UK retail sales beats expectations; coronavirus remains in focus

Notes/Observations

- UK Jan Retail Sales data continues string of better data for the country; MoM reading was the best since May 2018)

- Corinavirus remained in focus: moderating pace of new cases in China but concerns about regional contagion (South Korea cases doubled to over 100 and reported its 1st death)

Asia:

- China's National Health Commission: Total cases at 74,576, +400 from previous day; revised its diagnostic criteria for the coronavirus (to only confirmed cases rather than including those clinically diagnosed via CT scans)

- China cut the benchmark lending rate (as expected) to lower financing costs for businesses and support an economy impacted by coronavirus

- China Hebei Govt announced the establishment of a special financing vehicle with CNY50B (~$7.1B) to restore production and stabilize investment amid coronavirus outbreak

- Coronavirus effect outside China: 2 people from cruise ship moored off of Yokohama have died from the virus; South Korea: virus cases have risen from 46 to 82

- Australia Jan Employment Change: +13.5K v +10.0Ke; Unemployment Rate: 5.3% v 5.2%e

Europe:

- German Fin Min Scholz saw no signs of Germany entering a recession; maintained its 2020 GDP growth forecast of 1.1% despite coronavirus risks - EU member states said to be unable to agree on language calling for Britain to abide by EU rules preventing it becoming an unfair competitor

Americas:

- White House economists said to note US GDP growth would not hit Trump's 3% target unless ‘big changes' occurred (Reminder: Trump's 2021 budget assumed 3.1% GDP growth in 2020 and 3% in 2021 )

- FOMC Jan Minutes noted that the coronavirus was a new risk to the global outlook and warranted close watching. Generally saw the distribution of risks to the outlook for economic activity as somewhat more favorable than at the previous meeting, al­though a number of downside risks remained prominent

Mid-East/Energy:

- Weekly API Crude Oil Inventories: +4.2M v +6.0M prior

- OPEC has sent out invitations for scheduled March 5-6th meeting

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.20% at 433.02, FTSE +0.07% at 7,462.39, DAX -0.09% at 13,776.56, CAC-40 -0.12% at 6,103.72, IBEX-35 -0.50% at 10,033.50, FTSE MIB -0.36% at 25,384.88, SMI -0.18% at 11,243.00, S&P 500 Futures -0.08%]

Market Focal Points/Key Themes: European indices mostly in the red following Asia indices mixed and lower US futures. On a busy corporate earnings front, Maersk, Lloyds, Schneider Electric, Bouygues, UCB, Accor, Anglo American, Smith & Nephew, Spectris and BAE Systems are trading higher. Fresenius and Fresenius Medical up as the companies reported solid earnings; Fresenius guided FY20 revenue to increase 4-7% y/y and hiked the dividend by 5%. Tomra and Recipharm jump on top and bottom line Q4 beats. Air-France down following earnings and concern regarding coronavirus impact and Vallourec tanks following earnings and planned €800M rights issue. Other decliners following earnings include Telefonica, Axa, Swiss Re, Krones, Nexans, MTU Aero Engines and Elekta. ING CEO Ralph Hamers stepping down to take over CEO role at UBS; both banks shares trading higher today. On the M&A front, Dialog Semiconductor up slightly following bid to acquire US-based Adesto Technologies for $12.55/shr. Notable earners today include Hormel Foods, Henry Schein, Tenneco, Noble Corp and Mosaic Company.

 

Equities

- Consumer discretionary: Schneider Electric [SU.FR] +7% (earnings), Accor [AC.FR] +0.5% (earnings), Air France-KLM [AF.FR] -6% (earnings)

- Financials: Lloyds Banking Group [LLOY.UK] +2% (earnings), Hays [HAS.UK] +0.5% (earnings), Swiss Re [SREN.CH] -5% (earnings)

- Healthcare: UCB [UCB.BE] +3.5% (earnings), Smith and Nephew [SN.UK] +7% (earnings), Fresenius [FRE.DE] +5% (earnings)

- Industrials: Maersk [MAERSKB.DK] +1% (earnings)

- Technology: Dialog Semiconductor [DLG.DE] +0.5% (acquires Adesto Technologies), moneysupermarket.com [MONY.UK] +9% (earnings)

- Telecom: Telefonica [TEF.ES] -4% (earnings)

 

Speakers

- German VDMA Engineering association: Global impact of coronavirus on exports could not be estimated at this time but would not change the importance of the Chinese markets. 2019 Exports -1.5% y/y with further decline likely in 2020. German exports to China for 2019 at €18.8B, -1.1% y/y

- Indonesia Central Bank (BI) Policy Statement: Decision to cut rate was in line with efforts to anchor inflation, provide stability and support economic growth amid the coronavirus outbreak. Rate policy was consistent with inflation target

- Indonesia Central Bank Gov Warjiyo pre-rate decision commentary noted that it had cut its 2020 GDP growth outlook due to impact from coronavirus. Would maintain an accommodative policy as cCoronavirus to impact tourism, investment and trade. Saw IDR currency (Rupiah) remaining stable and reflecting fundamental. Indonesia cut its 2020 GDP from between 5.1-5.5% to 5.0-5.4% while maintaining its 2020 CPI between 2.0-4.0% range

- Japan Cabinet Office (Govt) Monthly Economic Report for Feb maintained its overall economic assessment that domestic economy was recovering at a moderate pace, while weakness, mainly among manufacturers, was increasing further; exports continued on a weak tone

- Japan Econ Min Nishimura: Department store sales warranted attention as both Japanese shoppers and Chinese tourists seen declining in February. Did not see any major impact on domestic automakers and suppliers from delayed China output due to coronavirus; METI and JAMA to establish committee on auto industry virus impact

- China Commerce Ministry (MOFCOM) official Li Xingqian saw 'big' impact on food, agricultural sectors if coronavirus epidemic lasted. Consumption would be most heavily impacted by coronavirus in Q1 but expected a gradually recovery in Q2 and be even better in H2. Reiterated epidemic won't hurt China's long-term consumption upgrade. Coronavirus to keep hurting auto sales; to study way to boost the sector's consumption

- China Commerce Ministry (MOFCOM) spokesperson Gao Feng: China-EU investment talks moving ahead as scheduled

- China's Hubei province said to have asked companies not to resume work before Mar 11th amid coronavirus concerns

 

Currencies/Fixed Income

- EUR/USD moved off fresh 3-year lows of 1.0778 during the session with the focus on upcoming release of ECB Jan minutes and Friday's key PMI data.

- USD/JPY continued to move higher after a firm break of the 110 resistance area earlier in the week. Japan's 4Q GDP was worse than expected and the economy was not expected to grow in coming quarters due to the coronavirus impact. Pair probing the 112 area just ahead of the US morning.

 

Economic Data

- (NL) Netherlands Feb Consumer Confidence: -2 v -3 prior

- (NL) Netherlands Dec Consumer Spending Y/Y: 1.3% v 1.3% prior

- (NL) Netherlands Jan Unemployment Rate: 3.0% v 3.2% prior

- (DE) Germany Mar GfK Consumer Confidence: 9.8 v 9.8e

- (DE) Germany Jan PPI M/M: 0.8% v 0.1%e; Y/Y: +0.2% v -0.4%e

- (CH) Swiss Jan Trade Balance (CHF): 2.8B v 2.0B prior; Real Exports M/M: +1.7 v -2.0% prior; Real Imports M/M: -1.8% v +0.3% prior; Watch Exports Y/Y: 9.4% v 7.8% prior

- (TR) Turkey Feb Consumer Confidence: 57.3 v 58.8 prior

- (SE) Sweden Prospera Inflation Expectations Survey

- (DK) Denmark Feb Consumer Confidence Indicator: 3.3 v 4.5 prior

- (DK) Denmark Jan PPI M/M: -0.1% v +0.3% prior; Y/Y: -0.9% v -0.3% prior

- (ID) Indonesia Central Bank (BI) cut the7-Day Reverse Repo by 25bps to 4.75% (as expected)

- (FR) France Jan Final CPI M/M: -0.4% v -0.4%e; Y/Y: 1.5% v 1.5%e; CPI Ex-Tobacco Index: 103.94 v 103.91e

- (FR) France Jan Final CPI EU Harmonized M/M: -0.5% v -0.5%e; Y/Y: 1.7% v 1.6%e

- (TW) Taiwan Jan Export Orders Y/Y: -12.8% v -6.7%e

- (CN) China Jan New Yuan Loans (CNY): 3.340T v 3.100Te

- (CN) China Jan Aggregate Financing (CNY: 5.070T v 4.100Te

- (CN) China Jan M2 Money Supply Y/Y: 8.4% v 8.6%e

- (TW) Taiwan Q4 Current Account Balance: $17.0B v $12.9B prior

- (HK) Hong Kong Jan CPI Composite Y/Y: 1.4% v 3.1%e

- (SE) Sweden Q4 Total Number of Employees Y/Y0.4% v 0.7% prior

- (ES) Spain Dec Trade Balance: -€2.1B v -€1.9B prior

- (PL) Poland Jan Sold Industrial Output M/M: 4.5% v 3.0%e; Y/Y: 1.1% v -0.4%e

- (PL) Poland Jan PPI M/M: 0.1% v 0.1%e; Y/Y: 0.8% v 1.0%e

- 30 (UK) Jan Retail Sales (ex-auto/fuel) M/M: 1.6% v 0.8%e (highest since May 2018); Y/Y: 1.2% v 0.5%e

- (UK) Jan Retail Sales (includes-auto/fuel) M/M: 0.9% v 0.7%e; Y/Y: 0.8% v 0.6%e

Fixed Income Issuance

- (ES) Spain Debt Agency (Tesoro) sold total €4.553B vs. €4.0-5.0B indicated range in 2025 and 2030 bonds

- Sold €3.165B new 0.0% Jan 2025 SGPB bonds; Avg Yield: -0.220% v -0.103% prior; Bid-to-cover: 1.57x v 2.26x prior

- Sold €1.388B in 0.50% Apr 2030 SPGB bonds; Avg Yield: 0.235% v 0.347% prior; bid-to-cover: 2.28x v 1.57x prior

- (FR) France Debt Agency (ATF) sold total €8.747B vs. €7.25-8.75B indicated range in 2023, 2025 and 2026 Bonds

- Sold €3.292B in 0.00% Feb 2023 Oat; Avg Yield: -0.59% v -0.53% prior; Bid-to-cover: 2.29x v 2.65x prior

- Sold €2.575B in 0.00% Mar 2025 Oat; Avg Yield: -0.50% v -0.38% prior; Bid-to-cover: 2.26x v 2.34x prior

- Sold €2.88B in 0.25% Nov 2026 Oat; Avg Yield: -0.40% v +0.38% prior; Bid-to-cover: 1.52x v 2.14x prior

- (SE) Sweden sold SEK500M in 0.125% Jun inflation-linked 2032 Bonds; Avg Yield: -1.5073% v -1.6772% prior; Bid-to-cover: 1.87x v 2.45x prior

- (IE) Ireland Debt Agency (NTMA) sold €500M vs. €500M indicated in 6-month Bills; Avg Yield:% v -0.55% prior; Bid-to-cover: 2.9x v 3.97x prior

 

Looking Ahead

- (EU) EU Leaders hold special summit for 2021-27 budget

- 05:30 (UK) DMO to sell £3.25B oin1.5% 2026 Gilts

- 05:30 (ES) ECB's De Guindos (Spain) in Frankfurt

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

- 05:30 (PL) Poland to sell Bonds

- 05:50 France Debt Agency (AFT) to sell €1.0-1.25B in inflation-linked bonds (Oatei)

- 06:00 (UK) Feb CBI Industrial Trends Total Orders: -20e v -22 prior; Selling Prices: 1e v 2 prior

- 06:00 (IE) Ireland Jan CPI M/M: No est v 0.2% prior; Y/Y: No est v 1.3% prior

- 06:00 (IE) Ireland Jan CPI EU Harmonized M/M: No est v 0.2% prior; Y/Y: No est v 1.1% prior

- 06:00 (PT) Portugal Dec Current Account Balance: No est v -€0.1B prior

- 06:00 (IL) Israel Dec Manufacturing Production M/M: No est v -0.8% prior

- 06:00 (BR) Brazil Feb FGV Consumer Confidence: No est v 90.4 prior

- 06:35 (IN) India Central Bank (RBI) Feb Minutes

- 07:00 (BR) Brazil Mid-Feb IBGE Inflation IPCA-15 M/M: 0.2%e v 0.7% prior; Y/Y: 4.2%e v 4.3% prior

- 07:30 (EU) ECB account of Monetary Policy Meeting (Jan Minutes)

- 08:00 (PL) Poland Central Bank (NBP) Feb Minutes

- 08:00 (RU) Russia Jan Unemployment Rate: 4.7%e v 4.6% prior; Real Wages Y/Y: 3.65e v 2.7% prior

- 08:00 (RU) Russia Jan Real Retail Sales Y/Y: 2.2%e v 1.9% prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 14th: No est v $562.2B prior

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

- 08:30 (US) Feb Philadelphia Fed Business Outlook: 11.0e v 17.0prior

- 08:30 (US) Initial Jobless Claims: 210Ke v 205K prior; Continuing Claims: 1.72Me v 1.698M prior

- 08:30 (CA) Canada Jan Teranet/National Bank HPI M/M: No est v 0.2% prior; Y/Y: No est v 0.9% prior; House Price Index: No est v 228.44 prior

- 10:00 (US) Jan Leading Index: +0.4%e v -0.3% prior

- 10:00 (EU) Euro Zone Feb Advance Consumer Confidence: -8.2e v -8.1 prior

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

- 11:00 (US) Weekly DOE Oil Inventories

- (AR) Argentina Feb Consumer Confidence Indicator: No est v 43.0 prior

- (MX) Citibanamex Survey of Economists

- 13:20 (US) Fed's Barkin (hawk, non-voter) at Harvard

- 17:00 (AU) Australia Feb Preliminary PMI Manufacturing: No est v 49.6 prior; PMI Services: No est v 50.6 prior; PMI Composite: No est v 50.2 prior

- 18:30 (JP) Japan Jan National CPI Y/Y: 0.7%e v 0.8% prior; CPI Ex-Fresh Food (core) Y/Y: 0.8%e v 0.7% prior; CPI Ex-Fresh Food/Energy (core-core) Y/Y: 0.8%e v 0.9% prior

- 19:30 (JP) Japan Feb Preliminary PMI Manufacturing: No est v 48.8 prior; PMI Services: No est v 51.0 prior; PMI Composite: No est v 50.1 prior

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

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

- 23:00 (MY) Malaysia Jan CPI Y/Y: 1.7%e v 1.0% prior

- 23:30 (JP) Japan Dec All Industry Activity Index M/M: 0.3%e v 0.9% prior