European Major PMI Manufacturing data beats expectations to 6-year highs

Notes/Observations

- US healthcare vote back on; Trump said to have issued an ultimatum to leave Obamacare in place unless they pass new healthcare bill; political risk weighing on market participation

- Major European Manufacturing PMI extend further into expansion territory to multi-year highs

Overnight:

Asia:

- Japan Mar Preliminary Manufacturing PMI registers its 7th month of expansion (52.6 v 53.3 prior)

- BOJ chief Kuroda says "no reason" to withdraw stimulus now

Europe:-

- BOE Vlieghe stated that higher inflation did not mean any interest rate hike. Needed to see evidence of strong wage growth before considering voting for a rate rise

Americas:

- Fed's Kaplan (moderate, voter): 3 rate hike this year is reasonable baseline; could be faster or slow but not looking for a pause in hikes now

- Fed's Kashkari (dove, dissenting vote): - We're coming up short on our inflation mandate; Fed has powerful tools if inflation rises too fast

Energy:

- State Dept to approve Keystone pipeline permit Friday

Summary of Trump Healthcare Bill:

- Vote has been postponed to Friday morning (no set time)

- White House and GOP leadership said to have presented a 'final offer' on healthcare bill to the Freedom Caucus to either accept or reject. Freedom Caucus yet to give formal answer to this offer. White House reportedly offered to remove essential benefits from plans on the individual market

- Trump said to have issued an ultimatum to House Republicans that he will leave Obamacare in place unless they pass new healthcare bill - financial press

- White House: Freedom Caucus discussion was positive; does not say deal reached; moderate members will come to white house for talks; Trump has not asked house speaker Ryan to delay healthcare vote; ultimately expects to have votes to pass healthcare bill; confident the bill will pass in the morning

- President Trump: the healthcare bill vote is going to be very close; we have a chance

- Freedom Caucus Chair Meadows: still hopeful will get agreement on health care bill; Freedom Caucus has made reasonable requests. still not enough votes to pass health bill; plans to reach out to moderate Republicans in House to try to reach agreement; optimistic common ground will be found with enough Senators to pass a bill

- House Republican Leader McCarthy: there are not enough votes currently to pass healthcare bill; will start debate on house floor on healthcare bill on Friday morning

- White House spokesman Spicer: Trump is looking forward to a vote on the healthcare bill; have seen the numbers rising for 'yes' votes

Economic Data

- (NL) Netherlands Q4 Final GDP Q/Q: 0.6% v 0.5%e; Y/Y: 2.5% v 2.3%e

- (FR) France Q4 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.1% v 1.2%e

- (FR) France Mar Preliminary Manufacturing PMI (beat): 53.4 v 52.4e (6th month of expansion), Services PMI: 58.5 v 56.1e, Composite PMI: 57.6 v 55.8e

- (CZ) Czech Mar Business Confidence: 13.1 v 15.2 prior; Consumer Confidence: 6.3 v 5.8 prior

- (DE) Germany Mar Preliminary Manufacturing PMI (beat): 58.3 v 56.5e (28th month of expansion and highest since Apr 2011), Services PMI: 55.6 v 54.5e, Composite PMI: 57.0 v 56.0e

- (EU) Euro Zone Mar Preliminary Manufacturing PMI (beat): 56.2 v 55.3e (45th month of expansion and highest since Apr 2011), Services PMI: 56.5 v 55.3e, Composite PMI: 56,7 v 55.8e

- (UK) Feb BBA Loans for House Purchase (miss): 42.6K v 44.9Ke

Fixed Income Issuance:

- (ZA) South Africa sold total ZAR650M vs. ZAR650M indicated in I/L 2029, 2033 and 2050 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 09:20 GMT)

Indices [Stoxx50 -0.3% at 3,442, FTSE -0.1% at 7,336, DAX flat at 12,035, CAC-40 -0.3% at 5,017, IBEX-35 -0.4% at 10,288, FTSE MIB -0.2% at 20,134, SMI -0.2% at 8,613, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European equity indices are trading lower in the morning session as market participants remain jittery ahead of the highly anticipated vote on US President Trump’s healthcare bill; Banking stocks generally lower across the board; shares of Allianz the laggard in the Eurostoxx after receiving an analyst downgrade; Commodity and mining stocks trading higher in the FTSE 100 as copper prices consolidate around intraday highs; Oil stocks lower as oil prices consolidate near intraday lows.

Upcoming notable scheduled US earnings (pre-market) include Finish Line, and REX American Resources.

Equities (as of 09:15 GMT)

- Consumer Discretionary: [IG Design IGR.UK +9.3% (trading update)]

- Financials: [Credit Suisse CSGN.CH +0.8% (revises Q4 Net loss, annual report), Allianz ALV.DE -1.4% (analyst downgrade)]

- Healthcare: [Biotest BIO.DE -8.8% (ImmunoGen has elected not to exercise its late stage co-development option for the US-Market with Biotest's antibody-drug conjugate (BT-062)), PureTech Health PRTC.UK +4.4% (Novartis licensing agreement)]

- Industrials: [FACC FACC.AT +0.1% (prelim FY16 results)]

- Technology: [Smiths Group SMIN.UK +3.9% (H1 results)]

Speakers

- ECB's Praet (Belgium, chief economist) reiterated view that Euro Area was doing better and that deflation risk was gone. Reiterated view that talks of exit from accommodative measures was premature as labor market had more slack than what jobs data showed. Italy's low growth showed acute structural problems and any return to ITL currency (Lira) for Italy would not solve the country's problem

- France Fin Min Sapin reiterated view that conditions were in place for budget deficit to GDP ratio to move below 3.0% in 2017

- Germany Fin Min Schauble reiterated view that pumping more money into Europe was the wrong message

- EU's Juncker reiterated view that UK Brexit bill will be around £50B

- EU's Dombrovskis reiterated EU Commission view that Italy needed to bring its debt level down; country needed to ensure 0.2% budget correction

- Italy Fin Min Padoan stated that its domestic economic and inflation situation was improving

- Sweden Central Bank (Riksbank) Business Survey: Industrial activity stronger than expected. Companies saw the coming six months economic activity would remain good, although there was some concern over political developments abroad

- Moody's affirmed New Zealand sovereign rating at AAA; outlook stable

Currencies

- FX price action and risk outlook hinging on President Trump looming healthcare vote. Political risk weighing on participation as time was running out to get votes for the Republican plan to repeal and replace "Obamacare"

- EUR/USD was back above 1.08 level aided by the major European Manufacturing PMI as it extended further into expansion territory to multi-year highs

- GBP/USD was slightly lower in quiet trade hovering below the 1.25 level.

- USD/JPY moved off Thursday's low to stay above the 111 level in the session.

Fixed Income:

- Bund futures trade at 159.98 down 4 ticks retracing the bulk of the earlier losses with stronger preliminary PMI data out of Europe coming ahead of estimates with the highest reading recorded since April 2011. Resistance remains at 160.45 followed by 160.66. Support moves to 159.41 then contract low of 158.73.

- Gilt futures trade at 126.36 down 4 ticks, off the 126.05 session low, with weakness in Equities pushing futures higher during the session. Support moves to 125.80 followed by 125.47. Resistance moves to 126.85 then 127.35 followed by 127.89. Short Sterling futures trade flat to 1bp with Jun17Jun18 spread widening to 23/23.5Bp.

- Friday's liquidity report showed Thursday's excess liquidity rose to €1.336B a rise of €7B from €1.329T prior. Use of the marginal lending facility rise to €283M from €232M prior.

- Corporate issuance saw no deals priced with weekly issuance at $20.8B at the low end of analysts estimates.
For the week ending Mar 22nd Lipper US fund flows reported IG net inflows $5.2B bringing YTD inflows to €35.1B, High Yield Bonds saw inflows of $736M bringing YTD outflows to €5.69B.

Looking Ahead

- (US) House of Representatives vote on Healthcare Bill (no set time)

- 06:00 (EU) Daily Euribor Fixing

- 06:00 (FR) France Debt Agency (AFT) announces upcoming Bill/Oat auctions

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave Key 7-Day Auction Rate unchanged at 10.00%

- 07:00 (UK) DMO to sell combined £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively)

- 07:30 (IS) Iceland cancels Bonds

- 07:30 (IN) India Weekly Forex Reserves

- 07:45 (US) Daily Libor Fixing

- 08:00 (CL) Chile Feb PPI M/M: No est v 0.9% prior

- 08:00 (US) Fed's Evans speaks at Community Development Event

- 08:00 Russia Central Bank (CBR) Gov Nabiullina to hold post rate decision press conference

- 08:30 (US) Feb Preliminary Durable Goods Orders: 1.3%e v 2.0% prior; Durables Ex-Transportation: 0.6%e v 0.0% prior; Capital Goods Orders (Non-defense ex aircraft): +0.5%e v -0.1% prior, Capital Goods Shipments (non-defense/ex-aircraft): +0.3%e v -0.4 prior; Ex-Defense: No est v 1.5% prior

- 08:30 (CA) Canada Feb CPI M/M: 0.2%e v 0.9% prior; Y/Y: 2.1%e v 2.1% prior; Consumer Price Index: No est v 129.5 prior

- 08:30 (CA) Canada Feb CPI Common Core Y/Y: No est v 1.3% prior; CPI Medium Core Y/Y: No est v 1.9% prior; CPI Trim Core Y/Y: No est v 1.7% prior

- 08:30 (US) Fed's Bullard to speak to Economic Club of Memphis

- 09:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance

- 09:15 (UK) Baltic Dry Bulk Index

- 09:30 (BR) Brazil Feb Current Account: $0.0Be v -$5.1B prior; Foreign Direct Investment (FDI): $4.8Be v $11.5B prior

- 09:45 (US) Mar Preliminary Markit Manufacturing PMI: 54.7e 54.2 prior

- 10:00 (MX) Mexico Jan Retail Sales M/M: -0.6%e v -1.4% prior; Y/Y: 5.1%e v 9.0% prior

- 11:00 (EU) Potential European sovereign ratings after the close

- (CY) Cyprus Sovereign Debt to Be Rated by Moody's

- (DK) Denmark Sovereign Debt to be rated by Moody's

- (SA) Saudi Arabia Sovereign Debt to be rated by Moody's

- (LU) Luxembourg Sovereign Debt to be rated by DBRS

- 13:00 (FR) France Feb Net Change in Jobseekers: -10.0Ke v +0.8K prior; Total Jobseekers: 3.457Me v 3.468M prior

- 13:00 (US) Weekly Baker Hughes Rig Count data

- 13:00 (IT) Pope Francis meets EU Leaders before Rome Summit

- 15:00 (CO) Colombia Jan Economic Activity Index Y/Y: 0.6%e v 1.0% prior

- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to cut Overnight Lending Rate by 25bps to 7.00%