France and Italy Feb CPI level remains some distance below ECB inflation target

Notes/Observations

- France Feb Preliminary CPI data misses expectations (YoY: 1.2% v 1.5%e); Gives credence that ECB view that recent spike up inflation is transitory and to maintain its current accommodative stance

- Markets awaits President Trump 1st major policy speech; await clarity on key issues

Overnight:

Asia:

- China said to be targeting 12% growth in M2 money supply in 2017 (**Note: would be slightly lower than last year's target of 13%)

- China Stats Bureau official reiterated govt view that domestic economy was facing external uncertainties and domestic overcapacity in 2017

Europe:

- UK Gfk noted that any momentum behind post Brexit spending boom was debt fueled, and now appeared to be softening (Feb Consumer Confidence -6 v -6e)

- UK Feb Lloyds Business Barometer: at its highest reading since Mar 2016 (40 v 29 prior)

- Greece's auditors to present revised bailout plans as they resume talks in Athens

- EU Commissioner Oettinger (Germany) stated that Germany and other net contributors to pay more into EU budget once Britain leaves bloc

Americas:

- Fed's Kaplan (moderate, voter): confident US economic growth to be higher than 2% this year; labor slack remained. Current monetary policy was highly accommodative; even raising rate a few times this year would leave monetary policy accommodative

Economic data

- (JP) Japan Feb Small Business Confidence: 47.7 v 48.5e

- (JP) Japan Jan Housing Starts: 1.001M v 916Ke; Y/Y: 12.8% v 3.3%e

- (TR) Turkey Jan Trade Balance: -$4.3B v -$4.2Be

- (FR) France Feb Preliminary CPI (miss) M/M: 0.1% v 0.4%e; Y/Y: 1.2% v 1.5%e

- (FR) France Feb Preliminary CPI EU Harmonized M/M: 0.1% v 0.4%e; Y/Y: 1.4% v 1.7%e

- (FR) France Q4 Preliminary GDP (2nd reading) Q/Q: 0.4% v 0.4%e; Y/Y: 1.2% v 1.1%e

- (FR) France Jan Consumer Spending M/M: 0.6% v 0.6%e; Y/Y: 1.4% v 1.7%e

- (CH) Swiss Feb KOF Leading Indicator: 107.2 v 102.1e

- (SE) Sweden Q4 GDP Q/Q: 1.0% v 0.8%e; Y/Y: 2.3% v 2.3%e
(PL) Poland Q4 Final GDP Q/Q: 1.7% v 1.7% prelim; Y/Y: 2.7% v 2.7% prelim

- (IT) Italy Feb Preliminary CPI (Including tobacco) M/M: 0.3% v 0.1%e; Y/Y: 1.5% v 1.3%e

- (IT) Italy Feb Preliminary CPI EU Harmonized M/M: +0.2% v -0.1%e ; Y/Y: 1.6% v 1.3%e

**Fixed Income Issuance:

- (ID) Indonesia sold IDR16.35T vs. IDR15T target in bonds

- (ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2023, 2035 and 2040 bonds

- (HU) Hungary Debt Agency (AKK) sold HUF20B in in 3-month Bills; Avg Yield: 0.06% v 0.06% prior; Bid-to-cover: 3.37x v 2.57x prior

- (EU) ECB allotted €25.3B in 7-Day Main Refinancing Tender at fixed 0.00% vs. €30.0Be

- (DE) Germany sold €4.145B vs. €5.0B indicated in new 0% Mar 2019 Schatz; Avg yield: -0.92% (record low) v -0.75% prior; Bid-to-cover: 1.8x v 1.3x prior

- (BE) Belgium Debt Agency (BDA) sold total €1.26B vs. €1.0-1.4B indicated range in 3-Month and 6-Month Bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Index snapshot (as of 10:00 GMT)**

Indices [Stoxx50 flat at 3,311, FTSE flat at 7,253, DAX -0.1% at 11,815, CAC-40 +0.1% at 4,849, IBEX-35 +0.3% at 9,495, FTSE MIB +0.1% at 18,934, SMI -0.1% at 8,512, S&P 500 Futures flat]

Market Focal Points/Key Themes: European equity indices are trading generally mixed after a raft of corporate earnings pre-market, and as market participants await Trump's address to Congress scheduled later today; Asia ending mainly higher overnight; major banking stocks trading generally higher in the Eurostoxx; shares of GKN the notable gainer in the FTSE 100 after they released their FY16 results; commodity and mining stocks weighing in the index.

A plethora of upcoming scheduled US earnings (pre-market) include AutoZone, TopBuild, Barnes & Noble, Bank of Nova Scotia, Cable ONE, CenterPoint Energy, Dominos Pizza, Endo International, Ensco, FTI Consulting, Intelsat, INC Research, Libbey, Cheniere Energy, NRG Energy, Nexstar Broadcasting, NRG Yield, Platform Speciality Products, PDC Energy, PNM Resources, Primoris Services Corp, Ryman Hospitality, SeaWorld Entertainment, Steven Madden, Sempra Energy, Extended Stay America, TarvelCenters of America, Target Corp, Tuniu, US Concrete, Valeant Pharmaceuticals, and Xenia Hotels & Resorts.

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Boohoo.com BOO.UK +0.9% (trading update, completes acquisition of Nasty Gal), Europcar EUROP.FR +2.3% (FY16 results), Go-Ahead Group GOG.UK -14.1% (H1 results), Johnson Service JSG.UK +2.5% (FY16 results), Laird LRD.UK -3.3% (final FY16 results)]

- Consumer Staples: [Eurofins Scientific ERF.FR -5.2% (FY16 results)]

- Energy: [Seadrill SDRL.NO -10.7% (Q4 results)]

- Financials: [Derwent London DLN.UK +2.1% (FY16 results), Erste Group EBS.AT -0.4% (FY16 results), Provident Financial PFG.UK +0.1% (FY16 results), St. James Place STJ.UK -2.3% (FY16 results, new CEO), Virgin Money VM.UK +1.2% (FY16 results)]

- Healthcare: [Grifols GRF.ES -1.1% (FY16 results)]

- Industrials: [Babcock BAB.UK +3.2% (trading update), Croda CRDA.UK +2.5% (FY16 results), Georg Fischer FI.N.CH +3.2% (FY16 results), GKN GKN.UK +5.4% (FY16 results), Hapag-Lloyd HLAG.DE +1.5% (FY16 results), Hochtief HOT.DE -0.8% (FY16 results), Interserve IRV.UK -1.0% (FY16 results), Meggitt MGGT.UK +10.4% (FY16 results), Obrascon OHL.ES +1.8% (FY16 results), Taylor Wimpey TW.UK -0.2% (FY16 results), Tecnicas Reunidas TRE.ES +1.7% (FY16 results), Thales HO.FR +0.7% (FY16 results)]

- Materials: [Arkema AKE.FR -0.7% (FY16 results), Fresnillo FRES.UK -2.2% (FY16 results), Salzgitter SZG.DE -2.7% (final FY16 results)]

- Technology: [Moneysupermarket.com MONY.UK -5.2% (FY16 results)]

Speakers

- BOE's Dep Gov nominee Hoggparliamentary testimony noted that her tolerance for temporarily above target inflation to depend on events. Reiterated MPC view that households were facing income squeeze from inflation and that Brexit was one of the biggest risks facing the domestic economy. Path of UK business investment is unclear

- Bank of Japan (BOJ) Gov Kuroda reiterated stance that CPI to pick up pace towards the 2% target and would continue powerful monetary easing under current

- BOJ provided dates for upcoming monthly JGB bond purchases (as promised). Aimed to cut excessive yield volatility and increase transparency for its bond buying operations. To hold buying operations 6 times in March for 1-5 and 5-10 year operations and 5 times for super long operations (over 10 years)

- China President Xi reiterated to strive for stability and progress in the country's economic works and deepen supply-side structural reform

- Russia Feb oil production cuts approx 124K bpd (17K tons/day) under current OPEC/Non-Opec agreement (**Note: Russia agreed to 300K in cuts by June)

**Currencies**

- FX markets lacked a clear direction as participants took a wait-and-see stance ahead of Trump's 1st major speech. Indications appeared that Trump would use the set-piece to preview elements of his plans to cut taxes for the middle class and make US companies more globally competitive

- EUR/USD hovered just below the 1.06 level with dealers still cautious on the European political front.

- BOE Dep Gov nominee Hogg testified in Parliament and took a more dovish tone than anticipated in her commentary. GBP/USD slightly softer at 1.2425 just ahead of the NY morning.

**Fixed Income:

- Bund futures trade at 166.03 up 13 ticks trading in the middle of today's range, with price slightly coming off the February highs. Further downside momentum targets 165.60 initially followed by 165.31. A resumption higher targets 166.40 followed by 166.61.

- Gilt futures trade at 128.00 down 9 ticks with volatility likely to increase due to futures rolling to the June contract this week. Resistance moves to the 128.34 Monday high then 128.50. Support lies at 127.50 followed by 126.80 then 125.90.

Looking Ahead

- 05.30 (UK) Weekly John Lewis LFL sales data

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

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

- 05:30 (DE) Germany to sell €5.0B in new 0% Mar 2019 Schatz

- 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-Month and 6-Month Bills

- 06:00 (IE) Ireland Feb Unemployment Rate: No est v 7.1% prior

- 06:00 (IN) India Jan Fiscal Deficit (INR)

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India Q4 GDP Y/Y: 6.0%e v 7.3% prior; GVA Y/Y: 6.1%e v 7.1% prior; 2017 GDP Annual Estimate Y/Y: 6.8%e v 7.9% prior

- 07:00 (ZA) South Africa Jan Trade Balance (ZAR): 1.3Be v 12.0B prior

- 07:00 (ZA) South Africa Jan Budget Balance (ZAR): No est v 22.7B prior

- 07:00 (CL) Chile Jan Total Copper Production: No est v 503.9K prior

- 07:00 (CL) Chile Jan Unemployment Rate: 6.2%e v 6.1% prior

- 07:00 (CL) Chile Jan Manufacturing Production Y/Y: +0.1%e v -0.3% prior; Industrial Production Y/Y: 0.5%e v 0.3% prior

- 07:45 (US) Weekly Goldman Economist Chain Store Sales

- 08:00 (HU) Hungary Central Bank (NBH) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%

- 08:00 (RU) Russia announces weekly OFZ bond auction

- 08:15 (UK) Baltic Dry Bulk Index - 08:30 (US) Q4 Preliminary GDP Annualized Q/Q: 2.1%e v 1.9% advance; Personal Consumption: 2.5%e v 2.5% advance

- 08:30 (US) Q4 Preliminary GDP Price Index: 2.1%e v 2.1% advance; Core PCE Q/Q: 1.3%e v 1.3% advance

- 08:30 (US) Jan Advance Goods Trade Balance: -$66.0Be v -$64.4B prior (revised from $65.0B)

- 08:30 (US) Jan Preliminary Wholesale Inventories M/M: 0.4%e v 1.0% prior; Retail Inventories M/M: No est v 0.0% prior

- 08:30 (CA) Canada Jan Industrial Product Price M/M: 0.5%e v 0.4% prior; Raw Materials Price Index M/M: 1.2%e v 6.5% prior

- 08:30 (ZA) South Africa Crop Estimate Committee: 7th winter-crop output forecast

- 08:55 (US) Weekly Redbook Sales

- 09:00 (US) Dec S&P / Case-Shiller 20-City M/M: 0.70%e v 0.88% prior; Y/Y: 5.30%e v 5.27% prior; House Price Index (HPI): No est v 192.14 prior

- 09:00 (US) Dec S&P / Case-Shiller (overall) HPI Y/Y: No est v 5.64% prior, House Price Index (HPI): No est v 185.23 prior

- 09:00 (BE) Belgium Q4 Final GDP Q/Q: No est v 0.4% prelim; Y/Y: No est v 1.1% prelim

- 09:00 (EU) Weekly ECB Forex Reserves

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

- 09:45 (US) Feb Chicago Purchasing Manager: 53.0e v 50.3 prior

- 10:00 (US) Feb Consumer Confidence: 111.0e v 111.8 prior

- 10:00 (US) Feb Richmond Fed Manufacturing Index: 10e 12 prior

- 10:00 (MX) Mexico Jan Net Outstanding Loans (MXN): No est v 3.63T prior

- 10:00 (CO) Colombia Jan National Unemployment Rate: No est v 8.7% prior; Urban Unemployment Rate: 11.4%e v 9.8% prior

- 11:00 (UR) Ukraine to sell Bonds

- 11:30 (US) Treasury to sell 4-Week and 52-Week Bills

- 11:30 (NZ) New Zealand Feb QV House Prices Y/Y: No est v 13.5% prior

- 12:30 (CH) Bank of International Settlements (BIS) chief Caruana speaks in Geneva

- 15:00 (US) Jan Agriculture Prices Received: No est v -1.7% prior

- 16:30 (US) Weekly API Oil Inventories