Euro regional data remains soft

Notes/Observations

- Subdued session in Europe; China markets closed for Lunar New Year holiday

- European data remains on soft footing; Euro Zone Feb Sentix Investor Confidence at a fresh 4-year low; UK Jan Construction PMI at a 10-month low

Asia:

- Lunar New Year holiday has China markets closed all week

- China Jan Caixin Services PMI: 53.6 v 53.4e

Europe:

- UK PM May office denies report related to June 6th election plan (Note: w/e press article suggested advisers to PM May were considering holding elections on June 6th under a plan where the Brexit was delayed past March 29th).

- Alternative Arrangements Working Group will begin a 3-day meeting on Monday, Feb 4th for talks to find another way of avoiding an Irish border

- Bank of Italy Gov Visco: There were internal and external downside risks for Italy's growth. Saw significant downside risks to Italy's 2019 GDP growth forecast of +0.6%; interest rates on govt bonds also a significant risk

- Renewed speculation that Germany was looking at €24.7B budget shortfall by 2023. A previous article cited that if spending was not tightened because tax revenues were expected to decline amid higher public sector wage costs.

Americas:

- Fed's Kashkari (dove, non-voter): Chairman Powell is coming around to the view that more rate hikes are not needed

Macro

(UK) United Kingdom: The government and members of parliament who collectively form the new created Alternative Arrangements Working Group will convene today through to Wednesday to try and come up with an alternative solution to the Irish backstop, the ideas from which PM May will return to Brussels with. The EU has continued to pre-emptively reject it with the Irish PM stating over the weekend that it was "very frustrating" that the UK government was "going back to the idea of technology." If the EU rejects whatever proposals are put forward then the Withdrawal Agreement will remain unmodified and likely to be voted down next week, although May could under this scenario simply just cancel the vote altogether.

(EU) Eurozone: ECB's Nowotny said he doesn't expect a recession in the Eurozone, despite a lot of economic uncertainty, especially around the situation in Germany. "The ECB is a fact based institution - when we have reliable developments we have to discuss". Nowotny has been pushing for further policy normalization sooner rather than later but his comments suggests slight shift in rhetoric and even the most hawkish of board members are starting to worry about the poor run of economic data.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.02% at 359.76, FTSE +0.27% at 7,039.05, DAX +0.03% at 11,184.08, CAC-40 -0.23% at 5,007.57, IBEX-35 -0.23% at 8,998.80, FTSE MIB +0.29% at 19,633.50, SMI +0.08% at 9,005.50, S&P 500 Futures +0.11%]

Market Focal Points/Key Themes: Equities European Indices trade flat to slightly higher tracking slightly higher US futures overnight ahead of a busy week for corporate earnings as China is closed for the week for lunar New Year. On the corporate front Wirecard trades sharply higher following weakness last week after an investigation found no evidence to support allegations wrong doing by senior executives. On the earnings front CompuGroup rises on strong earnings and Revenue growth; with Kainos Group and Tissue Regenix among other trading higher on trading updates. Meanwhile Ryanair falls sharply after reporting a Q3 loss while affirming their recently lowered guidance; Julius Baer is another notable faller after earnings missed consensus. In other notable news, Gensight Biologics plummets after its Rescue Phase III trial failed to meet primary endpoint; Panlpina also declines as major shareholders does not support proposed acquisition by DSV. Looking ahead notable earners include Sysco Corp, Johnson Outdoor, and Alexion Pharmaceutical among others.

- Consumer discretionary: Ryanair [RYA.UK] -4.5% (earnings), Wizz Air Holdings [WIZZ.UK] +0.5% (load factor)

- Materials: Ferrexpo [FXPO.UK] -7.5% (to conduct review amid discrepancies in bank statements)

- Financials: Julius Baer [BAER.CH] -4.5% (earnings; cost reduction program)

- Healthcare: argenx [ARGX.BE] +2.5% (collaboration), Tissue Regenix Group [TRX.UK] 0.5% (trading update), GenSight Biologics [SIGHT.FR] -17.5% (study results), Curetis [CURE.NL] +6% (regulatory approval)

- Industrials: Stabilus [STM.DE] -2.5% (earnings; outlook cut), Panalpina [PWTN.CH] -8.5%, DSV [DSV.DK] -3.5% (Panalpina's largest shareholder does not support DSV's takeover offer), RPS Group [RPS.UK] +8.5% (trading update; acquisition)

- Technology: Wirecard [WDI.DE] +15.5% (issues statement on internal investigation), Kainos Group [KNOS.UK] +5.5% (trading update), Compugroup [COP.DE] +10% (earnings)

Speakers

- ECB's Nowotny (Austria): Would see an increase in core CPI; reiterated ECB stance that policy was data driven. Reiterated ECB Council stance that the region will not experience a recession

- ECB's Mersch (Luxembourg): Best solution is to integrate financial stability concerns into monetary policy at the European level

- UK MP Jacob Rees Mogg (Brexiteer): Would accept a Brexit deal that did not include the Irish backstop. Leaving the EU without a deal a rational decision; key would be having a functional govt after Brexit

- Ireland Fin Min Donohoe reiterated view that EU stands firmly behind Ireland on Brexit; will not take part in hard border. If no deal then would engage with UK and EU on border

Currencies/Fixed Income

- USD holding onto recent ranges despite the recent dovish FOMC. Greenback aided by a recent strong payroll report. Analysts note that headline message was that US growth still looked quite strong currently and in?ation pressures were not announcing themselves at the moment.

- EUR/USD little changed in session at 1.1450 area.

- GBP/USD lower by 0.3% at 1.3055 as the UK continued to find common ground among its Parliamentary members to secure a Brexit deal.

Economic Data

- (TR) Turkey Jan CPI M/M: 1.0% v 1.0%e; Y/Y: 20.4% v 20.3%e; CPI Core Index Y/Y: 19.0% v 19.0%e

- (TR) Turkey Jan PPI M/M: +0.5% v -2.2% prior; Y/Y: 32.9% v 32.2%e

- (BR) Brazil Jan FIPE CPI (Sao Paulo) M/M: 0.6% v 0.6%e

- (ES) Spain Jan Net Unemployment M/M: +83.5K v +62.5Ke

- (CH) Swiss Total Sight Deposits w/e Feb 1st (CHF): 576.2B v 576.7B prior; Domestic Sight Deposits: 482.7B v 481.7B prior

- (EU) Euro Zone Feb Sentix Investor Confidence: -3.7 v -1.3e (lowest since Nov 2014)

- (UK) Jan Construction PMI: 50.6 v 52.5e (10th month of expansion but lowest since March)

- (EU) Euro Zone Dec PPI M/M: -0.8% v -0.5%e; Y/Y: 3.0% v 3.1%e

- (IT) Italy Jan Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: 0.9% v 0.9%e

- (IT) Italy Jan Preliminary CPI EU Harmonized M/M: -1.7% v -1.9%e; Y/Y: 0.9% v 0.8%e

**Fixed Income Issuance**

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month bills; Avg Yield: 0.99% v 0.82% prior; Bid-to-cover: 2.22x v 2.93x prior

Looking Ahead

- (RU) Russia Dec Sovereign Wealth Funds: Wellbeing Fund: $58.1B prior

- 05:25 (BR) Brazil Central Bank Weekly Economists Survey

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills

- 06:00 (IL) Israel to sell 2023, 2026, 2027 and 2028 bonds - 06:45 (US) Daily Libor Fixing

- 07:00 (CL) Chile Dec Retail Sales Y/Y: 3.0%e v -0.8% prior; Commercial Activity Y/Y: No est v 0.6% prior

- 08:00 (SG) Singapore Jan Purchasing Managers Index: No est v 51.1 prior; Electronics Sector Index: No est v 49.8 prior

- 08:00 (RU) Russia Annual 2018 GDP Y/Y: 1.9%e v 1.5% prior

- 08:00 (UK) Baltic Dry Bulk Index

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming issuance

- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.6-4.8B in 3-month. 6-month and 12-month Bills

- 09:00 (PT) ECB's Costa (Portugal at Conference on Companies

- 09:00 (IT) Italy PM Conte on plan for Income Support Scheme

- 09:45 (US) Jan ISM New York

- 10:00 (US) Nov Factory Orders: +0.3%e v -2.1% prior; Factory Orders (Ex-transportation): No est v 0.3% prior

- 10:00 (US) Nov Final Durable Goods Orders: 1.5%e v 0.8% prelim; Durables Ex-Transportation: 0.1%e v 0.3% prelim; Capital Goods Orders (Non-defense/ex-aircraft): +0.1%e v -0.6% prelim; Capital Goods Shipments (Non-defense/ex-aircraft): +0.1%e v -0.1% prelim

- 11:00 (DK) Denmark Jan Foreign Reserves (DKK): No est v 457.4 prior

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 19:30 (US) Fed's Mester on Economic Outlook and Monetary Policy