 down 9 ticks having traded as low as 158.73 a contract low, fading some of the move lower as Equities retreat. A move back below lows target 158.26 followed by 158.04. Resistance moves to 159.68 then 159.85 Friday high followed by 160.20.
Gilt futures trade at 125.89 down 15 ticks ahead of the launch of a new 10 year Gilts due later today. Support moves to 125.57 with further weakness eyeing 125.24. Resistance moves to 126.38 then 126.87 followed by 127.35. Short Sterling futures trade flat to down 1bp, in slight steepening trade with Jun17Jun18 spread rising to 17/18bp.
Tuesday liquidity report showed Monday’s excess liquidity remained flat at €1.371T. Use of the marginal lending facility rose to €620M from €450M prior.
Corporate issuance saw another strong start to the week with $18.3B coming to market via 8 issuers headlined by Verizon $11B 5 part offering and Citigroup 2 part $2.5B offering, with the Verizon deal just over 2 times covered. Issuance for the week is already at the top end of analysts expectations, with monthly issuance topping $77B.
Political/In the Papers:
US Congressional Budget Office (CBO) scored American Health Care Act (AHCA): 14M more people would be uninsured in 2018 and 24M more by 2026
Looking Ahead
(PT) Bank of Portugal reports Jan ECB financing to Portuguese Banks: No est v €23.0B prior
06:00 (US) Feb NFIB Small Business Optimism: 105.6e v 105.9 prior
06:00 (DE) Germany Mar ZEW Current Situation Survey: 78.0e v 76.4 prior; Expectations Survey: 13.0e v 10.4 prior
06:00 (EU) Euro Zone Mar ZEW Survey Expectations: No est v 17.1 prior
06:00 (EU) Euro Zone Jan Industrial Production M/M: +1.3%e v -1.6% prior; Y/Y: 0.9%e v 2.0% prior
06:00 (EU) Daily Euribor Fixing
06:00 (ZA) South Africa to sell combined ZAR2.35B in 2023, 2035 and 2040 bonds
06:15 (CH) Switzerland to sell 3-month Bills
06.30 (UK) Weekly John Lewis LFL sales data
06:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
06:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
06:30 (UK) DMO to sell £2.25B in new 2927 Gilt
07:00 (ZA) South Africa Jan Manufacturing Production M/: No est v 0.3% prior; Y/Y: +1.6%e v -2.0% prior
07:00 (TR) Turkey to sell Floating 2022 Bonds; Yield: % v 4.87% prior
07:30 OPEC Monthly Report
07:45 (US) Weekly Goldman Economist Chain Store Sales
07:45 (US) Daily Libor Fixing
08:00 (IN) India Feb CPI Y/Y: 3.6%e 3.2% prior
08:00 (IS) Iceland Feb Unemployment Rate: No est v 3.0% prior
08:30 (US) Feb PPI Final Demand M/M: 0.1%e v 0.6% prior; Y/Y: 1.9%e v 1.6% prior
08:30 (US) Feb PPI Ex Food and Energy M/M: 0.2%e v 0.4% prior; Y/Y: 1.5%e v 1.2% prior
08:30 (US) Feb PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.4% prior; Y/Y: No est v 1.6% prior
08:30 (CA) Canada Feb Teranet/National Bank HPI M/M: No est v 0.5% prior; Y/Y: No est v 13.0% prior
08:55 (US) Weekly Redbook Sales
09:00 (RU) Russia announces weekly OFZ bond auction
09:00 (PL) Poland Feb CPI M/M: 0.2%e v 0.4% prior; Y/Y: 2.1%e v 1.8% prior
09:00 (PL) Poland Feb M3 Money Supply M/M: +0.6%e v -1.3% prior; Y/Y: 8.4%e v 8.5% prior
09:00 (RU) Russia Jan Trade Balance: $11.6Be v $11.8B prior; Exports: $24.6Be v $31.1B prior; Imports: $13.5Be v $19.3B prior
09:00 (US) The Federal Open Market Committee (FOMC) begins 2-day policy meeting (decision on Wed)
09:15 (UK) Baltic Dry Bulk Index
10:00 (MX) Mexico Jan Industrial Production M/M: 0.0%e v -0.1% prior; Y/Y: 0.0%e v -0.6% prior; Manufacturing Production Y/Y: 2.5%e v 1.8% prior
10:00 (EU) Weekly ECB Forex Reserves:
10:50 (UK) BoE conducts reverse Gilt auction (over 15 years)
11:30 (US) Treasury to sell 4-Week Bills
12:00 (IS) Iceland Feb International Reserves (ISK): No est v 855B prior
12:00 (UR) Ukraine to sell Bonds
15:00 (CO) Colombia Jan Retail Sales Y/Y: 3.0%e v 6.2% prior
15:00 (CO) Colombia Jan Industrial Production Y/Y: 2.2%e v 2.2% prior
16:30 (US) Weekly API Oil Inventories
