Risk appetite continues to find momentum

Notes/Observations

- Risk appetite continues to muster momentum aided by China tariff cuts on US goods

- Germany Dec Factory Orders post significant declines

 

Asia:

- Coronavirus update: confirmed cases 28.1K; deaths 564; cured patients 1.2K

- China might delay annual meeting of National People’s Congress scheduled for March, due to coronavirus

- China Tariff Committee: To cut tariff rates by as much as 50% (some goods to be cut from 10% to 5% prior and others from 5% to 2.5%) on $75B in US goods, effective Feb 14th (*Reminder: On Jan 15th China's Vice Premier Liu He and US President Trump signed the US–China Phase One trade deal in Washington DC). Note: Timing of tariff cuts corresponds to planned implementation of US tariff cuts on Chinese products

- China said to likely considering disaster-related clause in Phase 1 trade deal with US over coronavirus outbreak

- Australia Dec Trade Balance: A$5.2B v A$5.6Be

- Australia Dec Retail Sales M/M: -0.5% v -0.2%e; Q/Q: 0.5% v 0.3%e

- Australia PM Morrison announced cabinet reshuffle, after 2 senior ministers resign

- BOJ Member Masai stated that needed to watch economic impact of coronavirus, must ease without hesitation if risks materialized

 

Europe:

- Germany Chancellor Merkel's CDU party has aligned itself with the far right in a state vote, seen as very out of character. German coalition leaders said to hold a crisis meeting on Saturday, Feb 8th

 

Brexit:

- UK Foreign Sec Rabb stated that he hoped Australia will be part of first wave of Free Trade deals with UK

- National Institute of Economic and Social Research (NIESR): UK govt target of doubling the pace of economic growth to 2.75% has only a one-in-five chance of success

 

Americas:

- Senate voted to acquit President Trump on both articles of impeachment (as expected). Abuse of power 52 to acquit vs 48 to convict (Sen Romney joined Democrats in voting to convict). Obstruction of Congress 53-47

- Brazil Central Bank cut the Selic Target Rate by 25bps to 4.25% (as expected); Reiterated stance that current state of the economic cycle warranted caution on the next policy steps; next move depends on the evolution of the economy. Considering the lagged effects of monetary easing, a pause in easing was warranted

 

Mid-East/ Energy:

- Russia is not supportive of an additional output cut by OPEC+; Russia prefers to extend the existing agreement

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities
Indices [Stoxx600 +0.31% at 424.92, FTSE +0.22% at 7,499.15, DAX +0.62% at 7,502.15, CAC-40 +0.66% at 6,024.75, IBEX-35 +0.60% at 9,776.00, FTSE MIB +0.70% at 24,406.68, SMI +0.15% at 11,010.50, S&P 500 Futures +0.27%]

Market Focal Points/Key Themes:
European indices well in the green following Asian indices higher and higher US futures.

 

Equities

- Consumer discretionary: Royal Mail [RMG.UK] -8% (trading update), Publicis [PUB.FR] +5% (earnings)

- Energy: Total [FP.FR] +5% (earnings; buyback)

- Financials: Unicredit [UCG.IT] +6% (earnings), Societe Generale [GLE.FR] -1.5% (earnings), ING [INGA.NL] +2% (earnings)

- Healthcare: Sanofi-Aventis [SAN.FR] +2% (earnings)

- Industrials: Dassault Systemes [DSY.FR] -3% (earnings), Compass [CPG.UK] +3% (earnings)

- Materials: ArcelorMittal [MT.NL] +10% (earnings)

- Telecom: Nokia [NOKIA.FI] +4% (earnings)

 

Speakers

- ECB Economic Bulletin: Risks remain to the downside but less pronounced (in-line with Lagarde Jan press conference)

- ECB chief Lagarde testified that low inflation and rates had reduced the scope for central banks to ease. Reiterated of seeing tentative signs of stabilization in region but still required monetary policy support. Euro Area continued to grow with modest momentum

- ECB’s De Guindos (Spain): Side effects of ECB policy are being monitored

- France INSEE Survey of Industrial Investment: Businesses plan to increase investment by 3% in 2020

- India Central Bank (RBI) Policy Statement noted that the vote was unanimous to keep policy steady (6-0) and maintained its accommodative policy stance to help revive growth for as long as necessary. Had policy space available for future action but to remain vigilant about potential generalization of inflationary pressures. Outlook for inflation was highly uncertain at this juncture

- India Central Bank (RBI) Gov Das post rate decision press conference: To be guided by evolving situation; had several instruments to address economic growth

- Philippines Central Bank (BSP) Policy Statement noted that inflation expectations remained firmly anchored with risks tilted to the upside in 2020 and to the downside in 2021. Coronavirus could adversely impact economy and market sentiment

- OPEC+ JMMC technical panel might agree on the need for a deeper oil production cut of at least 500K bpd

- Russia Energy Min Novak reiterated stance that needed time to gauge impact on oil demand from effects from coronavirus; needed time to form its stance

 

Currencies/ Fixed Income

- USD was holding onto its recent gains as potential harm to the global economy from the coronavirus seemed to favor flows into the greenback.

- EUR/USD continued to face headwinds as continued German data showed declines it its manufacturing orders. ECB chief Lagarde testified that the low inflation and rates environment hampered the scope for central banks to ease further.

- GBP/USD holding below the 1.30 level over the transition period concerns. Reports circulated that EU authorities planned to take aim at London's financial sector by amending the bloc's MIFID 11 laws

- Risk haven flows continued to ease as China announced tariff cuts by as much as 50% to match the timing of tariff cuts corresponds to planned implementation of US tariff cuts on Chinese products

 

Economic Data

- (IN) India Central Bank (RBI) left the Repurchase Rate unchanged at 4.90% (as expected)

- (DE) Germany Dec Factory Orders M/M: -2.1% v +0.6%e; Y/Y: -8.7% v -6.6%e

- (CH) Swiss Q4 UBS Real Estate Bubble Index: 0.95 v 0.93 prior

- (PH) Philippines Central Bank (BSP) cut Overnight Borrowing Rate by 25bpt to 3.75% (as expected)

- (TW) Taiwan Jan CPI Y/Y: 1.9% v 1.2%e; CPI Core Y/Y: 1.3% v 0.9%e; WPI Y/Y: -3.1% v -3.6% prior

- (CZ) Czech Dec National Trade Balance (CZK): -6.7B v -4.9Be

- (CZ) Czech Dec Industrial Output Y/Y: -0.9% v +1.7%e; Construction Output Y/Y: 6.3% v 4.5% prior

- (HU) Hungary Dec Industrial Production M/M: -3.8% v -1.4% prior; Y/Y: -3.7% v +3.3%e

- (DE) Germany Jan Construction PMI: 54.9 v 53.8 prior

- (IS) Iceland Jan Preliminary Trade Balance (ISK): +2.5B v -10.7B prior

- (IS) Iceland Q4 Unemployment Rate: 3.3% v 3.5% prior

- (ZA) South Africa Jan Sacci Business Confidence: 92.2 v 93.2e

- (GR) Greece Nov Unemployment Rate: 16.5% v 16.6% prior

- (CY) Cyprus Jan CPI M/M: -0.6% v -0.2% prior; Y/Y: 1.1% v 0.7% prior

Fixed Income Issuance- (ES) Spain Debt Agency (Tesoro) sold total €4.432B vs. €4.0-5.0B indicated range in 2023, 2026 and 2030 bonds

- Sold €1.60B in 0% Apr 2023 bonds; Avg Yield: -0.301% v -0.236% prior; Bid-to-cover: 2.94x v 1.64x prior (Jan 23rd 2020)

- Sold €1.14B in 1.95% Apr 2026 SPGB bond; Avg Yield: -0.018% v -0.105% prior; Bid-to-cover: 2.44x v 3.24xprior (July 4th 2019)

- Sold €1.692B in 0.50% Apr 2030 SPGB bonds; Avg Yield: 0.347% v 0.525% syndicate, bid-to-cover: 1.57x

- (ES) Spain Debt Agency (Tesoro) sold €525M vs. €250-750M indicated range in 0.65% Nov 2027 inflation-linked bonds (SGPBei); Real Yield: -0.917% v -0.338% prior; Bid-to-cover: 3.32x v 2.09x prior

- (FR) France Debt Agency (AFT) sold total €B vs. €7.5-9.0B indicated range in 2029, 2034, 2039 and 2066 Bonds

- Sold €4.931B in 0.00% Nov 2029 Oat; Avg Yield: -0.11% v +0.04% prior; Bid-to-cover: 2.16x v 2.36x prior

- Sold €1.565B in 1.25% May 2034 Oat; Avg Yield: 0.16% v 0.24% prior; Bid-to-cover: 2.02x v 2.84x prior

- Sold 1.50€B in 1.75% Jun 2039 green Oat; Avg Yield: 0.38% v 0.19% prior; Bid-to-cover: 1.7x v 1.94x prior

- Sold €982M in 1.75% May 2066 Oat; Avg Yield: 0.83% v 0.95% prior, Bid-to-cover: 1.7x v 2.29x prior

- (SE) Sweden sold SEK500M vs SEK500M innew 0.125% Jun Inflation-Linked 2030 Bonds; Avg Yield: -1.5967%; Bid-to-cover: 3.87x

 

Looking Ahead

- (IL) Israel Jan Foreign Currency Balance: No est v $126.0B prior

- (RU) Russia Jan Light Vehicle Car sales Y/Y: No est v 2.3% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills

- 05:30 (PL) Poland switch auction results

- 06:00 (IE) Ireland Jan Live Registry Monthly Change: No est v -1.1K prior; Live Registry Level:: No est v 185.3K prior

- 06:00 (ZA) South Africa Dec Electricity Production Y/Y: No est v -2.8% prior; Electricity Consumption Y/Y: No est v -3.1% prior

- 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 2.00%

- 07:00 (CH) Chile Dec Nominal Wage M/M: No est v 0.2% prior; Y/Y: No est v 4.1% prior

- 07:30 (US) Jan Challenger Job Cuts: No est v -38.2K prior; Y/Y: No est v -25.2% prior

- 08:00 (RU) Russia Jan CPI M/M: 0.5%e v 0.4% prior; Y/Y: 2.5%e v 3.0% prior

- 08:00 (RU) Russia Jan CPI Core M/M: 0.3%e v 0.1% prior; Y/Y: 2.8%e v 3.1% prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 31st: No est v $559.8B prior

- 08:00 BR) Brazil Jan Vehicle Production: No est v 170.5K prior; Vehicle Sales: No est v 262.6K prior; Vehicle Exports: No est v 29.0K prior

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:15 (CZ) Czech Central Bank (CNB) Gov Rusnok Interest post rate decision press conference

- 08:30 (US) Q4 Preliminary Nonfarm Productivity: +1.6%e v -0.2% prior; Unit Labor Costs: 1.3%e v 2.5% prior

- 08:30 (US) Initial Jobless Claims: 215Ke v 216K prior; Continuing Claims: 1.72Me v 1.703M prior

- 08:30 (US) Weekly USDA Net Export Sales

- 09:00 (FR) ECB’s Villeroy (France) in Paris

- 09:15 (US) Fed’s Kaplan in Dallas on economic outlook

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 16:30 (AU) Australia Jan AiG Performance of Services Index: No est v 48.7 prior

- 17:30 (AU) RBA Gov Lowe semi-annual testimony in Parliament

- 18:30 (JP) Japan Dec Labor Cash Earnings Y/Y: -0.1%e v +0.1% prior (revised from -0.2%); Real Cash Earnings Y/Y: -0.9 v -0.6% prior (revised from -0.9%)

- 18:30 (JP) Japan Dec Household Spending Y/Y: -1.7%e v -2.0% prior

- 18:50 (JP) Japan Jan Official Reserve Assets: No est v $1.324T prior

- 19:15 (US) Fed’s Quarles on monetary policy

- 19:30 (AU) RBA Statement On Monetary Policy (SOMP)

- 20:05 (NZ) New Zealand to sell NZD50M in 2.5% 2040 Bonds

- 21:00 (NZ) New Zealand Q1 Inflation Expectation Survey: 2-year Expectations: No est v 1.8% prior

- 22:00 (ID) Indonesia Jan Foreign Reserves: No est v $129.2B prior

- 22:00 (CN) China to sell 3-month and 6-month Bills

- 22:30 (JP) Japan to sell 3-Month Bills

- 23:00 (MY) Malaysia Dec Industrial Production Y/Y: 2.0%e v 2.0% prior; Manufacturing Sales Value Y/Y: No est v 2.3% prior