Better UK data dampens hope of any rate cut by BOE in 2020

Notes/Observations

- Continued better data out of UK dampens any hope of near-term BOE rate cut

- Iowa Democratic caucus tech issues hampers results

Asia:

- China National Health Commission: Confirmed cases 20,438 v 17,205 prior; Death toll of 425 v 361 prior; Hong Kong said to report its first coronavirus death

- China PBOC: Liquidity injections showed resolution to boost confidence, was to steer interbank rates lower; more than expected injection to lower loan rate (Note: The PBOC has injected a gross total of CNY1.7T in its open market operations during the first two trading sessions since the extended Lunar New Year break)

- South Korea Jan CPI registered its fastest annual pace since Nov 2018 (YoY: 0.9%e v 0.7% prior) -RBA left its Cash Rate Target unchanged at 0.75% (as expected). Reiterated stance that prepared to ease monetary policy if needed; reasonable to expect an extended period of low rates

- BOJ Gov Kuroda: Coronavirus was already having an impact on domestic economy; reiterates stance to ease further if necessary

Europe:

- ECB's Weidmann (Germany): new inflation target should dispel perception that the ECB can control inflation to a tenth of a percent; ECB review should look at how to unwind stimulus

Americas:

- US Trade Rep spokesperson: "USTR has not received any requests from China's government to discuss changes in China's purchase commitments due to the coronavirus outbreak."

- Iowa Democrats not to release results for caucus citing technical glitch

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +1.04% at 416.02, FTSE +1.28% at 7,420, DAX +1.08% at 13.186, CAC-40 +1.26% at 5,905, IBEX-35 +1.25% at 9,522, FTSE MIB +1.41% at 23,788, SMI +0.72% at 10,742, S&P 500 Futures +1.14%]

Market Focal Points/Key Themes: European indices in the green following Asia indices higher and higher US futures. BP up on top and bottom line Q4 beat, as well as small dividend increase. Carlsberg up on FY19 earnings results and share buyback announcement. UK grocers Tesco, Morrison and Sainsbury trading a bit higher following Kantar grocery sales and market share data. Ambu rallying after strong top and bottom line beat. Axactor surges on earnings and termination of discussions regarding potential public offer for company that were initiated in Q4. Siemens Gamesa Renewable, Alfa Laval and Amadeus Fire up on quarterly earnings. DCC and Electrocomponents up on trading statements. NMC Health higher as the company expects FY19 results to come in line with expectations. Husqvarna down following missing earnings on the top and bottom line. Pandora also down following quarterly results. Micro Focus plummets after guiding FY20 revenue decrease of 6-8% y/y. Wizz Air lower on January passenger and traffic stats. Ferguson trading higher on $500M share buyback program and US listing options proposals. Banca Monte Paschi de Siena jumps after press reports that the EU is expected to rule on non-performing loans transfer scheme end of February. On the M&A front, OHL shares surge on merger approach from Caabsa, controlled by Mexican Amodio family. Kongsberg up after signing agreement to sell its subsidiary Hydroid. Swiss SGS trading lower after the Von Finck family sells 960K shares (12.7% of share capital) and Atos up after selling 13.1% stake in Worldline. Looking ahead notable earners include Ferrari, Cummins, Centene, Eaton Corp, Emerson Electric and Ralph Lauren among others.

 

Equities

- Consumer discretionary: Wizz Air [WIZZ.UK] -1% (placement; traffic), Pandora [PNDORA.UK] -3.5% (earnings; comments on China sales)

- Energy: BP [BP.UK] +4.5% (earnings)

- Healthcare: Siemens Gamesa [SGRE.ES] +1% (earnings), Bayer [BAYN.DE] +2% (Susquehanna comments)

- Materials: Glencore [GLEN.UK] +5% (production)

 

Speakers

- Czech Finance Ministry revised its economic outlook which raised its 2020 Average CPI from 2.6% to 2.8% and raised 2021 Average CPI from 2.0% to 2.2. It maintained bot 2020 and 2021 GDP growth outlook at 2.0% and 2.2% respectively

- Bank of Korea (BOK) Jan minutes: Dissenter: Monetary policy was not appropriate tool to address heating up of local property markets

- South Korea govt refuted speculation that China President Xi's planned trip is delayed

- South Korea ruling party said to call for extra budget

- Iran said to plan execution of alleged CIA spy over its nuclear program

 

Currencies/Fixed Income

- Continued concerns over the Brexit transition period and the ‘tough' trade negotiations initially weighed upon the GBP currency. GBP/USD tested 6-week lows around 1.2940 before consolidating. The pair regained its composure ahead of UK Construction PMI data and steady back above the 1.30 afterwards. Better UK data has significantly dampen any hope of any rate cut by BOE in 2020. Just two weeks ago the market saw 100% chance of a cut by June. It is no longer fully pricing in a cut in 2020.

- Higher equity prices in Far East and Europe helped to unwind safe-haven flows as both the JPY and CHF currencies were weaker in the session. USD/JPY back above the 109 level

 

Economic Data

- (FR) France Dec YTD Budget Balance: -€92.8B v -€113.9B prior

- (ES) Spain Jan Net Unemployment Change: +90.2K v -34.6K prior

- (BR) Brazil Jan FIPE CPI M/M: 0.3% v 0.3%e

- (HK) Hong Kong Dec Retail Sales Value Y/Y: -19.4% v -22.6%e; Retail Sales Volume Y/Y: -21.0% v -24.7%e

- (UK) Jan Construction PMI: 48.4 v 47.1e (9th month of contraction)

- (EU) Euro Zone Dec PPI M/M: 0.0% v 0.0%e; Y/Y: -0.7% v -0.7%e

- (IT) Italy Jan Preliminary CPI M/M: -1.7%% v -1.7%e; Y/Y: 0.6% v 0.5%e

- (IT) Italy Jan Preliminary CPI EU Harmonized M/M: 0.2% v 0.2% prior; Y/Y: 0.5% v 0.5%e

Fixed Income Issuance

- (ID) Indonesia sold total IDR21.0T vs. IDR15.0T target in 3-month and 12-month bills; 5-year, 10-year, 15-year, 20-year and 30-year bonds

- (FI) Finland opened its book to sell EUR-denominated bonds; guidance seen -9bps to mid-swaps

- (ZA) South Africa sold total ZAR4.53B vs. ZAR4.53B indicated in 2026, 2035 and 2040 bonds

 

Looking Ahead

- 05:30 (UK) Weekly John Lewis LFL Sales data

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 05:30 (UK) DMO to sell £800MB in 0.125% Nov 2036 inflation-linked Gilts (UKTi)

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month bills

- 05:30 (DE) Germany to sell combined €500M in 2030 and 2046 I/L Bonds (Bundei)

- 06:00 (IE) Ireland Jan Unemployment Rate: No est v 4.8% prior

- 06:30 (TR) Turkey Real Effective Exchange Rate (REER): No est v 76.17 prior

- 06:30 (EU) ESM to sell €2.5B in 3-month bills - 06:45 (US) Daily Libor Fixing

- 07:00 (BR) Brazil, Dec Industrial Production M/M: -0.5%e v -1.2% prior; Y/Y: -0.8%e v -1.7% prior

- 07:00 (TR) Turkey to sell 13.8% 2021 Bonds

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)

- 07:45 (US) Goldman Economist Chain Store Sales - 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:55 (US) Weekly Redbook LFL Sales data

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (US) Dec Factory Orders: +1.2%e v -0.7% prior; Factory Orders (ex-transportation): No est v 0.3% prior

- 10:00 (US) Dec Final Durable Goods Orders: 2.4%e v 2.4% prelim; Durables (ex-transportation): -0.1%e v -0.1% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v -0.9% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v -0.4% prelim

- 10:00 (MX) Mexico Dec Total Remittances: No est v $2.9B prior

- 10:30 (MX) Mexico Jan PMI Manufacturing: No est v 47.1 prior

- 11:00 (DK) Denmark Jan Foreign Reserves: No est v 435.4B prior

- 16:00 (KR) South Korea Jan Foreign Reserves: No est v $408.8B prior

- 16:30 (AU) Australia Jan AiG Performace of Construction Index: No est v 38.9 prior

- 16:30 (US) Weekly API Oil Inventories

- 16:45 (NZ) New Zealand Q4 Employment Change Q/Q: 0.3%e v 0.3% prior (revised from 0.2%; Y/Y: 1.2%e v 1.0% prior (revised 0.9%) - 16:45 (NZ) New Zealand Q4 Unemployment Rate: 4.2%e v 4.2% prior

- 17:00 (AU) Australia Jan Final PMI Services: No est v 48.9 prelim; PMI Composite: No est v 48.6 prelim

- 19:00 (NZ) New Zealand Jan ANZ Commodity Price: No est v -2.8% prior

- 19:30 (HK) Hong Kong Jan PMI Composite: No est v 42.1 prior

- 19:30 (SG) Singapore Jan PMI Composite: No est v 51.0 prior

- 19:30 (JP) Japan Jan Final PMI Services: No est v 52.1 prelim; PMI Composite: No est v 51.1 prelim

- 20:01 (IE) Ireland Jan PMI Services: No est v 55.9 prior; PMI Composite: No est v 53.0 prior

- 20:30 (AU) RBA Gov Lowe speech in Sydney

- 20:30 (JP) BOJ's Wakatabe speech in Ehime

- 20:45 (CN) China Jan Caixin PMI Services: 52.0e v 52.5 prior; PMI Composite: No est v 52.6 prior

- 22:00 (CN) China to sell 3-year and 7-year Upsized Government Bonds

- 22:30 (TH) Thailand Jan Consumer Confidence: No est v 68.3 prior; Economic Confidence: No est v 56.0 prior