Notes/Observations
- G20 communique to reflect fears of protectionism. Disagreement remained over whether to address trade friction through a bilateral or multilateral framework
- Trade escalation seen entering its next stage with the US administration considering imposing a $60B tariff on China’s $510B of exports into the US.
- UK Feb CPI comes in below expectations (YoY: 2.7% v 2.8%e); but unlikely to sway expectations that next BOE rate hike could come as soon as May
Asia:
- Japan Vice Fin Min Kihara: Told G20 recent market volatility did not reflect global economic fundamentals; communique likely to note concerns over inward looking policies. Told its G20 counterparts that protectionism benefited no country and was among key risks to the global economy as it would shrink trade
- Japan Trade Min Seko: High chance Japan would secure some exemptions from US tariffs on steel and aluminum on per-item basis
- RBA March Meeting Minutes reiterated low rates were playing a part in lowering unemployment and lifting inflation. Reiterated stance that the steady monetary policy would be consistent with sustainable growth in the economy and achieving the inflation target over time. Financial market pricing continued to imply that the cash rate was expected to remain unchanged during 2018, with a 25 basis point increase expected in the first half of 2019
- China Premier Li stated that was fully confident in achieving 2018 economic targets. Reiterated view that did not hope to see relatively big trade surplus with US and that a trade war would not be beneficial and hoped it would be avoided
Europe:
- ECB’s Mersch (Luxembourg): economic recovery in the euro area had developed better than expected and employment had increased significantly; Reiterated Council view that have become more confident that inflation is on the right track
- ECB’s Weidmann (Germany) indicated rift at G20 regarding trade. Officials talked about the risks of a trade war and what it could mean for economic growth.
- Italy President Mattarella to allow several months for coalition talks on forming govt
Americas:
- President Trump said to be readying $60B package of China tariffs that could be announced by Friday, Mar 23rd (China Commerce Ministry (MOFCOM) did not comment but urged US to correct abuse of trade measures)
Energy:
- Trump-Saudi meeting scheduled for Tuesday, Mar 20th. Saudi Arabia had previously called the 2015 nuclear deal between Iran and world powers a “flawed agreement
Economic Data:
- (DE) Germany Feb PPI M/M: -0.1% v +0.1%e; Y/Y: 1.8% v 2.0%e
- (CH) Swiss Feb Trade Balance (CHF): 3.1B v 2.1B prior, Real Exports M/M: +2.3% v -4.8% prior, Real Imports M/M: -9.5% v +4.7% prior
- (DK) Denmark Mar Consumer Confidence Indicator: 8.5 v 7.5e
- (ZA) South Africa Jan Leading Indicator: 106.1 v 105.8 prior
- (FI) Finland Feb Unemployment Rate: 8.6% v 8.8% prior
- (TR) Turkey Mar Consumer Confidence: 71.3 v 72.3 prior
- (TW) Taiwan Feb Export Orders Y/Y: -3.8% v +3.5%e
- (ZA) South Africa Feb CPI M/M: 0.8% v 0.9%e ; Y/Y: 4.0% v 4.1%e
- (ZA) South Africa Feb CPI Core M/M: 1.1% v 1.1%e; Y/Y: 4.1% v 4.1%e
- (ZA) South Africa Q4 Current Account (ZAR): -137B v -106Be; C/A to GDP ratio: -2.9% v -2.0%e
- (HU) Hungary Jan Average Gross Wages Y/Y: 13.8% v 12.0%e
- (HK) Hong Kong Feb CPI Composite Y/Y: 3.1% v 2.2%e
- (UK) Feb CPI M/M: 0.4% v 0.5%e; Y/Y: 2.7% v 2.8%e; CPI Core Y/Y: 2.4% v 2.5%e; CPIH Y/Y: 2.5% v 2.6%e
- (UK) Feb RPI M/M: 0.8% v 0.8%e; Y/Y: 3.6% v 3.7%e, RPI-X (ex-mortgage interest payment) Y/Y: 3.6% v 3.6%e, Retail Price Index: 278.1 v 278.3e
- (UK) Feb PPI Input M/M: -1.1% v -0.9%e; Y/Y: 3.4% v 3.8%e
- (UK) Feb PPI Output M/M: 0.0% v 0.1%e; Y/Y: 2.6% v 2.7%e – (UK) Feb PPI Output Core M/M: 0.2% v 0.2%e; Y/Y: 2.4% v 2.4%e
- (UK) Jan ONS House Price Index Y/Y: 4.9% v 5.0%e
Fixed Income Issuance:
- (ID) Indonesia sold total IDR8.9T vs. IDR8.0T target in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
- (ZA) South Africa sold total ZAR3.3B vs. ZAR3.3B indicated in 2023, 2031, 2037 and 2048 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.1% at 373.3, FTSE +0.1% at 7051, DAX -0.2% at 12198, CAC-40 -0.2% at 5211, IBEX-35 -0.5% at 9618, FTSE MIB -0.1% at 22608 , SMI -0.4% at 8776, S&P 500 Futures -0.2%]
- Market Focal Points/Key Themes: European Indices drift into negative territory tracking US futures lower, with the Nasdaq continuing to underperform with Facebook remaining in focus following privacy backlash. On the corporate front solid earnings from Tom Tailor, Partners Group and Bellway saw shares higher, while John Wood Group, Ocado, 888 Holdings were some of the names lower after results. In the M&A space Fenner trades sharply higher after its to be acquired by Michelin for £1.2B, whilst Rio Tinto trades higher after divesting its interest in Hail Creek coal mine. Looking ahead notable earnings include Children’s Place and Duluth holdings.
Movers
- Consumer Discretionary [ Fingerprint Cards [FINGB.SE] -6.9% (New CFO), 888 Holdings [888.UK] -5.8% (Earnings), Ocado [OCDO.UK] -1.4% (Trading update), Mears Group [MER.UK] -1.4% (Earnings) ]
- Industrials [ John Wood Group [WG.UK] -1.6% (Earnings) ) ]
- Financials [ Partners Group [PGHN.CH] +2.3% (Earnings) ]
- Technology [Fingerprint Cards [FINGB.SE] -6.9% (New CFO), Delarue [DLR.UK] -11% (Earnings) ]
- Energy [ BKW [BKW.CH] +4% (Earnings)]
- Real Estate [ Bellway [BWY.UK] +2.7% (Earnings)]
Speakers
- Swiss SECO March 2018 Economic Forecasts raised both 2018 and 2019 GDP growth forecasts but warned the US protectionism stance was a risk to the global economy
- Bundesbank Dombret (ECB SSM member): Brexit banks should file license applications by June
- EU Parliamentary official Huebner: Saw support for giving ECB clearing oversight
- South Africa Hawks police unit: No investigation of Gordhan (refutes new speculation)
- Bank of Korea (BOK) Feb Minutes: One member saw the need for a rate hike but the timing was uncertain while another member noted that reaching the 2% inflation target looked unclear
- Japan said to consider summit with South Korea and China after Golden Week
- BOJ Dep Gov Amamiya stated that the country was not in deflation but still far from inflation target. Would do the utmost to end deflation. Needed to continue with easing persistently. Challenges included exit and side effect of current policy. No need to consider rate hike at this time; didnot rule out adjusting rates before hitting inflation target (in-line with Gov Kuroda views)
- BOJ Dep Gov Wakatabe: Had no preconceptions on policy as aim was to hit price target asap. Did have tools for more easing. Needed to avoid any premature shift in policy but should not hesitate to add to easing if needed. Various data showed positive impact of easing. Benefits of monetary easing had yet to spread through economy
- S&P affirmed Hong Kong sovereign rating at AA+; outlook stable
- OPEC/Non-Opec committee said to see market re-balancing by Q3
Currencies
- The focus has been on trade over the past 24 hours as G20 meets in Argentina. Dealers note that an escalation on trade issues was now seen entering its next stage with the US administration considering imposing a $60B tariff on China’s $510B of exports into the US by the end of the week.
- The USD/JPY pair moved higher as the session began after a Japanese official noted that the country would secure some exemptions from US tariffs on steel and aluminum on per-item basis. The pair peaked at 106.60 after the new BOJ Dep Govs Amamiya and Wakatabe touted the BOJ standard rhetoric. Both new members noted that they saw no need to consider rate hike at this time but did not rule out adjusting rates before hitting inflation target
- EUR/USD maintained some legs after reports circulated on Monday that the ECB policymakers had begun shifting the debate towards the steepness of the rate path with even the most dovish members accepting that QE should end this year. The pair was steady at 1.2340 and still well-contained with the 4 big figure range that has enveloped the pair this year.
- The GBP/USD was building to its gains in the aftermath of an agreement on the Brexit transition ahead of the EU Leaders summit this week. Focus was on key inflation data ahead of Thursday’s BOE rate decision. UK Feb CPI came in below expectations (YoY: 2.7% v 2.8%e); but was viewed as unlikely to sway expectations that
Fixed Income
- Bund Futures trade 16 ticks lower at 157.99 ahead of the March German ZEW survey. Upside targets 158.75, while a return lower targets the157.25 level.
- Gilt futures trade at 122.62 down 14 ticks after softer than expected UK inflation. Support continues to stand at 120.75 then 120.15, with upside resistance at 122.85 then 123.35.
- Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.824T from €1.834T prior. Use of the marginal lending facility stayed steady at nil.
Looking Ahead
- G20 Meeting continues in Argentina
- (PL) EU update on Poland Rule of Law (no decision expected)
- Saudi Crown Prince Mohammed bin Salman meets President Trump in Washington
- (IL) Israel Mar 12-month CPI Forecast: No est v 0.8% prior
- (AR) Argentina Feb Budget Balance (ARS): No est v 3.9B prior
- 06:00 (DE) Germany Mar ZEW Current Situation: 90.0e v 92.3 prior; Expectations Survey: 13.0e v 17.8 prior
- 06:00 (EU) Euro Zone Mar ZEW Expectations Survey: No est v 29.3 prior
- 06:00 (IT) Italy’s Berlusconi gathers newly-elected lawmakers
- 06:00 (EU) Daily Euribor Fixing
- 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 (MRO)
- 06:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills;
- 06:30 (DE) Germany to sell €4.0B in 0% Mar 2020 Schatz
- 07:00 (IL) Israel Jan Manufacturing Production M/M: No est v -0.5% prior
- 07:00 (TR) Turkey to sell 2019 and 2028 bonds
- 07:30 (EU) ESM to sell €2.0B in 6-month bills
- 07:45 (US) Weekly Goldman Economist Chain Store Sales
- 07:45 (US) Daily Libor Fixing
- 08:00 (RU) Russia announces weekly OFZ bond auction
- 08:30 (CA) Canada Jan Wholesale Trade Sales M/M: +0.1%e v -0.5% prior
- 08:30 (NZ) Fonterra Global Dairy Trade Auction
- 08:55 (US) Weekly Redbook Sales
- 09:05 (US) Baltic Dry Bulk Index
- 10:00 (EU) Weekly ECB Forex Reserves
- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
- 10:45 (UK) BOE APF Gilt purchase operation (over 15-years)
- 11:00 (EU) Euro Zone Mar Advance Consumer Confidence: 0.0e v 0.1 prior
- 11:00 (CO) Colombia Jan Trade Balance: -$0.6Be v +$0.5B prior; Total Imports: $3.8Be v $3.6B prior
- 11:30 (US) Treasury to sell 4-Week Bills
- 15:00 (AR) Argentina Q4 Unemployment Rate: 7.5%e v 8.3% prior
- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.50%
- 15:00 (MX) Mexico Citibanamex Survey of Economists
- 16:30 (US) Weekly API Oil Inventories
- 17:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 2.50%
