Quiet start to week despite G20 omitting language on promoting free trade

Notes/Observations

- G20 Finance Ministers official Communique affirmed commitment against competitive devaluation but omitting language on promoting free trade thanks to recent threats of more protectionism from US govt

- China home price gains spread in Feb amid stepped up battle against speculators

Weekend/Overnight:

G20 Summary and commentary

- G20 Communique: excess FX volatility is bad for growth, affirms commitment against competitive devaluation; omits language on promoting free trade

*US Treasury Sec Mnuchin: US wants free but fair and balanced trade. NAFTA would have to be reviewed, some WTO rules needed to be better enforced and older agreements may have to be renegotiated

*German Fin Min Schaeuble: G20 Communique was adopted unanimously. G20 trade discussions were complicated; there was broad consensus that open trade is necessary to strengthen global growth. No controversy on FX at G20

*Bundesbank President Weidmann: no consensus at G20 meeting on further development of trade system. Meeting was marked by intense struggle for a common position, still much to discuss on trade. Agreed now is the time to implement structural reforms

*Japan Fin Min Aso: No one at the meeting remarked that they were against free trade and confirmed importance of free trade despite language in communique

*China Fin Min Xiao Jie: Unwaveringly supports free trade and investment, opposes protectionism

*IMF's Lagarde: Global cooperation and pursuing the right policies can help achieve strong, sustained, balanced, and inclusive growth, while the wrong ones could stop the new momentum in its tracks

Asia:

- North Korea has conducted a test of a new high-thrust engine at its Tongchang-ri rocket launch station would help North Korea achieve world-class satellite launch capability

Europe:

- UK Trade officials said to consider proposing a transitional decade-long deal to EU that includes no tariffs under WTO clause if Brexit negotiations ended with no trade deal - Eurogroup chief Dijsselbloem calls for ESM bailout fund to be turned into a European IMF

- German Defense Min von der Leyen: "There is no debit account in NATO" (rejects Trump's claim that Germany owes NATO/US large sums of money for defense)

- Germany Social Democrats (SPD) officially elected Martin Schulz as their leader and challenger to Chancellor Angela Merkel for the national election in September

- German DIHK Chambers of Commerce: Hard Brexit' would severely hit German economy

Americas:

- Brazil govt said to detain meatpacking executive after raids in rotten meat probe

- President Trump: Meetings on health care bill are going well; North Korea is "acting very badly"

Energy:

- Weekly Baker Hughes US Rig Count: 789 v 768 w/w (+2.7%) (9th straight weekly rise)

Economic Data

- (NL) Netherlands Mar Consumer Confidence: 16 v 14e

- (DE) Germany Feb PPI M/M: 0.2% v 0.4%e; Y/Y: 3.1% v 3.2%e

- (TW) Taiwan Feb Export Orders Y/Y: 22.0% v 16.1%e

**Fixed Income Issuance:

- None seen

**Index snapshot (as of 09:30 GMT)**

Indices [Stoxx50 -0.2% at 3,436, FTSE -0.2% at 7,411, DAX -0.3% at 12,055, CAC-40 -0.4% at 5,011, IBEX-35 -0.3% at 10,215, FTSE MIB -0.3% at 20,016, SMI flat at 8,698, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices are trading lower in the morning session as market participants digest the G20 Communique from the weekend, and as oil prices trade lower intraday weighing on sentiment; Banking stocks generally lower with sector losses led by shares of Deutsche Bank after releasing its annual report; Energy, commodity and mining stocks trading lower in the FTSE 100 as oil and copper prices trade lower intraday; Chinese markets ending generally higher with the Nikkei closed overnight on Spring Equinox holiday.

Upcoming scheduled US earnings (pre-market) include Destination XL, Gulf Resources, Movado Group, and Shenandoah Telecom.

Equities (as of 09:20 GMT)

- Consumer Discretionary: [Ingenico ING.FR -2.1% (Atos refutes speculation that Worldline subsidiary preparing Ingenico bid)]

- Financials: [Aviva AV.UK +0.4% (Reportedly working with Goldman Sachs to sell Friends Provident International; said to be valued at $700M), Deutsche Bank DBK.DE -2.0% (annual report), Euronext ENX.FR -0.2% (Collaborates with Morningstar in European Indices and Derivatives Launch), Hansteen Holdings HSTN.UK +2.8% (Confirms disposal of its German and Dutch portfolios for €1.28B to funds advised by affiliates of Blackstone Group and M7 Real estate; FY16 results), Phoenix Group Holdings PHNX.UK +1.6% (FY16 results), Talanx TLX.DE -0.6% (FY16 results)]

- Healthcare: [AB Science AB.FR +10.6% (positive top-line results of final analysis from study AB10015 of masitinib in ALS), EKF Diagnostics EKF.UK +5.6% (shareholder update, reorganization, FY16 results)]

- Industrials: [GKN GKN.UK +0.3% (may issue £250M in debt to correct £2B pension deficit)]

Speakers

- ECB's Visco (Italy): Cannot signal end of QE and still keep rates low; may shorten the break between exit from QE and first rate hike.

- ECB: Banks need to implement realistic and ambitious strategies for Non-performing loan (NPL) reduction

- Russia Fin Min Siluanov saw 2017 GDP growth between 1.5-2.0% and noted the RUB currency (Ruble) was 10-12 stronger than what fundamentals suggested

- India cabinet approved 4 draft laws related to the rollout of the Goods and Service Tax (GST) that is set to begin on July 1st

Currencies

- FX markets began the week on a quiet note with the recent Fed rate hike guidance still weighing upon USD upside momentum. G20 omission of language on promoting free trade provided some uncertainty in global markets but limited price action in FX for the time being.

- Dealers noted that ECB seemed unable to curb speculation regarding rate increases so long as macroeconomic data remained resilient. EUR/USD was slightly higher in the session around 1.0760 area

- GBP/USD was steady above the 1.24 handle as the dealers awaited the pending trigger to Article 50 before the end of March.

**Fixed Income:

- Bund futures trade at 159.60 down 23 ticks in lackluster trade in a quiet morning trade as Futures decline off the opening gap higher. Support lies at 159.06 initially before testing contract low at 158.73 followed by 158.40. A move back higher targets 160.16 followed by 160.45.

- Gilt futures trade at 125.96 down 29 ticks tracking Bunds having opened up above 126 at 126.10. The UK sees £2B of supply this week on Wednesday which is the equivalent of 39K Gilt futures. Support remains at 125.57 with further weakness eyeing 125.24. Resistance moves to 126.44 then 126.75, 126.87 followed by 127.35. Short Sterling futures flat to 2bp with Jun17Jun18 spread remaining at 20bp.

- Monday's liquidity report showed Friday's excess liquidity remained unchanged at €1.355T. Use of the marginal lending facility rose to €178M from €157M prior.

- Corporate issuance saw $28.2B come to market last week via 31 tranches bringing issuance for the month to $87.3B and issuance for the year to $355B. In Euro denominated issuance last week saw €22.9B come to market via 36 issuers, led by multi tranche offering from Engie, RELX Finance and SCA Hygiene. Monday saw the bulk of the volume with just shy of €6.5B coming to market.

Looking Ahead

- 06:00 (EU) Euro Zone Q4 Labour Costs Y/Y: No est v 1.5% prior

- 06:00 (SK) Slovakia Debt Agency (ARDAL) to sell 2023 and 2027 Bonds

- 06:00 (EU) Lithuania to sell Bonds

- 06:00 (RO) Romania to sell Bonds

- 06:00 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)

- 06:30 (BE) Belgium Debt Agency (BDA) to sell €2.7-3.2B in 2027, 2038 and 2041 OLO Bonds

- 06:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills

- 07:00 (IL) Israel to sell 2018, 2021, 2025, 2027 and 2047 bonds

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 07:00 (DE) German Bundesbank Monthly Report

- 07:30 (CL) Chile Q4 GDP Q/Q: -0.2%e v 0.6% prior; Y/Y: 0.5%e v 1.6% prior

- 07:30 (CL) Chile Q4 Current Account: -$1.2Be v -$2.8B prior

- 07:45 (US) Daily Libor Fixing

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 08:30 (US) Feb Chicago Fed National Activity Index: +0.03e v -0.05 prior

- 08:30 (CA) Canada Jan Wholesale Trade Sales M/M: 0.5%e v 0.7% prior

- 09:00 (RU) Russia Feb Unemployment Rate: 5.6%e v 5.6% prior

- 09:00 (RU) Russia Feb Real Retail Sales M/M: -1.5% v -24.5% prior; Y/Y: -2.0%e v -2.3% prior

- 09:00 (RU) Russia Feb PPI M/M: -0.8%e v 3.3% prior; Y/Y: 13.0%e v 12.7% prior

- 09:15 (UK) Baltic Dry Bulk Index

- 09:50 (FR) France Debt Agency (AFT) to sell combined €5.2-6.4B in 3-month, 6-month and 12-month BTF Bills

- 10:30 (EU) ECB announces Covered-Bond Purchases

- 10:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 10:50 (UK) BoE conducts reverse Gilt auction

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 13:10 (US) Fed's Evans speaks on Economy and Policy in New York