Markets lacked strong conviction ahead of US holiday

Notes/Observations

- Quiet session ahead of US President Day holiday on Monday. Upcoming elections in Europe and uncertainty over Trump's policies providing some decreased risk appetite

- UK Jan retail sales data misses expectations

Overnight:

Asia:

- Japan Fin Min Aso: Planning to start economic dialogue with Trump administration in April; have not decided on specific contents

- US, South Korea and Japan foreign Ministers condemn in strongest terms the recent North Korea's ballistic missile test

Europe:

- ECB's Coeure (France): Exit option for countries from Euro Zone would create permanent impairment of ECB's monetary policy transmission mechanism

- EU's Juncker: Not confident that agreement can be reached about Brexit conditions in 2 years. At least 20,000 laws had to be changed in Britain before it could leave the bloc

Americas:

- (US) President Trump intends to rescind travel order in near future and replace with ‘substantially revised' order; US Appeals Court puts proceedings over current Trump travel ban on hold, pending further developments on new executive order

- (US) President Trump's choice as replacement for National Security Adviser, Robert Harward, has turned down the offer; nominates Alexander Acosta as Labor Secretary

Economic data

- (SE) Sweden Jan CPI M/M: -0.7% v -0.7%e; Y/Y: 1.4% v 1.5%e

- (SE) Sweden Jan CPI CPIF M/M: -0.7% v -0.7%e; Y/Y: 1.6% v 1.7%e

- (EU) Euro Zone Dec Current Account (Seasonally Adj): €31.0B v €36.4B prior; Current Account NSA (unadj): €47.0B v €40.8B prior

- (ES) Bank of Spain (BOS): Dec Bad loans at 9.1% v 9.2% prior

- (UK) Jan Retail Sales (Ex-Auto Fuel) M/M: -0.2% v +0.7%e; Y/Y: 2.6% v 3.9%e

- (UK) Jan Retail Sales (including Auto/Fuel) M/M: -0.3% v +1.0%e; Y/Y: 1.5% v3.4%e

**Fixed Income Issuance:

- (ZA) South Africa sold total ZAR80M vs. ZAR650M indicated in I/L 2025, 2029 and 2033 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx50 -0.6% at 3289, FTSE -0.2% at 7266, DAX -0.5% at 11702, CAC-40 -0.9% at 4855, IBEX-35 -0.7% at 9484, FTSE MIB -1.0% at 18896, SMI -0.3% at 8444, S&P 500 Futures -0.3%]

Equities

- Materials: [Essentra ESNT.UK +2.0% (Earnings)]

- Industrials: [Heijmans HEIJ.NL +6.5% (Analysts upgrade)]

- Financials: [Allianz ALV.DE +2.7% (Earnings, Buyback)]

- Healthcare: [Astrazeneca AZN.UK +1.5% (Lynparza meets primary endpoint) ]

- Energy: [Vopak VPK.NL -9% (Earnings)]

Speakers

- ECB's Lane (Ireland): No need to give up forward policy guidance and saw n o reason seen to turn off policy accommodation. Monetary policy to target inflation but did not expect to cut Deposit Rate again

- Turkey Dep PM Simsek:Jan indicators pointed towards moderate economic growth. Domestic demand seen growing moderately but must create 700-800K jobs to reduce the unemployment rate (**Note: Nov Unemployment Rate: 12.1%)

- Iceland Stats Agency saw 2017 GDP growth seen at 4.3%

- Japan PM Abe reiterated that US and Japan agreed that G20 and G7 finance ministers should discuss FX; did not discuss topic with Trump at all at recent meeting

- China Securities Regulatory Commission (CSRC) adjusted rules for refinancing which would now cap private share sales amount at 20% of total shares outstanding under the new rule

- Philippines Central Bank's Guinigundo: Monitoring CPI pressure from weak PHP currency (Peso)

- Fitch affirmed New Zealand sovereign rating at AA; outlook stable

Currencies

- FX majors were mainly stuck in narrow ranges in the absence of meaningful data with USD index stuck near 1-week lows. US yields brushed off upbeat data which capped the USD uptrend. Dealers noted that upcoming elections in Europe will drive currency volatility in coming weeks and uncertainty over Trump's policies seen capping the USD for the time being

- The GBP currency was softer after Jan UK retail sales missed expectations coupled with lower back-month revisions. GBP/USD fell by 0.5% to test 1.2420.

**Fixed Income:

-Bund futures trade at 164.23 up 39 ticks back above 164 as the curve flattens on risk off trade with French election developments weighing on sentiment. A continued move higher targets 164.94. Support moves to 163.62 then 163.13, 162.92 followed by 162.44.

- Gilt futures trade at 126.22 up 32 ticks trading higher with the overall risk off tone as well as weaker Jan Retail sales numbers of out the UK. Resistance moves to 126.70 followed by 127.16. Support stands at 124.91 followed by 124.46. Short Sterling trade flat to up 3 bp with the curve flattening. Jun17Jun18 trades lower to 15/16bp.

- Friday's liquidity report showed Thursday's excess liquidity fell to €1.300T down €28B from €1.328T prior. Use of the marginal lending facility falls to €52M from €137M prior.

- Corporate issuance saw $800M come to market via 2 issuers in a quiet day, bringing weekly issuance to $23.1B. For the week ending Feb 15th Lipper fund flows reported IG fund net inflows of $3.05B bringing YTD inflows to $20.34B. High yield funds net inflows $157.70M bringing YTD inflows to $890.1M.

Looking Ahead

- 06:00 (PT) Portugal Jan PPI M/M: No est v 1.0% prior; Y/Y: No est v1.7% prior

- 06:00 (UK) DMO to sell combined £2.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.0B respectively)

- 06:30 (IN) India Weekly Forex Reserves

- 06:30 (IS) Iceland cancelled planned Bond auction

- 06:45 (US) Daily Libor Fixing

- 07:30 (BR) Brazil Jan Current Account: -$5.4Be v -$5.9B prior; Foreign Direct Investment (FDI): $9.3Be v $15.4B prior

- 08:00 (RU) Russia Jan Industrial Production Y/Y: 3.0%e v 3.2% prior

- 08:00 (PL) Poland Jan Sold Industrial Output M/M: -3.3%e v -4.3% prior; Y/Y: 8.1%e v 2.3% prior, Construction Output Y/Y: -1.7%e v -8.0% prior

- 08:00 (PL) Poland Jan PPI M/M: 0.3%e v 1.0% prior; Y/Y: 3.7%e v 3.0% prior

- 08:00 (PL) Poland Jan Retail Sales M/M: -24.4%e v 21.3% prior; Y/Y: 7.7%e v 6.4% prior, Real Retail Sales Y/Y: 7.2%e v 6.1% prior

- 08:15 (UK) Baltic Dry Bulk Index

- 08:30 (CA) Canada Dec Int'l Securities Transactions (CAD): No est v 7.2B prior

- 09:00 (BE) Belgium Feb Consumer Confidence: No est v 0 prior

- 10:00 (US) Jan Leading Index: 0.5%e v 0.5% prior

- 10:00 (CO) Colombia Dec Trade Balance: -$0.7Be v -$1.3B prior; Imports: $4.0Be v $4.2B prior

- 11:00 Potential sovereign ratings (Moody's on Spain and United States Sovereign Debtl Fitch on Finland Sovereign and Canadian rating agency DBRS on Netherlands Sovereign Debt

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