European Q4 GDP data highlights growth concerns

EU Mid-Market Update: European Q4 GDP data highlights growth concerns; markets trying to end week on a calm note

Notes/Observations

- Plethora of rhetoric from Japanese officials; theme that action would be taken on exchange rates if necessary

- European Q4 GDP data highlight the headwinds to growth

- Overall Volatility has been extremely high in trading week; European session exhibiting calm with equity prices moving higher (hand in hand with oil prices)

Economic data

- (DE) Germany Q4 Preliminary GDP (mixed) Q/Q: 0.3% v 0.3%e; Y/Y: 1.3% v 1.4%e; GDP NSA Y/Y: 2.1% v 1.7%e

- (DE) Germany Jan Final CPI (in-line) M/M: -0.8% v -0.8%e; Y/Y: 0.5% v 0.5%e

- (FI) Finland Dec GDP Indicator WDA Y/Y: 0.6% v 0.2% prior

- (FR) France Q4 Preliminary Non-Farm Payrolls Q/Q: 0.2% v 0.0%e; Wages Q/Q: 0.1% v 0.2% prior

- (ES) Spain Jan Final CPI (in-line) M/M: -1.9% v -1.9%e; Y/Y: -0.3% v -0.3%e

- (CZ) Czech Jan CPI (slight beat) M/M: 0.6% v 0.5%e; Y/Y: 0.6% v 0.5%e

- (HU) Hungary Q4 Preliminary GDP (beat) Q/Q: 1.0% v 0.7%e; Y/Y: 3.2% v 2.5%e

- (IT) Italy Q4 Preliminary GDP (miss) Q/Q: 0.1% v 0.3%e; Y/Y: 1.0% v 1.2%e

- (PL) Poland Q4 Preliminary GDP Q/Q: 1.1% v 1.1%e; Y/Y: 3.9% v 3.8%e

- (PT) Portugal Q4 Preliminary GDP (miss) Q/Q: 0.2% v 0.4%e; Y/Y: 1.2% v 1.4%e

- (EU) Euro Zone Dec Industrial Production M/M: -1.0% v +0.3%e; Y/Y: -1.3% v +0.9%e

- (EU) Euro Zone Q4 Advance GDP q/Q: 0.3% v 0.3%e; Y/Y: 1.5% v 1.5%e

- (GR) Greece Q4 Advance GDP Q/Q: -0.6% v -0.8%e; Y/Y: -2.0% v -1.4%e

**Fixed Income Issuance:

- (ZA) South Africa sold total ZAR650M in I/L 2025, 2033 and 2046 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 +1.2% at 2,721, FTSE +1.5% at 5,620, DAX +1.3% at 8,867, CAC-40 +1.2% at 3,944, IBEX-35 +1.2% at 7,843, FTSE MIB +2.6% at 16,173, SMI +1.3% at 7,591, S&P 500 Futures +0.8%]

Market Focal Points/Key Themes: European equity indices opened higher this morning as oil prices regained some ground, despite a weaker Asian session in China and Japan; FTSE 100 strength attributing to commodity stocks with Anglo American leading the commodity led-rally, Rolls-Royce leading the FTSE 100 gains after reporting better than expected FY15 results whilst cutting its dividend; Financial stocks such as Unicredit, Deutsche Bank and Intesa Sanpaolo leading the way in the Eurostoxx; upcoming notable US earnings include American International Group, Brookfield Asset Management, Calpine, Interpublic, and LifePoint Health.

Equities

- Consumer discretionary: [SuperGroup SGP.UK -7.4% (Places 4M shares on behalf of founder Julian Dunkerton at 1,200p/shr)]

- Consumer staples: [Carl Zeiss Meditec AFX.DE +2.3% (Q1 results)]

- Financials: [Aktia Bank AKTAV.FI -3.4% (Q4 results), Commerzbank CBK.DE +13.8% (Q4 results, FY16 outlook, dividend proposal)]

- Industrials: [Aker Solutions AKSO.NO +0.4% (Q4 results, halts dividend, FY16 outlook), DFDS DFDS.DK +5.0% (Q4 results, share buyback, dividend declaration), Renault RNO.FR +0.3% (FY15 results, raises dividend), Rolls Royce RR.UK +13.0% (FY15 results, cuts dividend for first time since 1992), Schindler Holding SCHP.CH +2.3% (FY15 results), SSAB SSABA.SE +16.7% (Q4 results, job cuts), ThyssenKrupp TKA.DE +0.4% (Q1 results)]

Speakers

- Russia Central Bank First Dep Gov Tulin: Could act to counter FX volatility

- Eurogroup chief Dijsselbloem reiterated view of having joint interest in having UK remain inside EMU

Currencies

- Calmer European markets and higher oil prices helped the USD hold steady in the session.

- EUR/USD moved off its recent 4-monthy highs of 1.1375 to probe under 1.1270 area. Dealers still concede that ECB to at least reaffirm its dovish guidance at its policy meeting in March even if no rate action is taken.

- Continued Japanese verbal intervention help to make sure yen price action was not a one-way street.

Fixed Income:

-Bund futures trade at 165.01, down 58 ticks recovering from contract highs seen yesterday as strong numbers by Commerzbank helped sooth investor fears, however weaker Euro GDP figure has weighed. Having trading as high as 165.09 analysts eye a break testing 165.61 with extension seeing 166.16 high with further levels of interest at 166.23 and 166.43. Support is seen at 164.64 today's low with a break below seeing 165.23 previous high followed by 164.14.

- Gilt futures trade at 122.32, down 80 ticks following the rebound in stocks which are helping lift yields from near record lows. Having gaped down from yesterdays close, a move up to 122.80 closes the gap, with follow through seeing 123.20. A break of this will see a run up to 123.64 highs. Support moves to 121.98 low followed by 121.79 gap fill with further downside looking to test 121.44.

-Friday's liquidity report showed Thursday's excess liquidity rose to €672.3B a rise of €1.5B from €670.8B prior. This was primarily due to AFs and MonPol portfolios falling to negative €261.1B a record low. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €42M from a prior €31M.

**Political/In the Papers:

- UAE energy minister Suhail bin Mohammed al-Mazrouei: OPEC now ready to cooperate on production levels; believe that oil market will rebalance this year

**Looking Ahead***

- 06:00 (UK) DMO to sell combined £5.5B in 1-month, 3-month and 6-month Bills (£1.5B, £2.0B and £2.0B respectively)

- 06:00 (DE) German Chancellor Merkel with Poland PM Szydlo

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India Dec Industrial Production Y/Y: -0.4%e v -3.2% prior

- 07:30 (IN) India Jan CPI Y/Y: 5.4%e v 5.6% prior

- 07:00 (IS) Iceland Jan Unemployment Rate: No est v 2.8% prior

- 08:00 (PL) Poland Jan CPI M/M: -0.2%e v -0.2% prior; Y/Y: -0.5%e v -0.5% prior

- 08:00 (PL) Poland Jan M3 Money Supply M/M: -0.8%e v +2.2% prior; Y/Y: 9.5%e v 9.1% prior

- 08:00 (PL) Poland Dec Current Account Balance: -€0.3Be v +€0.6B prior; Trade Balance: €0.0Be v €0.8B prior; Exports: €13.6Be v €15.5B prior; Imports: €13.7Be v €14.8B prior

- 08:00 Spain Debt Agency (Tesoro) announces upcoming bond auction for Thurs Feb 18th

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Jan Advance Retail Sales M/M: +0.1%e v -0.1% prior; Retail Sales Ex Auto M/M: 0.0%e v -0.1% prior; Retail Sales Ex Auto and Gas: 0.3%e v 0.0% prior; Retail Sales Control Group: +0.3%e v -0.3% prior

- 08:30 (US) Jan Import Price Index M/M: -1.5%e v -1.2% prior; Y/Y: -6.8%e v 8.2% prior

- 08:30 (CA) Canada Jan Teranet/National Bank HPI M/M: No est v -0.1% prior; Y/Y: No est v 6.2% prior; House Price Index: No est v 177.51 prior

- 10:00 (US) Feds Dudley (Voter, Dove) in NY

- 10:00 (US) Dec Business Inventories: +0.1%e v -0.2% prior

- 10:00 (US) Feb Preliminary University of Michigan. Confidence: 92.3e v 92.0 prior

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

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

- 13:00 (CO) Colombia Central Bank Jan Minutes

Weekend:

- (CN) China Jan Trade Balance: $60.6Be v $60.01B prior; Exports Y/Y: -2.0%e v -1.4% prior; Imports Y/Y: -3.9%e v -7.6% prior