EU Mid-Market Update: Rumored Deutsche Bank bond buyback installs calm in Europe; markets await Yellen testimony


Notes/Observations

- European finds a sense of calm after reports that Deutsche Bank sought a multi billion Euro bond buyback in effort to help support the value of the securities; peripheral spreads narrow

- European Industrial Production data continues to miss expectations (France IP YoY: -0.7% vs. +1.7%e while UK IP YoY: -1.1% vs. -0.1%e)

- Focus turn to Fed Chair Yellen's semi-annual testimony today in the House and insight on rate path


Economic data

- (FR) France Dec Industrial Production M/M: -1.6% v +0.3%e; Y/Y: -0.7% v +1.7%e

- (FR) France Dec Manufacturing Production M/M: -0.8% v +0.3%e; Y/Y: 0.5% v 1.7%e

- (IS) Iceland Central Bank (Sedibanki) leaves 7-Day Term Deposit Rate currently at 5.75%

- (IT) Italy Dec Industrial Production M/M: -0.7% v +0.3%e; Y/Y: 2.1% v 4.3% prior; Industrial Production WDA Y/Y: -1.0% v +1.4%e

- (NO) Norway Jan CPI M/M: 0.6% v 0.0%e; Y/Y: 3.0% v 2.4%e

- (UK) Dec Industrial Production M/M: -1.1% v -0.1%e; Y/Y: -0.4% v +1.0%e

- (UK) Dec Manufacturing Production M/M: -0.2% v +0.1%e; Y/Y: -1.7% v -1.4%e

**Fixed Income Issuance:

- (IN) India sold total INR140B vs. INR140B indicated in 3-month and 6-month Bills

- (DK) Denmark sold DKK6.0B in 3-month Bills; Yield: -0.460 % v -0.450% prior

- (SE) Sweden sold SEK12.5B vs. SEK12.5B indicated in 3-month Bills; Avg Yield: -0.5169% v -0.4758% prior; Bid-to-cover: x v 1.26x prior

- (EU) ECB allotted $98M in 7-day USD Liquidity Tender at fixed 0.87% vs. $90M prior

- (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 12-month Bills; Avg Yield: -0.032% v -0.074% prior; Bid-to-cover: 1.61x v 1.38x prior


SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +2.1% at 2,801, FTSE +1.1% at 5,694, DAX +2.0% at 9,060, CAC-40 +2.1% at 4,080, IBEX-35 +3.0% at 8,162, FTSE MIB +4.2% at 16,585, SMI +2.3% at 7,756, S&P 500 Futures +0.9%]

Market Focal Points/Key Themes: European equity indices are trading higher in the morning session ahead of Fed Chair Janet Yellens testimony before the House Financial Services Committee scheduled later in the day; FTSE 100 trading up but being weighed down by Hikma Pharmaceuticals after cutting its FY16 and FY17 outlook, commodity stocks mixed despite oil prices hovering between $28 and $29; Deutsche Bank leading the strong gains seen in the Dax and Eurostoxx after reportedly considering a multi-billion Euro bond buyback; Other financial stocks including Unicredit, Intesa Sanpaolo, Soc Gen, BBVA, Santander and BNP Paribas leading the rally in the Eurostoxx; upcoming notable US earnings include DTE Energy, Henry Schein, Humana and Time Warner


Equities

- Consumer discretionary: [Carlsberg CARLB.DK +4.2% (Q4 results), Heidelberger Druckmaschien HDD.DE +13.8% (Q3 results), Dunelm DNLM.UK +7.3% (H1 results), Heineken HEIA.NL +0.4% (FY15 results), Hermes RMS.FR -0.5% (Q4 results), Hornby HRN.UK -45.7% (Guides FY16 wider net loss than forecasted)]

- Energy: [Tullow Oil TLW.UK -4.3% (FY15 results)]

- Financials: [Deutsche Bank DBK.DE +10.1% (Reportedly considering a multi-billion Euro bond buyback)]

- Healthcare: [Hikma HIK.UK -11.5% (Cuts FY16 and FY17 outlook, announces revised acquisition terms of Roxane Labs), Lundbeck LUN.DK +18.4% (Q4 results)]

- Industrials: [Aurubis NDA.DE +2.1% (Q1 results), Maersk MAERSKB.DK -6.5% (FY15 results), SAAB SAABB.SE +5.4% (Q4 results), Smurfit Kappa SKG.UK +12.8% (Q4 results, CFO transition)]

- Materials: [Akzo Nobel AKZA.NL -1.5% (Q4 results, dividend increase), VoestAlpine VOE.AT +0.8% (Q3 results)]

- Technology: [ARM Holding ARM.UK -3.8% (Q4 results)]

- Telecom: [Opera Software OPERA.NO +37.2% (Q4 results, Golden Brick takeover offer), Millicom International Cellular MIC.SE +2.1% (Q4 results), Telenet TNET.BE +2.4% (Q4 results, share buyback), Telenor TEL.NO -7.8% (Q4 results)]

- Utilities [Abertis ABE.ES +0.6% (FY15 results)]


Speakers

- Greece PM Tsipras stated that the Govt was open to suggestions and proposals for improvement to reform in pension plan

- Bank of Greece Gov Stournaras: Capital controls to be a headwind on H1 economic activity. Non-performing loans (NPLs) were 0.biggest challenge for Greek banking sector and the Central Bank to set NPL target for each lender

- BOE Agents Summary of Business Conditions noted that growth had ease a little in recent months. Employment growth intentions were overall softening. Forecasted 2016 avg pay growth of 2.8% vs. 2.4% y/y

- German DIHK Chambers of Commerce affirmed its forecast that Germany 2016 GDP seen at 1.3%

- Poland Central Bank stated that the banking sector faced PLN44B in costs related to FX-loan scheme but the overall domestic banking sector seen as stable and resilient. Large scale CHF-denominated loan conversion could impact sovereign rating


Currencies

- USD consolidated its recent losses as a sense of calm enveloped the European session. Focus turned to upcoming testimony from Fed Chair Yellen and any insight on the path/pace of rate hikes in the US. The EUR was softer by 0.3% ahead of the NY morning assuming that the divergences between the ECB and Fed policy paths were intact.

- The GBP recovered losses despite a miss in its Industrial and Manufacturing data. GBP/USD was higher by 0.2% and trying to recapture the 1.45 level. The USD/JPY was off the Asian session lows of 114.26 and trying to regain the 115 level in the session. The yen currency softening as overall risk aversion sentiment eased in Europe for the time being.

- Higher Norwegian inflation data helped the NOK currency (Krona) to firm against the Euro as dealers pared back any near term rate cut from Norges. EUR/NOK cross was under the 9.61 level ahead of the NY morning.

**Fixed Income:

- Bund futures trade at 164.74 down 29 ticks after a rebound in stocks helped lift yields. Analysts eye resistance at 165.23 contract highs with a break seeing 165.66 followed by 165.98. Support moves to 164.10 followed by 163.72 with 163.30 looking to cap the move. Today sees Germany looking to sell €5.0B in 2 year Shatz the equivalent of 45K Shatz futures.

- Gilt futures trade at 121.67 down 16 trading down on risk on flows but off lows following weaker industrial and manufacturing data out of the UK. Analyst see upside resistance at 122.11 contract highs with a break seeing 122.38 followed by 122.67. Support moves to 121.44 then 121.14 followed by 120.67 with a break seeing 120.14 looking to hold.

- Wednesday's liquidity report showed Tuesday's excess liquidity rose to €669.5B a rise of €14.8B from €654.7B prior. This was primarily due to AFs and MonPol portfolios falling to negative €257.2B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €127M from a prior €91M.

- Corporate issuance remains a non factor as credit deteriation continues. Itraxx Europe main rose to 123 having traded at 69 at the begining of December. The index comprises 125 equally-weighted European names that trade 3, 5, 7 and 10-year maturities.

**Political/In the Papers:

- (US) Sanders and Trump take New Hampshire primary

- (SY) Russia reportedly rejected Syria opposition "pre-conditions: for talks as they insisted including Kurds in Syria peace negotiations

- Japan announces fresh round of sanctions on North Korea to protest against a rocket launch seen as a test of missile technology


Looking Ahead

- (PT) Bank of Portugal releases Data on Banks

- (MX) Mexico Jan Nominal Wages: No est v 4.5% prior

- (MX) Mexico Jan ANTAD Same-Store Sales Y/Y: No est v 8.1% prior

- (GR) Greece Debt Agency (PDMA) to sell 13-week Bills;

- 05:30 (DE) Germany to sell €5.0B in new 0% Mar 2018 Schatz

- 06:00 (RU) Russia to sell Bonds

- 06:00 (CZ) Czech Republic sells total CZK in 2018 and 2030 Bonds

- 06:00 (PT) Portugal Jan CPI M/M: No est v -0.3% prior; Y/Y: No est v 0.4% prior

- 06:00 (PT) Portugal Jan CPI EU Harmonized M/M: No est v -0.3% prior; Y/Y: No est v 0.3% prior

- 06:20 OPEC Monthly Report

- 06:30 (CL) Chile Central Bank's Economist Survey

- 06:30 (CL) Chile Central Bank's Traders Survey

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Feb 5th: No est v -2.6% prior

- 07:00 (UK) PM Cameron weekly Question Time in House of Commons

- 08:00 (HU) Hungary Central Bank (NBH) Feb Minutes

- 08:00 (NL) Eurogroup Chief Dijsselbloem in Dutch Parliament

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Text release of Fed's Yellen testimony

- 08:30 (SE) Sweden Fin Min Andersson with EU Committee

- 09:00 (BE) ECBs Preat (Belgium) in Washington

- 09:00 (UR) Ukraine to sell Bonds

- 09:30 (BR) Brazil Weekly Currency Flows Weekly

- 09:30 (EU) EUs Tusk in Brussels

- 10:00 (UK) Jan NIESR GDP Estimate: No est v 0.6% prior

- 10:00 (US) Fed's Yellen to appear before House Financial Services Committee

- 10:30 (US) DOE Weekly Crude Oil Inventories

- 11:00 (NG) Nigeria to sell 2020 and 2026 Bonds

- 12:00 (DE) German Chancellor Merkel at CDU rally in Demmin

- 13:00 (US) Treasury to sell $23B in new 10-Year Notes

- 13:30 (US) Fed's Williams speaks on Health and the Economy in LA

- 14:00 (US) Jan Monthly Budget Statement: +$22.8Be v -$17.5B prior

- 16:30 (NZ) New Zealand Jan Manufacturing PMI: No est v 56.7 prior

- 19:00 (AU) Australia Feb Consumer Inflation Expectation Survey: No est v 3.6% prior

- 19:01 (UK) Jan RICS House Price Balance: 52%e v 50% prior

- 20:05 (NZ) New Zealand to sell NZD100M in 2.5% 2035 I/L Bonds

- 23:00 (MY) Malaysia Dec Manufacturing Sales Value Y/Y: No est v 2.2% prior; Industrial Production Y/Y: 1.0%e v 1.8% prior

All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD stabilizes near 1.0800 as trading action turns subdued

EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.

EUR/USD News

GBP/USD extends sideways grind above 1.2600

GBP/USD extends sideways grind above 1.2600

GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.

GBP/USD News

Gold pulls away from daily highs, holds above $2,200

Gold pulls away from daily highs, holds above $2,200

Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.

Gold News

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC

XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase. 

Read more

Portfolio rebalancing and reflation trades emerge into Q2

Portfolio rebalancing and reflation trades emerge into Q2

Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.

Read more

Majors

Cryptocurrencies

Signatures