China said to be shaking up its economic team

Notes/Observations

- China President Xi Jinping said to be shaking up his economic team ahead of a major power shuffle later this year (top banking regulator, the commerce minister and the top economic-planning official)

- German Mar GKF Consumer Confidence misses expectations but within earshot of 16-year highs (10.0 v 10.1e)

- Bundesbank braces for QE losses after lowest profit in decade

Overnight:

Asia:

- (KR) Bank of Korea (BOK) left its7-Day Repo Rate unchanged at 1.25% (as expected) for its 8th straight pause in the current easing cycle

Europe:

- ECB's Hansson (Estonia) noted that rising inflation was good news but needed more months with positive surprises. Saw good reasons to be steady at this time and avoid drastic measures. Central bank should be factor of stability in situations of political unrest rather than adding to turbulence

- Germany Finance Ministry Monthly Report: Economy was on solid growth trajectory with economic upswing likely to continue in 2017

- IMF's Lagarde: debt restructuring has already been discussed by Greece and its creditors; what's needed was not a haircut but an interest rate cut. More reforms were needed before deal could be put to IMF board

- France centrist candidate Francois Bayrou said not to run for president, pledged support for Emmanuel Macron

Americas:

- FOMC Feb Minutes noted that it would begin debate on the balance sheet in upcoming meetings. Fed would have ample time to respond if inflationary pressures emerge.Some participates saw rate increase at an upcoming meeting could give Fed greater flexibility

- Fed's Powell (moderate, voter): risks are more balanced and gradual rate tightening is warranted

- Brazil Central Bank cut its Selic Target Rate by 75bps to 12.25% (as expected) for its 4th rate cut in the current easing cycle.

Energy:

- (US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks

Economic data

- (DE) Germany Q4 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.7% v 1.7%e; NSA Y/Y: 1.2% v 1.2%e

- (DE) Germany Q4 Private Consumption Q/Q: 0.3% v 0.3%e, Government Spending Q/Q: 0.8% v 0.8%e, Capital Investment Q/Q: 0.8% v 0.8%e, Construction Investment Q/Q: 1.6% v 1.5%e, Domestic Demand Q/Q: 0.9% v 0.6%e, Exports Q/Q: +1.8% v +1.4%e, Imports Q/Q: +3.1% v +1.8%e

- (DE) Germany Mar GfK Consumer Confidence: 10.0 v 10.1e

- (FR) France Feb Business Confidence: 104 v 104e; Manufacturing Confidence: 107 v 106e

- (TW) Taiwan Jan Industrial Production Y/Y: 2.8% v 3.0%e

- (PL) Poland Jan Unemployment Rate: 8.6% v 8.7%e v 8.3% prior

Fixed Income Issuance:

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.5B indicated in 0% Mar 2018 CTZ; Avg Yield: +0.029% v -0.071% prior; Bid-to-cover: 1.65x v 1.96x prior

- (IT) Italy Debt Agency (Tesoro) sold total €1.25B in I/L 2022 and 2026 bonds (BTPei)

- (HU) Hungary Debt Agency (AKK) sold HUF20B in 12-month Bills; Avg Yield: 0.22% (record low) v 0.26% v % prior; Bid-to-cover: 3.83x v 1.61x prior

- (UK) DMO sold £2.0B in 1.5% 2026 Gilts; Avg yield: 1.18% v 1.451% prior; Bid-to-cover: 2.34x v 2.27x prior; Tail: 0.3bps v 0.1bps prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.2% at 3,347, FTSE flat at 7,301, DAX +0.1% at 12,013, CAC-40 +0.3% at 4,911, IBEX-35 +0.5% at 9,525, FTSE MIB +0.3% at 18,946, SMI -0.1% at 8,578, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European equity indices are trading mixed but generally higher after a raft of corporate earnings pre-market; Asian session ending lower overnight; Markets jittery after French candidate Francois Bayrou offered an alliance with independent candidate Emmanuel Macron re May’s French elections; Banking stocks trading mixed across Europe with shares of SocGen and Deutche Bank trading higher but with ING, Intesa Sanpaolo and BBVA trading lower in the Eurostoxx; FTSE 100 gains led by shares of Intu, RSA, Barclays, Mondi and BAE Systems after all reported their earnings pre-market; shares of Centrica trading notable lower after releasing their FY results; Energy stocks trading higher as oil continue overnight rallies.

A plethora of upcoming scheduled US earnings (pre-market) include Atlas Air, AMC Networks, Ansys, Apache Corp, Brady Corp, Clear Channel Outdoor, Chesapeake Energy, Cinemark Holdings, CommScope, Cott Corp, Carter’s, EMCOR Group, Gildan Activewear, Hormel Foods, Iron Mountain, Isle of Capri Casinos, JAKKS Pacific, Kohl’s Corp, Leidos Holdings, LKQ Corp, Milacron, Mitel Networks, Patterson Companies, Pinnacle Foods, Sanderson Farms, Servicemaster Global, Sprouts Farmers Market, Stantec, Teleflex Teekay Corp, Toro, Marriott Vacations Worldwide, Visteon Corp, Wayfair, and Zebra Technologies.

Equities (as of 09:45 GMT)

- Consumer Discretionary: [British American Tobacco BATS.UK +0.3% (FY16 results), Edenred EDEN.FR +1.0% (FY16 results), ISS ISS.DK +2.6% (FY16 results), Kindred KIND.SE +2.5% (to acquire 32Red for £175.6M), Plastic Omnium POM.FR -1.0% (FY16 results), RELX REL.UK +0.1% (FY16 results), Rentokil RTO.UK +0.1% (FY16 results)]

- Energy: [Centrica CNA.UK -3.7% (FY16 results), Repsol REP.ES +1.5% (Q4 results)]

- Financials: [Aareal Bank ARL.DE -4.5% (FY16 results), Axa CS.FR -0.4% (FY16 results), Barclays BARC.UK +3.4% (Q4 results), Delta Lloyd DL.NL +0.1% (FY16 results), Royal & Sun Alliance RSA.UK +4.4% (FY16 results), Swiss Re SREN.CH -1.2% (Q4 results)]

- Healthcare: [Ipsen IPN.FR +6.0% (FY16 results), UCB UCB.BE +2.0% (FY16 results)]

- Industrials: [BAE Systems BA.UK +2.6% (FY16 results), Bouygues EN.FR +5.5% (FY16 results), Duerr DUE.DE -3.1% (Q4 results), Henkel HEN3.DE -1.1% (FY16 results), MTU Aero Engines MTX.DE +0.6% (FY16 results), Morgan Sindall MGNS.UK +6.5% (FY16 results), Mondi MNDI.UK +2.9% (FY16 results), PSA UG.FR -2.6% (FY16 results)]

- Materials: [Glencore GLEN.UK +2.8% (prelim FY16 results)]

- Technology: [Dialog Semiconductor DLG.DE +6.3% (Q4 results)]

- Telecom: [Orange ORA.FR +1.3% (FY16 results), Telefonica TEF.ES +2.2% (Q4 results)]

- Utilities: [Veolia VIE.FR -6.9% (FY16 results)]

Speakers

- ECB's Weidmann (Germany) noted that price pressure in Euro Zone remained relatively weak. Euro Zone recovery increasingly secure and would continue

- ECB's Praet(Belgium): Economic conditions have been improving within the Euro Zone but recovery remained dependent on support from monetary policy. Reiterated that monetary policy alone could not meet all economic goals

- ECB's Villeroy (France) reiterated view that France needed to implement reforms for sustainable growth

- German Bundesbank Annual Report reported 2016 Net €963M v €3.2B y/y. Risk provision at €15.4B, +1.8B increase y/yas it noted that QE exposed balance sheet to interest rate risk

- EU's Dombrovskis called for final push from all parties on Greece; optimistic of a solution for the country

- China President Xi said to be shaking up his economic team ahead of a major power shuffle later this year. To have appointed Zhong Shan as Commerce Minister. CBRC (banking regulator) and NDRC (Planning Agency) chiefs to step down as well

- China PBoC chief economist Ma Jun: Monetary policy to prevent asset bubbles and rapid rise in debt levels. Export growth could rebound this year

Currencies

- Little impetus in FX markets to move the USD from its recent ranges. US Treasury Mnuchin noted that strong USD was a reflection of confidence in US economy and its performance compared with rest of world and was a “good thing” in the long run

- EUR/USD little changed just under the 1.0550 level. In-line Q4 German GDP data and recent optimism of its domestic economy has not translated into a stronger Euro. ECB officials continued to note that economic conditions had been improved within the Euro Zone but recovery remained dependent on support from monetary policy

- USD/JPY was holding above the 113 area and the GBP/USD hovered just under the 1.25 handle.

Fixed Income:

-Bund futures trade at 165.02 up 3 ticks trading mid range as futures consolidate the recent move higher. Continuation higher targets 165.53 followed by 165.64. Support moves to 164.75 followed by 164.33 then 164.05.

- Gilt futures trade at 126.72 up 15 ticks approaching yesterday YTD highs ahead of the UK £2.0B Gilt auction later today. Resistance moves to 126.94 then 127.16. Support moves to 126.36 followed by 125.84 then 125.63. Short Sterling trade flat with Jun17Jun18 remaining at 13/14bp.

-Thursday liquidity report showed Wednesday's excess liquidity rose to €1.301T up €16B from €1.285T prior. Use of the marginal lending facility rose to €188M from €177M prior.

- Corporate issuance saw $5.73B come to market via 5 issuers in another relatively subdued session. Issuance was headlined by Bristol Myers Squibb 2 part $1.5B offering, and Mizuho Financial $3.25B 3 part offering.

Looking Ahead

- (UR) Ukraine Jan Industrial Production M/M: No est v 1.9% prior; Y/Y: No est v 4.5% prior

- (BR) Brazil Jan Central Govt Budget Balance (BRL): +3.9Be v -60.1B prior

- (AR) Argentina Feb Consumer Confidence Index: No est v 44.5 prior

- (SE) Sweden Central Bank (Riksbank) Jansson

- 06:00 (IL) Israel Jan Unemployment Rate: No est v 4.3% prior

- 06:00 (UK) Feb CBI Retailing Reported Sales: +4e v -8 prior, Total Distribution: 24e v 26 prior

- 06:00 (BE) ECB’s Praet (Belgium) in London

- 06:00 (CZ) Czech Republic to sell Bills

- 06:45 (US) Daily Libor Fixing

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

- 08:00 (BE) ECB’s Praet (Belgium) in London

- 09:00 (RU) Russia Gold and Forex Reserve w/e Feb 17th: No est v $393.6B prior

- 08:15 (UK) Baltic Dry Bulk Index

- 08:35 (US) Fed's Lockhart to speak on His 10-Year Tenure at the Fed

- 08:30 (US) Jan Chicago Fed National Activity Index: No est v 0.14 prior

- 08:30 (US) Initial Jobless Claims: 240Ke v 239K prior; Continuing Claims: 2.07Me v 2.076M prior

- 08:30 (BR) Brazil Jan Total Outstanding Loans (BRL): No est v 3.107T prior; M/M: No est v 0.1% prior

- 09:00 (US) Dec FHFA House Price Index M/M: No est v 0.5% prior; Q/Q: No est v 1.5% prior

- 10:00 (MX) Mexico Central Bank (Banxico) Feb Minutes

- 10:00 (BR) Brazil to sell 2023 LFT

- 10:00 (BR) Brazil to sell 2018, 2019 and 2020 Bills LTN

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

- 11:00 (US) Feb Kansas City Fed Manufacturing Activity: 9e v 9 prior

- 11:00 (US) Weekly DOE Crude Oil Inventories

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

- 14:00 (AR) Argentina Jan Industrial Production Y/Y: -0.9%e v -2.3% prior ; Y/Y: No est v -7.8% prior