Focus on upcoming vote on Brexit amendments

Notes/Observations

- UK parliament prepares to vote on amendments to PM May's Brexit withdrawal bill

- Significant supply in the euro zone issuance with Austria, Belgium and Greece opening syndicates

Asia:

- Canada confirmed US filed extradition request for Huawei CFO Meng; China asked US to withdraw arrest order for Meng

- Huawei denied subsidiaries or affiliates, had committed any of the asserted violations of US law in indictments

- China was planning over CNY2.5T ($370B) in tax cuts and infrastructure spending

- big divides said to remain as US/China trade talks restart; the Chinese delegation led by VP Liu planned to offer a big increase in purchases of US farm products and energy as well as modest reform of industrial policy

- RBA member Harper reiterates expect next rate move to be up

Europe:

- UK PM May urged MPs to support the 'Brady amendment' that called for the Irish backstop to be replaced by alternative arrangements

- UK MP Jacob Rees Mogg: Do NOT expected UK Government to produce an amendment ahead of debate on Tuesday, Jan 29th. ERG won't support any Brexit amendments tomorrow even if whipped unless PM clarified Brexit plan

- UK Home Office: if UK lefts the EU without a agreement, the govt will seek to end free movement of EU citizens as soon as possible

- ECB's Visco (Italy): with growth slowing, ECB monetary policy needed to stay substantially accommodating

- ECB's De Cos (Spain): Needed to see if some risks to growth more persistent. ECB's attitude had been that almost all deceleration seen in region was considered it temporary

Americas:

- House Speaker Pelosi invited President Trump to give State of the Union address on Tuesday, Feb 5th (Trump has agreed to the new date)

- Treasury Sec Mnuchin: we've had productive talks over last few weeks; looking forward to two days of talks this week with Chinese officials; President Trump will meet Chinese Vice Premier Liu He during his visit to Washington for trade talks

 

Macro

(FR) France: January consumer confidence increased to 91 from 86 m/m suggesting that much of the initial impact from the Yellow Vest protests has tailed off. With the recovery in consumer confidence it will be hoped that production will now recover and help stabilize the economy.

(UK) United Kingdom: The FTSE 100 is outperforming likely on expectations that there will be a Brexit extension beyond the March 29th deadline. Clearly the situation is fluid and there is no workable alternative to PM May's Withdrawal Agreement, but an extension will not be welcomed by the business community in the UK.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.60% at 356.62, FTSE +1.28% at 6,833.71, DAX +0.03% at 11,213.85, CAC-40 +0.49% at 4,912.74, IBEX-35 +0.40% at 9,099.00, FTSE MIB -0.01% at 19,606.50, SMI +0.51% at 8,907.70, S&P 500 Futures -0.02%]

Market Focal Points/Key Themes: European Indices trade mostly higher across the board rebounding from losses seen yesterday following a mixed session Asia overnight and lower US futures this morning ahead of today's amendment vote to PM May's Brexit withdrawal bill. On the corporate front SAP declines after a slight earnings beat and restructuring plans, Royal Mail also declines sharply after guiding lower addressed letter volume while Dutch listed Philips is a notable riser after a top and bottom line earnings beat as well as €1.5B share repurchase program. Elsewhere Sartorius and Sarorius Stedim, UDG, SSAB, Crest Nicholson, Siemens Gamesa were among the names trading higher on earnings and trading updates, while CVS Group, PZ Cussons, Domino's Pizza, Siemens Healthineers, Hargreaves Lansdown were among the decliners. In other news Innate Pharma rises after being granted Fast track designation for IPH4102 while Norwegian Air Shuttle announced a NOK3.0B right issue along with prelim earnings. Looking ahead notable earners include Verizon, 3M, Pfizer, Lockheed Martin, Allergan and Danaher among others.

 

Equities

- Consumer discretionary: Domino's Pizza UK & Ireland [DOM.UK] -7.5% (trading update), Norwegian Air [NAS.NO] -10% (prelim earnings; rights issue), Zalando [ZAL.DE] -5.5% (analyst actions), Swatch Group [UHR.CH] -3%, Richemont [CFR.CH] -2% (Swiss trade balance), British American Tobacco [BATS.UK] +5% (analyst action)

- Financials: Swedbank AB [SWEDA.SE] -3% (earnings, raises dividend), Hargreaves Lansdown [HL.UK] -4.5% (earnings)

- Healthcare: Koninklijke Philips [PHIA.NL] +2% (earnings; buyback program), CVS Group [CVSG.UK] -26% (trading update), Sartorius Stedim Biotech [DIM.FR] +14% (earnings), UDG Healthcare [UDG.UK] +10.5% (trading update)

- Industrials: SSAB [SSABA.SE] +6% (earnings), Royal Mail [RMG.UK] -9.5% (trading update)

- Technology: SAP AG [SAP.DE] -1.5% (earnings; raises medium-term targets)

 

Speakers

- First Minister of Scotland Sturgeon: Brexit uncertainty already hurting the economy, effects caused by mismanagement

- Ireland Foreign Min Coveney stated that was agnostic about Brexit solution but reiterated stance that sought a smooth transition

- Northern Ireland DUP Brexit Spokesman Wilson: Party to judge its approach to parliament vote to be based upon PM May's statement

- Sweden Central Bank (Riksbank) Dep Gov Floden acknowledged that was in uncertain economic situation with risks including trade conflict and Brexit. Rate hikes in period ahead must not be too rapid. Reiterates stance that the Dec rate decision was hardly a tightening

- Spain Budget Min Montoro: EU ssaid that govt did not need to present new budget plan. 2nd independence vote for Scotland hinged on Brexit path; must wait and see on direction the UK takes

- Czech Central Bank's Benda stated that still room to raise interest rates; see 2-3 more hikes. To decide how to vote at next policy meeting (Feb 7th) after seeing updated staff projections

 

Currencies/Fixed Income

- USD locked in a range ahead of key event risks later in the week including a Fed rate decision and press conference and high-level China/US trade talks in Washington. US data continued to be delayed despite the govt reopening on Monday. Dealers noted that affected agencies would take time to get back to normal

- GBP/USD was slightly higher ahead of Tuesday's vote on Brexit amendments. There was concern that PM May was losing control of the Brexit process as she fights to keep her path alive. UK PM May urged MPs to support the 'Brady amendment' that called for the Irish backstop to be replaced by alternative arrangements

- EUR/USD continued to trade within the 1.13-1.15 range with some key data later in the week. Germany reports its preliminary January CPI on Wednesday followed by the Euro Zone reading on Friday

- USD/JPY steady around 109.50 as the US-China trade talks resume on Wednesday. Japan also has a heavy slate of December data releases this week

 

Economic Data

- (CH) Swiss Dec Trade Balance (CHF): 1.9B v 4.8B prior; Real Exports M/M: -5.0% v +1.7% prior; Real Imports M/M: +3.7 v -1.6% prior; Watch Exports Y/Y: -2.8 v +4.1% prior - (FR) France Jan Consumer Confidence: 91 v 88e

- (ES) Spain Q4 Unemployment Rate: 14.5% v 14.5%e

- (AT) Austria Jan Manufacturing PMI: 52.7 v 53.9 prior (36th month of expansion)

- (IS) Iceland Jan CPI M/M: -0.4% v +0.7% prior; Y/Y: 3.4% v 3.7% prior

- (IT) Italy Dec PPI M/M: -0.6% v -0.7% prior; Y/Y: 5.2% v 5.8% prior

 

Fixed Income Issuance

- (AT) Austria Debt Agency (AFFA) opened its book to sell EUR-denominated 10-year RAGB bonds; guidance seen -17bps to mid-swaps

- (BE) Belgium Debt Agency (BDA) opens book to sell EUR-denominated Jun 2050 OLO bond via syndicate; guidance seen +46bps to mid-swaps

- (GR) Greece Debt Agency (PDMA) opened its book to sell EUR-denominated Apr 2024 bond via syndicate; Yield guidance seen 3.75-3.875%

- (ID) Indonesia sold total IDR23.2T in 3-month and 9-month Bills, 5-year, 10-year, 15-year, 20-year bonds

- (IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 6-month Bills; Avg Yield: % v 0.215% prior; Bid-to-cover: x v 1.33x prior

- (ZA) South Africa sold total ZAR2.85B vs. ZAR2.85B indicated in 2023, 2032 and 2044 bonds

- (CH) Switzerland sold CHF238.0M in 3-month Bills; Avg Yield: -0.766% v -0.281% prior

 

Looking Ahead

- 05:30 (UK) Weekly John Lewis Partnership LFL sales: No est v +2.0% prior

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

- 05:30 (DE) Germany to sell €5.0B in new 0% Dec 2020 Schatz

- 06:00 (IE) Ireland Jan Unemployment Rate: No est v 5.3% prior

- 07:30 (BR) Brazil Dec Total Outstanding Loans (BRL): No est v 3.202T prior; M/M: No est v 1.1% prior; Personal Loan Default Rate: No est v 4.8% prior

- 07:45 (US) Weekly Chain Store sales data

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base rate unchanged at 0.90%; Leave Overnight Deposit Rate unchanged at -0.15%

- 08:00 (UK) Baltic Dry Bulk Index

- 08:00 (RU) Russia announces upcoming OFZ Bond issuance

- 08:30 (US) Dec Advance Goods Trade Balance data delayed due to US govt shutdown

- 08:30 (US) Dec Preliminary Wholesale Inventories data delayed due to US govt shutdown

- 08:45 (IT) Italy Fin Min Tria in Washinton

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

- 09:00 (US) Nov S&P Case-Shiller 20-City M/M: 0.40%e v 0.41% prior; Y/Y: 4.90%e v 5.03% prior; House Price Index (HPI): No est v 213.89 prior

- 09:00 (US) Nov S&P Case-Shiller (overall) Y/Y: No est v 5.48% prior; Overall HPI Index: No est v 206.03 prior

- 09:00 (EU) Weekly ECB Forex Reserves: No est v €274.6B prior

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

- 10:00 (US) Jan Consumer Confidence: 124.6e v 128.1 prior

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

- 11:30 (BR) Brazil Dec Central Govt Budget Balance (BRL): -32.0Be v -16.2B prior

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

- 11:30 (US) Treasury to sell 2-Year Floating Rate Notes

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

- 14:00 UK Parliament vote on amendments to Prime Minister May's Brexit deal

- 16:00 (KR) South Korea Feb Business Manufacturing Survey: No est v 71 prior; Non-Manufacturing Survey: No est v 72 prior

- 16:30 (US) Weekly API Oil Inventory data