European inflation and employment data continues improving trend
Notes/Observations
US political volatility appears to be on the rise in the aftermath of the recent imposition of immigration controls; Trump fired acting U.S. Attorney General
European inflation continues to improve (France, Spain Euro Zone all beat expectations)
German unemployment hits fresh post-reunification low at 5.9% while Italy Dec reading hits a 18 month high
Overnight:
Asia:
(JP) Bank of Japan (BOJ) left Interest Rate on Excess Reserves (IOER) unchanged at -0.10% and maintains its current policy on both asset purchases and yield control); Reiterated overall assessment that domestic economy to maintain moderate expansion; Appears to signal no taper at this time
(JP) Japan Dec Jobless Rate in-line with expectations (3.1% v 3.1%e) and hold just above multi-decade lows
Japan Fin Min Aso expected weak Yen/strong USD trend to continue in H1; FX policy should be discussed in global context
Europe:
(UK) Parliament begins debate on Article 50; reports that five amendments presented to draft bill (**Note: final vote on Wed, Feb 8th)
(UK) Jan GFK Consumer Confidence hits a 3 month high (-5 v -8e)
Americas:
President Trump fires Acting Attorney General Yates (Obama holdover) who would not enforce immigration orders; names Dana Boente new acting AG
Economic data
(JP) Japan Dec Annualized Housing Starts (miss): 923K v 938Ke; Y/Y: 3.9% v 8.4%e v 6.7% prior
(FR) France Q4 Advance GDP (in-line) Q/Q: 0.4% v 0.4%e; Y/Y: 1.1% v 1.1%e
(DE) Germany Dec Retail Sales (miss) M/M: -0.9% v +0.5%e; Y/Y: -1.1% v 0.5%e
(TR) Turkey Dec Trade Balance: -$5.6B v -$5.6Be
(FR) France Jan Preliminary CPI (beat) M/M: -0.2% v -0.5%e; Y/Y: 1.4% v 1.1%e
(FR) France Jan Preliminary CPI EU Harmonized M/M: -0.2% v -0.5%e; Y/Y: 1.6% v 1.2%e
(FR) France Dec Consumer Spending M/M: -0.8% v +0.2%e; Y/Y: 1.5% v 2.1%e
(FR) France Dec PPI M/M: 0.9% v 0.7% prior; Y/Y: +1.7 v -0.5% prior
(ES) Spain Jan Preliminary CPI (beat) M/M: -0.5% v -1.2%e; Y/Y: 3.0% v 2.3%e
(ES) Spain Jan Preliminary CPI EU Harmonized M/M: -0.9% v -1.6%e; Y/Y: 3.0% v 2.2%e
(ES) Spain Jan Preliminary CPI Core M/M: % v 0.1% prior; Y/Y: % v 1.0%e
(AT) Austria Q4 GDP Q/Q: 0.6% v 0.4% prior; Y/Y: 1.8% v 1.2% prior
(DE) Germany Jan Unemployment Change (beat): -26K v -5Ke; Unemployment Rate: 5.9% v 6.0%e ( (post-reunification record low)
(IT) Italy Dec Preliminary Unemployment Rate (miss): 12.0% v 11.8%e
(PL) Poland Overall 2016 GDP Y/Y: 2.8% v 2.7%e
(UK) Dec Net Consumer Credit: £1.0B v £1.7Be; Net Lending: £3.8B v £3.2Be
(UK) Dec Mortgage Approvals (miss): 67.9K v 69.0Ke
(UK) Dec M4 Money Supply M/M: -0.5% v +0.4% prior; Y/Y: 6.2% v 6.4% prior
(EU) Euro Zone Dec Unemployment Rate (beat): 9.6% v 9.8%e (lowest level since 2009)
(EU) Euro Zone Q4 Advance GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.8% v 1.7%e
(EU) Euro Zone Jan CPI Estimate (beat) Y/Y: 1.8% v 1.5%e (3 1/2 year high); CPI Core Y/Y: 0.9% v 0.9%e
Fixed Income Issuance:
(ID) Indonesia sold total IDR22.0T in bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 +0.6% at 3,279, FTSE +0.6% at 7,161, DAX +0.3% at 11,721, CAC-40 +0.5% at 4,810, IBEX-35 +0.6% at 9,416, FTSE MIB +1.0% at 18,936, SMI +0.2% at 8,340, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes: European equity indices are trading higher despite the Asian and US sessions ending lower overnight; Rallies in European indices predominantly led by banking stocks; Italian FTSE MIB outperforming with the peripheral lenders trading sharply higher, with automobile manufacturers Fiat ad Ferrari also trading notably higher; FTSE 100 gains led by commodity and mining stocks as copper prices trade higher intraday.
A plethora of upcoming scheduled US earnings (pre-market) include AmerisourceBergen, Aetna, Ally Financial, Anixter, CIT Group, CONSOL Energy, Coach, Danaher, HCA, Harley Davidson, Hubbell, Eli Lilly, MasterCard, Manpowergroup, NASDAQ OMX, NuStar Energy, Nucor, Paccar, Pfizer, Pentair, Sprint Nextel, Stifel Financial, Scotts Miracle-Gro, Simon Property, Taylor Morrison, Thermo Fisher Scientific, Under Armour, UPS, Valero Energy, Exxon Mobil, Xerox, and Zimmer Biomet.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Centrotec CEV.DE +0.2% (prelim FY16 results), GFK GFK.DE +0.1% (prelim FY16 results), Givaudan GIVN.CH -4.2% (FY16 results), Hennes & Mauritz HMB.SE +5.5% (Q4 results), Ocado OCDO.UK +7.5% (FY16 results), Richemont CFR.CH +2.0% (Four execs to depart)]
Energy: [Nostrum Oil & Gas NOG.UK +4.7% (production), Royal Dutch Shell RDSA.UK +1.5% (To sell package of UK North Sea assets to Chrysaor for up to $3.8B), Seadrill SDRL.NO -20.6% (financial restructuring update), Scottish & Southern Energy SSE.UK -0.7% (trading update)]
Financials: [Sanne Group SNN.UK +3.6% (trading statement)]
Industrials: [Alfa Laval ALFA.SE +8.1% (Q4 results), UPM-Kymmene UPM1V.FI -9.5% (Q4 results, raises LT outlook)]
Telecom: [Com Hem COMH.SE +1.0% (Q4 results)]
Speakers
ECB’s Draghi: Financial integration essential for well-functioning single currency
ECB’s Villeroy (France) reiterated view that concerns about rising inflation are exaggerated
UK Government might may invoke Article 50 on March 9th at a European summit. Govt told House of Lords on Mon, Jan 30th that it wanted the bill authorizing Brexit to be approved on March 7th
France Fin Min Sapin: 2017 beginning with very good economic conditions
Spain Econ Min de Guindos saw national inflation easing from Q2
German Finance Ministry spokesman reiterated further payments to Greece depend on successful completion of debt review and IMF participation
Turkey Central Bank Quarterly Inflation Report raised its inflation forecasts for both 2017 and 2018 citing thatimport price rise was the main factor. It raised 2017 CPI from 6.5% to 8.0% and 2018 CPI from 5.0% to 6.0%. CBRT noted that in Jan it decided to strengthen policy tightening and could do additional policy tightening if needed and would use all policy tools until inflation was under control. CBRT also noted that 2017 economic recovery could be slower than expected and expected exports to recover
BOJ Gov Kuroda post rate decision press conference reiterates that that economic recovery remained on a moderate trend and the upward revision to GDP forecasts reflected overseas economies. Reiterated that risks to both growth and inflation remained on the downside (Board Members Kiuchi, Sato both believe that inflation to stay below 2% over BOJ forecast horizon). Reiterated to achieve 2% inflation target around FY18 (**Note: Apr 17 thru Mar 2018). To keep close watch on policy direction and impact from new Trump Administration. Kuroda added that the central bank had "no intention to signal future policy stance through bond buying operations. Too early to discuss any exit strategy from policy; only halfway to inflation target; balance sheet and interest rates were important parts of exit strategy but still dependent on economic situation
Currencies
USD remained on the defensive mode in the aftermath of US President Trump’s broad-sweeping executive order on immigration curbs from 7 Middle East countries. Safe-haven plays remained in focus with JPY and Gold being eyed as primary benefactors.
The EUR/USD hovered around the 1.07 level and little changed in the session despite continued improvement in European inflation data and record low unemployment in Germany. Dealers noted that several ECB officials, including President Draghi, have recently highlighted the importance of seeing core CPI pick-up as one of the determinants of meeting its price stability mandate
The USD/JPY moved off its worst levels after BOJ showed its firm commitment to managing the yield curve and dismissed speculation of any imminent tapering of policy. USD/JPY trying to make its way back to the 114 area after testing 113.26 overnight
GBP/USD was softer by 0.4% at 1.2435 as UK Parliament begins debate on the Article 50 bill. Several bits of UK data did disappoint in the session highlighted by mortgage approval for Dec
Fixed Income:
Bund futures trade at 161.66 down 40 ticks with on risk aversion flows with strong German job numbers, stronger Eurozone CPI and GDP readings also weighing on futures. Continued downside targets 161.19 followed by 160.80. A reversal higher targets 162.22 yesterday high, 162.49 then 163.01 followed by 163.38.
Gilt futures trade at 123.35 down 30 ticks of an opening high of 123.69 falling with the Euro Indices rising. Support moves to 122.99, 122.60, 122.23 then Dec low at 122.08. Resistance moves to 123.79 followed 124.13 to close the gap. Short Sterling futures trade flat with Jun17Jun18 remaining steady at 28/29bp.
Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.260T down €5B from €1.265T prior. Use of the marginal lending facility fell to €15M from €183M prior.
Corporate issuance saw $17.85B come to market via 3 deals headlines by Microsoft jumbo 7 part $17B issuance upsized from an original $14B with $11.5B being issued in 10, 20, 30 and 40 year bonds.
Looking Ahead
05.30 (UK) Weekly John Lewis LFL sales data
05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
05:30 (UK) DMO to sell £2.5B in 1.5% 2026 Gilts
05:30 (BE) Belgium Debt Agency (BDA) to sell €1.0-1.4B in 3-Month and 6-month Bills
06:00 (IE) Ireland Jan Unemployment Rate: No est v 7.2% prior
06:00 (IL) Israel Dec Unemployment Rate: No est v 4.6% prior
06:00 (BR) Brazil Dec National Unemployment Rate: 11.9%e v 11.9% prior
06:00 (BR) Brazil Dec PPI Manufacturing M/M: No est v 0.7% prior; Y/Y: No est v -0.1% prior
06:00 (IN) India Dec Fiscal Deficit (INR):
06:00 (RU) Russia announces weekly OFZ bond auction
06:45 (US) Daily Libor Fixing
07:00 (ZA) South Africa Dec Trade Balance (ZAR): +6.3Be v -1.1B prior
07:00 (IN) India 2016 annual GDP estimate Y/Y: No est v 7.1% prior
07:00 (CL) Chile Dec Unemployment Rate: 6.1%e v 6.2% prior
07:30 (BR) Brazil Dec Nominal Budget Balance (BRL): -113.2Be v -80.4B prior: Primary Budget Balance: -75.1Be v -39.1B prior
07:45 (US) Weekly Goldman Economist Chain Store Sales
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Q4 Employment Cost Index (ECI): 0.6%e v 0.6% prior
08:30 (CA) Canada Nov GDP M/M: +0.3%e v -0.3% prior; Y/Y: 1.4%e v 1.5% prior
08:30 (CA) Canada Dec Industrial Product Price M/M: 0.6%e v 0.3% prior; Raw Materials Price Index M/M: +2.8%e v -2.0% prior
08:55 (US) Weekly Redbook Sales
09:00 (EU) Weekly ECB Forex Reserves: No est v €280.8B prior
09:00 (US) Nov S&P / Case-Shiller 20-City M/M: 0.70%e v 0.63% prior; Y/Y: 5.00%e v 5.10% prior; House Price Index (HPI): No est v 191.79 prior
09:00 (US) Nov S&P / Case-Shiller (overall) HPI M/M: No est v 0.85% prior, Y/Y: No est v 5.61% prior, House Price Index (HPI): No est v 185.06 prior
09:00 (MX) Mexico Q4 Preliminary GDP Q/Q: 0.6%e v 1.0% prior; Y/Y: 2.2%e v 2.0% prior
09:00 (US) Federal Open Market Committee (FOMC) begins 2-day meeting (Decision on Wed)
09:45 (US) Jan Chicago Purchasing Manager: 55.0e v 53.9 prior (revised from 54.6)
09:50 (UK) Bank of England (BOE) Bond Buying Operation (over 15 years)
10:00 (US) Jan Consumer Confidence: 112.8e v 113.7 prior
10:00 (MX) Mexico Dec Net Outstanding Loans (MXN): No est v 3.61T prior
11:30 (US) Treasury to sell 52-Week Bills
14:00 (AR) Argentina Dec Industrial Production Y/Y: No est v -4.1% prior; Construction Activity Y/Y: No est v -9.4% prior
16:30 (US) Weekly API Oil Inventories
17:20 (CA) Bank of Canada (BOC) Gov Poloz speaks at University of Alberta
