Notes/Observations
- Easing trade tensions allowed risk appetite to rebound
- US Treasury poised for its largest weekly sale of debt ever (approx. $294B)
Asia:
- Trump Administration said to send letter from Treasury Sec and US Trade Rep to China President Xi’s top economic advisor Liu He seeking reduction of China’s tariffs on US autos, requested additional purchases by China of US semiconductors and more access to China’s financial sector.
- Treasury Sec Mnuchin: Trump administration was pressing ahead with tariffs, but remained hopeful on reaching trade deal with China. President Trump was not afraid of a trade war.
- ,South Korea Trade Min: South Korea and the United States have reached an agreement “in principle” on renegotiation of their free trade agreement; South Korea to be exempted from the 25% steel tariffs
- PBoC Gov Yi Gang inaugural speech noted that China’s economic performance in early 2018 had shown ‘good’ momentum extending from 2017; reiterated prudent and neutral monetary policy (not be too tight or too lose). Expected consumer inflation pressures to be mild in 2018.
- China Vice Premier Han Zheng inaugural speech stated that China pledged to move forward with market opening and reforms; reiterated China would treat domestic and foreign companies equally and protect intellectual property rights. Transition from high-speed growth to high-quality development would not be easy but would ensure that market played a decisive role in economy
Europe:
- Italy’s 5-star and League parties said to reach agreement on election of parliamentary speakers. Roberto Fico elected as President of the lower house and Forza Italia member Elisabetta Casellati as president of the Senate
- Italian PM Gentiloni: formally resigned on Saturday, Mar 24th (as expected). President Mattarella said to have asked Gentiloni while country forms new Govt
- Former Catalonia leader Carles Puigdemont was detained by police officials in Germany (acting on an international arrest warrant issued by a judge in Spain)
- Sovereign rating:
- S&P raised Spain sovereign debt rating one notch to A- from BBB+; outlook Positive
- S&P affirmed Belgium sovereign rating at AA; outlook Stable
- S&P and Fitch affirmed Norway sovereign debt rating at AAA; outlook Stable
- Fitch affirmed Switzerland sovereign debt rating at AAA; outlook Stable
- Moody’s affirmed South Africa sovereign debt rating at Baa3; outlook revised to Stable
Americas:
- San Francisco Fed President Williams (moderate, voter) thought to be leading candidate to become New York Fed President (Note: Dudley planning to step down this summer)
Energy:
- China launch its yuan denominated oil futures contract, the “petroyuan”, effective, Mar 26th after long awaited approval from China State Council (as speculated)
Economic Data:
- (NL) Netherlands Q4 Final GDP Q/Q: 0.8% v 0.8%e; Y/Y: 2.9% v 2.9%e
- (SG) Singapore Feb Industrial Production M/M: -0.5% v -8.4%e; Y/Y: 8.9% v 4.2%e
- (FI) Finland Feb PPI M/M: 0.7% v 0.7% prior; Y/Y: 2.4% v 2.4% prior
- (FI) Finland Feb Preliminary Retail Sales Volume Y/Y: 2.1% v 5.1% prior
- (FR) France Q4 Final GDP Q/Q: 0.7% v 0.6%e; Y/Y: 2.5% v 2.5%e
- (CZ) Czech Mar Business Confidence: 16.5 v 17.1 prior; Consumer Confidence: 10.3 v 9.5 prior
- (UK) BBA Loans for House Purchases: 38.1K v 39.0Ke
- (IS) Iceland Mar CPI M/M: 0.6% v 0.6% prior; Y/Y: 2.8% v 2.3% prior
Fixed Income Issuance:
- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 0.1% May 2023 I/L Bonds (BTPei); Avg Yield: -0.43% v -0.41% prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +04% at 367.1, FTSE +0.4% at 6946, DAX +0.6% at 11955, CAC-40 +0.4% at 5113, IBEX-35 +0.1% at 9405, FTSE MIB -0.3% at 22226 , SMI +0.8% at 8634, S&P 500 Futures +1.1%]
Market Focal Points/Key Themes:
- European Indices trade mostly higher across the board recovering from early weakness following a rebound in US Equity futures after a sharp selloff on Friday. The Swiss SMI outperforms as Alpiq trades over 5.5% higher following results and the divestment of its industrial business for CHF850M. Elsewhere in the M&A space, JD Sports announced the acquisition of Finishline for $13.50/shr; Naturex trades over 40% higher after Givaudan took a 40% stake and to launch tender for remaining shares; Smurfit Kappa trades lower after rejecting a second offer from International Paper.
Looking ahead notable earners include Paychex and Athenex.
Movers
- Consumer Discretionary [ JD Sports [JD.UK] +2% (Acquires FInishline for $13.50/shr), Inchcape [INCH.UK] +1.1% (Acquisition) ]
- Materials [Naturex [NRX.FR] +40.6%, Givaudan [GIVN.CH] +1.4% (Givaudan acquires 40.6% stake in Naturex, launches mandatory cash tender for remaining shares)]
- Industrials [ Smurfit Kappa [SKG.UK] -2.8% (Rejects 2nd proposal from IP), Speedy Hire [SDY.UK] +5.2% (Trading update) ]
- Consumer Staples [ Amplifon [AMP.IT] +1.8% (Mid term targets) ]
Speakers
- ECB’s Nouy (SSM chief): Greece still needed to reduce the levels of its bad loans (NPLs)
- France Fin Min Le Maire: 2018 GDP growth forecast seen at 1.7%
- IMF chief Lagarde called for a roadmap for reducing vulnerabilities in the Euro Zone banking sector. Needed an agreement for a schedule for a common Euro Zone Bank deposit insurance scheme. Called for a modernized capital markets union and improved banking union.
- Ireland Dep PM Coveney (also foreign Min): Will focus on trying to put in place a backstop position to avoid a hard border by maintaining full alignment with rules of the single market and customs union in Northern Ireland
- Former PM Berlusconi: Northern League leader Salvini (euro-skeptic) may try to form an Italian government
- Euro Working Group chief Vijbrief: Greece will have enhanced monitoring in post bailout period
- France Stats Agency (INSEE): 2017 public deficit to GDP at 2.6% v 3.4% y/y
- Turkey Dep PM Simsek: TRY currency (Lira) depreciation has made the country more competitive
Currencies
- Some of the risk aversion flowed ebbed in the session after dealers noted a de-escalation in the current phase of trade talks. Weekend reports noted that US Treasury Sec Mnuchin was more optimistic in reaching an agreement with China noted that recent conversations with China were “very productive”.
- USD/JPY moved off 16-month lows of 104.63 area to retest above the 105 area.
- GBP/USD was retesting the post BOE decision highs around 1.42 while EUR/USD was higher by 0.3% near the 1.24 handle
Fixed Income
- Bund Futures trade 22 ticks higher at 158.78 after Spain was upgraded by Fitch. Upside targets 159.75, while a return lower targets the158.25 level.
- Gilt futures trade at 121.57 down 25 ticks after BOE’s Vlieghe hawkish comments that UK data warrant further removal of stimulus. Support continues stands at 121.25 then 120.85, with upside resistance at 123.35 then 123.85.
- Monday’s liquidity report showed Friday’s excess liquidity fell to €1.801T from €1.810T prior. Use of the marginal lending facility increased from €70M to €100M.
- Corporate issuance, primary markets expect $29.5B sold this week
Looking Ahead
- (IT) Italy Debt Agency (Tesoro) to sell €2.5-3.0B in Zero Coupon Mar 2020 CTZ
- 05:30 (DE) ECB’s Weidmann (Germany) gives speech in Austrian Central Bank
- 06:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley gives Speech
- 06:00 (RO Romania to sell 2.3% 2020 Bonds
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil Mar FGV Construction Costs M/M: 0.2%e v 0.1% prior
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:05 (UK) Baltic Dry Bulk Index
- 08:00 (ES) Spain Debt Agency(Tesoro) announces size of upcoming auctions
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 08:30 (US) Feb Chicago Fed National Activity Index: 0.15e v 0.12 prior
- 08:55 (FR) France Debt Agency (AFT) to sell combined €4.7-5.9B in 3-month, 6-month and 12-month BTF Bills
- 09:00 (BR) Brazil Feb Federal Debt Total (BRL): No est v 3.528T prior
- 09:30 (BR) Brazil Feb Total Outstanding Loans (BRL): No est v 3.066T prior; M/M: No est v -0.8% prior
- 10:00 (MX) Mexico Jan Retail Sales M/M: -0.3%e v -0.5% prior; Y/Y: -0.2%e v -2.0% prior
- 10:30 (US) Mar Dallas Fed Manufacturing Activity: 33.5e v 37.2 prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 12:30 (US) Fed Dudley (dove, FOMC voter)
- 13:00 (US) Treasury to sell $30.0B in 2-Year Notes
- 16:30 (US) Fed’s Mester Speaks on Monetary Policy
