Bond yields remain in focus

Notes/Observations

- German Q4 GDP data revised higher in the final reading

- Continued global recovery hopes reverberate

- Waiting more clues on the global inflation outlook (pondering how further tick up in bond yields would impact equity valuations)

Asia:

- Reserve Bank New Zealand (RBNZ) left the Official Cash Rate (OCR) unchanged at 0.25% (as expected); withdraws OCR rate path noting it’s no rush to remove monetary stimulus; to remain cautious on the outlook

- RBNZ Gov Orr post rate decision press conference stressed to retain all stimulus options; OCR could go lower and had always spoken about negative rates as option

- South Korea says to submit extra budget to Parliament on March 4th (Note: Govt had 4 extra budgets in 2020)

- Hong Kong Govt Budget speech confirmed an increase to stamp duty on stock trading from 0.1% to 0.13%

- Japan Fin Min Aso stated that was not considering fresh economic stimulus beyond what was currently planned; no doubt Q1 GDP would be lower than Q4

Coronavirus:

- Total global cases 112.1M (+0.3% d/d); total deaths: 2.48M (+0.5% d/d)

Europe:

- UK Chancellor of the Exchequer Sunak (Fin Min) aid to be planning on extending the stamp duty holiday and extend the furlough scheme by three months until the end of June

Americas:

- House to vote on Biden-backed coronavirus relief package Friday

- Fed Chief Powell semi-annual testimony in Senate reiterated stance to keep rates near zero until full employment and inflation rose to 2.0% target and was on track to moderately exceed target for some time. Likely to take some time for substantial further progress to be achieved; economy is a long way from employment and inflation goals

Energy:

- Weekly API Crude Oil Inventories: +1.0M v -5.8M prior

Speakers/Fixed Income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.44% at 413.14, FTSE % at #, DAX +0.71% at 13,963.90, CAC-40 +0.22% at 5,792.54, IBEX-35 +0.45% at 8,289.00, FTSE MIB +0.22% at 22,990.50, SMI +1.11% at 10,728.50, S&P 500 Futures +0.12%]

Market Focal Points/Key Themes: European indices open mixed with slight downward bias, but later turned around to trade generally positive; sectors among better peformers are materials consumer discretionary; financials and technology sectors trending to the downside; Synthomer confirms approach from CVC; Moncler takes full ownership of Stone Island; focus on upcoming speech by Fed Chair Powell; earnings expected in upcoming US session include Nvidia, Alcon and Lowes

Equities

- Consumer discretionary: Accor [AC.FR] +2% (earnings), FNAC [FNAC.FR] +10% (final earnings), Puma [PUM.DE] -4% (earnings)

- Financials: Lloyds Banking Group [LLOY.UK] +2% (earnings), Metro Bank [MTRO.UK] -3% (earnings)

- Utilities: Iberdrola [IBE.ES] +1% (earnings)

Speakers

- Czech Central Bank's Michl stated that as long as pandemic was not under control than saw no reason to change rates **Reminder: CNB had previously indicated the potential for rate hikes in 2021)

- Turkey Central Bank (CRBT) raised its remuneration rate for TRY-denominated Required Reserves to by 150bps to 13.50% and raised reserve requirement ratios by 200bps for all lira liabilities

- Turkey President Erdogan reiterated stance that determined to lower inflation and cut interest rates

- German DIW Institute noted that the domestic economy was coping better than the lockdown last year; industry had come robustly through winter

- BOJ Gov Kuroda testified in parliament and reiterated stance that bond purchases were for monetary policy and not for govt. ETF purchases were being done in a flexible manner and not significantly hurting market function; purchases not aimed at any specific equity level

- RBI Gov Das stated that he expected an orderly evolution of yield curve, had given clear signal to bond markets. RBI to take all policy measures, will make availability of adequate liquidity at appropriate time

- China Commerce Ministry (MOFCOM): To reinforce policy support for foreign trade as outlook for 2021 remains grim and complex.

- Moody's revised outlook on Taiwan to positive from stable; affirms AAA sovereign rating

- US President Biden to sign executive order for supply chain review. The review to take months and offer no immediate solution and sought to end reliance on adversaries such as China

Currencies/Fixed Income

- Continued weakness in various safe-haven currencies was the predominant them in trading on growing confidence in the global economic recovery

- GBP continued its march higher as GBP/USD tested the 1.4240 level during the Asian session for its highest level since Apr 2018. Dealers noted that the UK's rapid Covid vaccine rollout program had boosted recovery hopes and seen a repricing of BoE rate expectations.

- NZD firmer as markets continued to price in a rate hike in late 2022 even after the central bank said that a ‘prolonged’ monetary stimulus remains necessary

Economic data

- (FI) Finland Jan Preliminary Retail Sales Volume Y/Y: 3.8% v 2.8% prior

- (DE) Germany Q4 Final GDP Q/Q: 0.3% v 0.1%e; Y/Y: -3.7% v -3.9%e; GDP NSA (unadj) Y/Y: -2.7% v -2.9%e

- (DE) Germany Q4 Private Consumption Q/Q: -3.3% v -1.5%e; Government Spending Q/Q: -0.5% v -0.6%e; Capital Investment Q/Q: 1.0% v 1.9%e

- (DK) Denmark Jan Retail Sales M/M: -5.0% v -8.3% prior; Y/Y: -7.6% v +1.3% prior

- (FR) France Feb Business Confidence: 90 v 92e; Manufacturing Confidence: 97 v 99e; Production Outlook Indicator: -8 v -6e; Own-Company Production Outlook: 10 v 10e

- (TW) Taiwan Jan Export Orders Y/Y: 49.3% v 45.0%e

- (CZ) Czech Feb Consumer Confidence Index: -21.0 v -17.8 prior; Business Confidence: +2.1 v -1.9 prior; Composite (Consumer & Business Confidence): -2.6 v -5.1 prior

- (AT) Austria Feb Manufacturing PMI: 58.3 v 54.2 prior (8th straight expansion and highest since Feb 2018)

- (CH) Swiss Feb Expectations Survey: 55.5 v 43.2 prior

Fixed income Issuance

(IN) India sold total INR190B vs. INR190B indicated in 3-month, 6-month and 12-month bills

- (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2025 and 2031 bonds

- (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month bills; Avg Yield: -0.429% v -0.448% prior; Bid-to-cover: 1.54x v 1.53x prior

Looking Ahead

- (ZA) South Africa Fin Min Mboweni budget presentation

- 05:10 (EU) Daily ECB Liquidity Stats

- 05:30 (DE) Germany to sell €4.0B in 0% Feb 2031 Bunds

- 05:30 Greece Debt Agency (PDMA) to sell €625M in 26-week bills

- 05:30 (EU) ECB allotment in 3-month LTRO tender

- 06:00 (RU) Russia OFZ Bond auction

- 06:00 (BR) Brazil Feb FGV Construction Costs M/M: 1.0%e v 0.9% prior

- 06:00 (BR) Brazil Feb FGV Consumer Confidence: No est v 78.5 prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Feb 19th: No est v -5.1% prior

- 07:00 (MX) Mexico Dec Retail Sales M/M: -3.0%e v +3.3% prior; Y/Y: -5.7%e v -5.1% prior

- 07:00 (BR) Brazil Mid-Feb IBGE Inflation M/M: 0.5%e v 0.8% prior; Y/Y: 4.5%e v 4.3% prior

- 07:00 (CL) Chile Jan PPI M/M: No est v 2.7% prior

- 07:00 (UK) Weekly PM Question time in House

- 07:00 (UK) BOE Haldane (chief economist) at seminar

- 07:30 (BR) Brazil Jan Current Account Balance (BRL): -$7.5Be v -$5.4B prior; Foreign Direct Investment (FDI): $2.8Be v $0.7B prior

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

- 09:30 (UK) BOE Gov Bailey with MPC members Broadbent, Vlieghe and Haskel testify at Treasury Select Committee

- 09:45 (UK) BOE to buy £1.48B in APF Gilt purchase operation (over 7-20 years)

- 10:00 (US) Jan New Home Sales: 855Ke v 842K prior

- 10:00 (US) Fed Chair Powell testifies in House

- 10:30 (US) Fed’s Bainard

- 10:30 (US) Weekly DOE Oil Inventories

- 11:30 (US) Treasury to sell 2-year FRN

- 13:00 (US) Fed’s Clarida

- 13:00 (US) Treasury to sell 5-year notes

- 14:00 (AR) Argentina Dec Economic Activity Index (Monthly GDP) M/M: 1.4% prior; Y/Y: No est v -3.7% prior

- (CO) Colombia Jan Industrial Confidence: No est v -1.6 prior; Retail Confidence: No est v 23.0 prior

- 19:00 (NZ) New Zealand Feb Final Business Confidence: No est v 11.8 prelim; Activity Outlook: No est v 22.3 prelim

- 19:30 (AU) Australia Q4 Private Capital Expenditure: -0.5%e v -3.0% prior

- 20:00 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 0.50%

- 21:00 (KR) South Korea Jan Department Store Sales Y/Y: No est v -16.9% prior

- 23:00 (TH) Thailand Jan Manufacturing Production Index: -4.2%e v -2.4% prior; Capacity Utilization: No est v 63.8% prior