Can markets inoculate itself from coroniavirus???

Notes/Observations

- China's Wuhan shuts down transport as global alarm mounts over virus spread; HK confirmed its 2nd case

- Britain moved a step closer to its Jan. 31 exit as Brexit bill cleared its final UK parliamentary hurdle; will officially become law when it receives Royal Assent from Queen Elizabeth II

 

Asia:

- Australia Jan Consumer Inflation Expectation Survey hits highest reading since 2008 (4.7%v 4.0% prior

- Australia Dec Employment Change: +28.9K v +11.0Ke; Unemployment Rate at a 9-month low (5.1% v 5.2%e)

- Japan Dec Trade Balance in-line (-¥152.5B v -¥152.6Be) as exports fell for the 13th straight month

- World Health Organization (WHO) delayed decision on whether to declare the coronavirus outbreak an international emergency, to meet again on Thursday (Jan 23rd)

- Lunar New Year Holiday Schedule: China markets to be closed Jan 24-30th for Lunar New Year holiday, Hong Kong markets to be closed Jan 27-28th for Lunar New Year Holiday

 

Europe:

-Ireland PM Varadkar said to be willing to enter grand coalition with main rival

- SNB's Maechler: FX reserves were a result of monetary policy and reiterated stance to prepared to intervene in currency markets. Would end negative interest rates as soon as we are able

 

Brexit:

- PM Johnson's Brexit agreement passed through UK Parliament; now moves to queen for royal assent to become law

Mid-East/ Energy:- Weekly API oil inventories: Crude Oil Inventories: 1.6M v +1.1M prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.20% at 422.20, FTSE -0.27% 7,551.70, DAX -0.42% at 13,459.09, CAC-40 -0.04% at 6,008.72, IBEX-35 +0.14% at 9,587.00, FTSE MIB +0.63% at 23,856.04, SMI +0.05% at 10,901.00, S&P 500 Futures -0.06%]

 

Market Focal Points/Key Themes:

European indices in the red following Asia indices lower and slightly lower US futures. Luxury goods and airlines equities trading down due to mounting fears over the spread of coronavirus in China and Hong Kong.
On a busy corporate reporting front, Asos shares rallying after stronger than expected quarterly sales. Blue Prism and Gear4Music surge on trading/earnings results. STMicroelectronics, Bilia and Novozymes jump as well following Q4 results. Autoneum, Computacenter, Hotel Chocolat and CMC Markets up on sales updates, as well as Sligro trading higher following FY19 earnings. Anglo American and Repsol down on quarterly production updates. Bonava tanks following earnings update. Getlink, Polymetal and Paypoint down on trading updates. Lufhansa up slightly after reports yesterday after market close that the company is contemplating listing the jet repair/maintenance unit. Mothercare dives after transformation plan update and planned CEO departure. Hochtief down after reporting impairment charge from subsidiary CIMIC due to plans to exit the Middle East region. ACS trading lower after announcing sale of photovoltaic projects in Spain with a total installed power of ~2,93GW to Galp Energia.
Notable earners today include American Airlines, Comcast, Freeport McMoran Copper & Gold, JetBlue Airways, KeyCorp, Kimberly-Clark, Southwest Airlines, M&T Bank Corp, Procter & Gamble, SLM Corp, Steel Dynamics, Travelers Companies, Union Pacific and VF Corp.

 

Equities

- Consumer discretionary: Asos [ASC.UK] +8% (trading update; strong black Friday sales), Lufthansa [LHA.DE] -1% (reports could list a unit), WM Morrison Supermarkets [MRW.UK] -1% (analyst action)

- Financials: Paypoint [PAY.UK] -6% (trading update)

- Healthcare: Novozymes [NZYMB.DK] +7% (earnings)

- Industrials: Anglo American [AAL.UK] -1% (production), Polymetal [POLY.UK] -1% (trading update)

- Technology: STMicroelectronics [STM.FR] +5% (earnings)

 

Speakers

- SNB's Jordan stated that he saw slight improvement in 2020 growth but risks remained to the downside. Reiterated SNB view that negative rates were a necessity and that FX rate was important for Swiss monetary conditions. SNB did not follow ECB on policy but could cut rates further into negative territory if needed

- Norway Central Bank (Norges) Policy Statement reiterated its forward guidance that Repo Rate was likely to remain at current level coming period. Reiterated view that underlying inflation was close to target. New information largely confirmed the picture of economic developments that was presented back in the Dec report

- IMF chief Georgieva reiterated stance that uncertainty remained the top risk to the downside for growth. Consensus was that interest rates to be lower for longer. Some central banks had no policy space left; some did (like Fed and PBoC). Needed to look at fiscal tools more closely; need to see govts steeping up action

- Indonesia Central bank (BI) Policy Statement reiterated its view that monetary policy remained accommodative and in-line with CPI outlook. Decision to keep policy steady was also in-line for efforts for higher growth. To continue to monitor global and domestic factors to take advantage of room for accommodative policies and push for more financing in govt priority projects

- US Commerce Sec Ross: Looking for a peaceful resolution with EU on trade; not abandoning car tariffs

 

Currencies/ Fixed Income

- Risk aversion again surfaced as the coronavirus continued to spread in China and several Chinese cities announced lockdowns in order to contain the spread ahead of the Lunar New Year holiday.

- USD/JPY was lower by 0.3% to probe the mid 109 area. The yen advanced for a third day as risk aversion was triggered by the coronavirus outbreak

- EUR/USD was steady ahead of the ECB decision later today. Lagarde to formally announce the start of the strategic review. Analysts noted that ECB would likely maintain its policy stance in 2020 but keep a dovish bias. ECB likely to remain patient to see if improvement in sentiment translated into better data in the coming months. The release of Friday’s preliminary PMI data for France, Germany and Euro Zone are highly anticipated in this respect.

- AUD/USD was higher as stronger jobs growth lowered the probability of Feb 2020 RBA rate cut. Pair higher by 0.4% at 0.6870 just ahead of the EU mid-session

 

Economic Data

- (FI) Finland Dec Preliminary Retail Sales Volume Y/Y: -1.7% v +2.2% prior

- (NO) Norway Nov AKU Unemployment Rate: 4.0% v 3.8%e

- (TR) Turkey Jan Consumer Confidence: 58.8 v 58.8 prior

- (DK) Denmark Jan Consumer Confidence Indicator: 4.5 v 2.5 prior

- (ID) Indonesia Central Bank (BI) leaves 7-Day Reverse Repo unchanged at 5.00% (as expected)

- (CN) Weekly Shanghai copper inventories (SHFE): 155.8K v 134.8K tons prior

- (SE) Sweden Dec Unemployment Rate: 6.0% v 6.6%e; Unemployment Rate (Seasonally Adj): 6.6% v 7.0%e; Unemployment Rate Trend: 6.9% v 6.9% prior

- (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 1.50% (as expected)

- (PL) Poland Dec Retail Sales M/M: 14.6% v 14.4%e; Y/Y: 7.5% v 7.3%e; Real Retail Sales Y/Y: 5.7% v 6.0%e

- (IS) Iceland Dec Wage Index M/M: 0.3% v 0.2% prior; Y/Y: 4.5% v 4.2% prior

 

Fixed Income Issuance

- (ES) Spain Debt Agency (Tesoro) sold total €4.973B VS. €4.5-5.5B indicated range in 2023, 2025 and 2048 Bonds

- Sold €2.75B in new 0.00% Apr 2023 SPGB bond; Avg Yield: -0.236%; Bid-to-cover: 1.64x

- Sold €1.345B in 2.15% Oct 2025 SPGB bond; Avg Yield: -0.013% v 1.039% prior; Bid-to-cover: 1.99x v 2.08x prior

- Sold €903M in 2.70% Oct 2048 SPGB bonds; Avg Yield: 1.270% v 1.327% prior; Bid-to-cover: 1.49x v 1.63x prior

- (FR) France Debt Agency (AFT) sold total €B vs. €7.0-8.5B indicated range in 2023, 2025 and 2027 Bonds

- Sold €3.592B in new 0.00% Feb 2023 Oat; Avg Yield: -0.53% v -0.63% prior; Bid-to-cover: 2.65x v 2.49x prior

- Sold €2.995B in 0.00% Mar 2025 Oat; Avg Yield: -0.38% v -0.39% prior; Bid-to-cover: 2.34x v 2.65x prior

- Sold €1.904B in 1.00% May 2027 Oat Avg Yield: -0.23% v +0.67% prior; Bid-to-cover: 1.90x v 1.99x prior

- (SE) Sweden sold SEK500M vs. SEK500M indicated in 0.125% 2027 I/L Bonds; Avg Yield: -1.7115% v -1.8366% prior; Bid-to-cover: 4.39x v 2.64x prior

 

Looking Ahead

- (IL) Israel Central Bank Jan Minutes

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

- 05:50 (FR) France Debt Agency (AFT) to sell €1.25-1.75B in 2028, 2029 and 2047 Inflation-linked bonds (Oatei)

- 06:00 (RO) Romania to sell RON300M in 4.75% 2034 Bonds; Avg Yield: % v 5.07% prior

- 07:00 (BR) Brazil Mid-Jan IBGE Inflation IPCA-15 M/M: 0.7%e v 1.1% prior; Y/Y: 4.3%e v 3.9% prior

- 07:45 (EU) ECB Interest Rate Decision: Expected to leave Main 7-Day Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.50%

- 08:00 (RU) Russia Gold and Forex Reserve w/e Jan 17th: No est v $557.5B prior

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

- 08:00 (BR) Brazil Jan CNI Industrial Confidence: No est v 64.3 prior

- 08:00 (RU) Russia Dec Industrial Production Y/Y: 1.9%e v 0.3% prior

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

- 08:30 (US) Initial Jobless Claims: 214Ke v 204K prior; Continuing Claims: 1.75Me v 1.767M prior

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

- 08:30 (EU) ECB Lagarde to hold post rate decision press conference

- 10:00 (US) Dec Leading Index: -0.2%e v 0.0% prior

- 10:00 (EU) Euro Zone Jan Advance Consumer Confidence: -7.8e v -8.1 prior

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

- 11:00 (US) Jan Kansas City Fed Manufacturing Activity Index: -6e v -8 prior

- 11:00 (US) Weekly DOE Oil Inventories

- 11:30 (US) Treasury to sell 4-week and 8-week

- 12:30 (SE) Sweden Central bank (Riksbank) Gov Ingves on panel

- 13:00 (US) Treasury to sell 10-Year TIPS Reopening

- 14:00 (AR) Argentina Dec Trade Balance: $2.1Be v $2.5B prior

- 14:00 (AR) Argentina Nov Economic Activity Index (Monthly GDP) M/M: No est v 1.9% prior; Y/Y: -0.8%e v -0.9% prior

- 14:00 (AR) Argentina Nov Supermarket Sales Y/Y: no est v -1.3% prior

- 16:45 (NZ) New Zealand Q4 CPI Q/Q: 0.4%e v 0.7% prior; Y/Y: 1.8%e v 1.5% prior

- 17:00 (AU) Australia Jan Preliminary PMI Manufacturing: No est v 49.2 prior; PMI Services: No est v 49.8 prior; PMI Composite: No est v 49.6 prior

- 18:30 (JP) Japan Dec National CPI Y/Y: 0.7%e v 0.5% prior; CPI Ex Fresh Food (core) Y/Y: 0.9%e v 0.5% prior; CPI Ex Fresh Food/Energy (core-core) Y/Y: 0.7%e v 0.8% prior

- 19:30 (JP) Japan Jan Preliminary PMI Manufacturing: No est v 48.4 prior; PMI Services: No est v 49.4 prior; PMI Composite: No est v 48.6 prior

- 21:00 (NZ) New Zealand Credit Card Spending M/M: No est v 1.6% prior; Y/Y: No est v 4.5% prior

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