China extends travel bans to contain coronavirus

Notes/Observations

- Coronavirus concerns continue weigh upon risk appetite

- China extends travel bans to help contain the virus

Asia:

- China coronavirus death toll climbs to 106 as confirmed cases near 4,500 - Trial of vaccine to combat Coronavirus outbreak said to be two months away. Inovio researchers in the US have been working round the clock to combat the contagion

- Concerns over economic impact on China from virus outbreak; Extended lunar new year break to hit travel, consumption and manufacturing. Tour operators in China been told the ban would be in place for as long as two months

- Australia Dec NAB Business Confidence hits a 6-year low (-2 v 0 (flat) prior - Japan PM Abe nominates Marusan Securities Economist Seiji Adachi for BOJ Board to replace Harada (dissenter)

Europe:

- ECB's Mersch (Luxembourg): asset prices are currently at very elevated levels; risks of asset price correction are increasing

Brexit:

- EU's Barnier: Reiterates belief that UK and EU will need much more time to reach a trade deal. bloc would "never, never, never" compromise on the integrity of its single market

- EU said to be demanding that EU judges have the power to rule on any post-Brexit agreement with the United Kingdom. To insist that the European Court of Justice be able to enforce the terms of a trade, fishing and security deal

Americas:

- White House said to work to contain damage from allegations in forthcoming Bolton book due in March. Could push the Senate impeachment trial into next week

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.04% at 413.90, FTSE +0.11% at 7,420.19, DAX -0.11% at 13,190.69, CAC-40 0.00% at 5,862.86, IBEX-35 +0.11% at 9,377.00, FTSE MIB +0.35% at 23,498.47, SMI -0.02% at 10,673.50, S&P 500 Futures +0.30%]

Market Focal Points/Key Themes: European indices in the green following Asia indices lower (Hang Seng and Shanghai closed) and higher US futures. On a busy corporate earnings front, risers include Swedbank, SGS, Just Eat and Wacker Chemie; Just Eat at also announced UK partnership with McDonald's. AG Barr and Sopheon rallying following results; AG Barr guided FY19 profit at top end of market expectations. In the UK, Virgin Money, Saga, UDG Healthcare, Severn Trent and McCarthy Stone up on trading update. German traded SAP declines over 2% following a slight miss on the top line, but raised outlook. Other decliners include Sartorius, Sartorius Stedim Biotech, Bankia, Zooplus, PZ Cussons, Komax, Veidekke and Philips. Lenzing dives after missing on the bottom-line. Philips also to review options of domestic appliance unit, create separate legal structure. Suess Microtec and Nostrum Oil & Gas plunge following earnings/trading results. Ion Beam Applications surges after award of proton therapy center contract award. Tissue Rgenix Group dives after reporting cyber security incident. Notable earners today Autoliv, Harley Davidson, Lockheed Martin, Lear Corp, McCormick, 3M, Nucor, Paccar, Pfizer, Pulte Group, United Technologies, Whirlpool and Xerox.

Equities

- Consumer discretionary: Just Eat [JE.UK] +1% (trading update; partnership), Saga [SAGA.UK] +5% (trading update)

- Financials: Swedbank [SWEDA.SE] +4% (earnings), Saga [SAGA.UK] +5% (trading update), Crest Nicholson [CRST.UK] +3% (earnings), Bankia [BKIA.ES] -2% (earnings)

- Healthcare: Koninklijke Philips [PHIA.NL] -2% (earnings)

- Technology: Sopheon [SPE.UK] +15% (trading update), SAP [SAP.DE] -2% (earnings), Suess MicroTec [SMHN.DE] -11% (earnings)

Speakers

- World Health Organization (WHO) General Dir: Confident in China's abilityto control and contain the spread of the coronavirus

- Sweden Central Bank (Riksbank) Giv Ingves stated that expectations of low interest rates for a long time could lead to challenges for financial stability

- Sweden FSA raised the capital requirements for commercial real estate citing elevated risks

- Czech Central Bank official Benda (hawk, dissenter) reiterated stance for tighter policy following a surge in inflation. Believed that foregoing rate hikes could backfire

- BOJ Gov Kuroda: reiterated stance to continue with easing to achieve price target. Vital for govt to maintain its trust in finances and take steps to maintain its medium and long term fiscal health

- China PBoC: To offer abundant liquidity after Lunar New Year holiday via Open market Operations (OMOs)

- Japan Health Min: Person in Japan without direct contract to Wuhan has contracted the coronavirus (patient;s occupation is a bus driver)

- Hong Kong Chief Exec Lam stated that needed to lower the travel between HK and China. China to halt high-speed railway service between city and the mainland China with measures starting on Thursday, Jan 30th

Currencies/Fixed Income

- Safe haven flows continued to be the theme as the coronavirus continued to spread. USD/JPY was again testing some key short-term support at 108.70 area after reports circulated that a Japanese person with no direct contact to Wuhan became ill with the coroniavirus. Reports later surfaced that the Japanese man was a bus driver who recently drove Wuhan tourist around Japan.

- GBP/USD was drifting lower back towards the 1.30 area. Cable unable to hold recent gains in the aftermath of better economic data reduced the risks of a BOE rate cut this week. Dealers pointed out the prospect of delicate UK-EU trade talks was a headwind

Economic Data

- (CH) Swiss Dec Trade Balance (CHF): 2.0B v 4.0B prior; Real Exports M/M: -3.4% v -0.4% prior; Real Imports M/M: +0.2% v -0.1% prior; Watch Exports Y/Y: +5.8% v -3.1% prior

- (ES) Spain Q4 Unemployment Rate: 13.8% v 14.0%e

- (SE) Dec Trade Balance (SEK): 0.3B v 2.7B prior

- (SE) Sweden Dec PPI M/M: -0.5% v +0.3% prior; Y/Y: 1.3% v 1.2% prior

- (SE) Sweden Dec Retail Sales M/M: +0.5% v -0.5%e; Y/Y: 3.4% v 1.3% prior

Fixed Income Issuance

- (FR) France Debt Agency (AFT) opened book to sell EUR-denominated May 2052 Oat via syndicate; guidance seen +6bps to mid-swaps

- (GR) Greece Debt Agency (PDMA) opened book to sell EUR-denominated 15-year bonds via syndicate; guidance seen +175bps to mid-swaps

- (ID) Indonesia sold IRD8.0T vs IDR7.0T target in 6-month Islamic Bills and 2-year, 4-year and 25-year Islamic bonds (sukuk)

- (ZA) South Africa sold combined ZAR4.53B v ZAR4.53B indicated in 2030, 2037 and 2044 bonds

- (IT) Italy Debt Agency (Tesoro) sold €2.0B vs. €1.5-2.0B indicated range in Nov 2021 CTZ; Avg Yield: % v -0.005% prior; Bid-to-cover: 1.75x v 1.48x prior

- (IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €0.75-1.25B indicated range in 0.10% May 2023 Inflation-linked Bonds (BTPei); Avg Yield: -0.50% v -0.02% prior; Bid-to-cover: 1.84x v 4.39x prior

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 £2.75B of 0.875% Oct 2029 Gilts

- 06:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v -3.3% prior; Y/Y: No est v 1.4% prior

- 06:00 (BR) Brazil Jan FGV Construction Costs M/M: 0.2%e v 0.1% prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (MX) Mexico Dec Trade Balance: $2.5Be v $0.8B prior

- 07:45 (US) Goldman Economist Chain Store Sales

- 08:00 (HU) Hungary Central Bank (MNB): Expected to leave Base Rate unchanged at 0.90%; Expected to leave Overnight Deposit Rate unchanged at -0.05%

- 08:00 (RU) Russia Dec Real Retail Sales Y/Y: 2.6%e v 2.3% prior

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

- 08:30 (US) Dec Preliminary Durable Goods Orders: +0.4%e v -2.1% prior; Durables (ex-transportation): +0.3%e v -0.1% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.2%e v 0.2% prior; Capital Goods Shipments (non-defense/ex-aircraft): +0.2%e v -0.3% prior

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

- 09:00 (US) S&P/Case Shiller (20-city) House Price Index M/M: 0.40%e v 0.43% prior; Y/Y: 2.40%e v 2.23% prior; HPI NSA Index: No est v 218.43 prior

- 09:00 (US) Nov S&P/Case Shiller (overall) House Price Index Y/Y: No est v 3.34%; Overall HPI Index: No est v 212.43 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:00 Hungary Central Bank Gov Matolcsy post rate decision statement

- 10:00 (US) Jan Consumer Confidence: 128.0e v 126.5 prior

- 10:00 (US) Jan Richmond Fed Manufacturing Index: -3e v -5 prior

- 10:00 (MX) Mexico Weekly International Reserve data

- 10:00 (IE) ECB's lane (Ireland, chief economist)

- 11:15 (SE) Sweden Central Bank (Riksbank) dep Gov Skingsley

- 11:30 (US) Treasury to sell 52-Week Bills

- 13:00 (US) Treasury to sell 2-Year FRNs

- 13:00 (US) Treasury to sell 7-Year Notes

- 16:00 (KR) South Korea Jan Consumer Confidence: No est v 100.4 prior

- 16:30 (US) Weekly API Oil Inventories

- 17:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 108.3 prior

- 18:50 (JP) BOJ Summary of Opinions

- 19:00 (AU) Australia Dec Leading Index M/M: No est v -0.1% prior

- 19:01 (UK) Jan BRC Shop Price Index Y/Y: No est v -0.4% prior

- 19:30 (AU) Australia Q4 CPI Q/Q: 0.6%e v 0.5% prior; Y/Y: 1.7%e v 1.7% prior

- 20:10 (JP) BOJ Outright Bond Purchase Operation; to buy 5~10 Years; 1~3 Years and 3~5 Years

- 22:30 (TH) Thailand Dec ISIC Manufacturing Production Index Y/Y: -7.0%e v -8.3% prior; Capacity Utilization: No est v 63.17 prior