Risk aversion finds some fresh legs after the epicenter of coronavirus revises its methodology to determine cases

Notes/Observations

- Chinese Hubei province revises methodology on coronavirus cases which sharply increased the number of cases and deaths in province.

- IEA Feb oil report cut the global oil demand down to 2011 level due to cooronavirus effect

Asia:

- Coronavirus update: Party heads in Hubei province and city of Wuhan replaced after Hubai province began using a broader definition to diagnose people for coronavirus. Previous the number of people diagnosed in Hubei region had thought to been stabilizing

- Japan Lower House approves BoJ board nominee Adachi which paved the way for parliamentary approval of the nomination.

Brexit:

- Jan RICS House Price Balance: 17% v 3%e (highest reading since May 2017)

Americas:

- Bank of Canada Gov Poloz: Rates would have to have fallen further without fiscal stimulus in Canada.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -1.01% at 426.80, FTSE -1.44% at 7,426.15, DAX -1.14% at 13,592.56, CAC-40 -1.15% at 6,034.53, IBEX-35 -1.28% at 9,813.00, FTSE MIB -1.01% at 24,610.91, SMI -0.64% at 11,018.50, S&P 500 Futures -0.84%]

Market Focal Points/Key Themes: European indices in the red following Asia indices down and lower US futures. On a busy corporate earnings front Commerzbank outperforms on earnings and continued cost cutting measures; Orange, ThyssenKrupp, Zurich Insurance, and Pernod Ricard up following earnings results. Barclays is a notable decliner on results and a probe in to its CEO; Nestle falls over 2% on earnings, which saw its water business have its worst performance in 10 years, whilst Credit Suisse declines slightly as profits missed forecasts. Other notable decliners include Airbus, Capgemini, Metro and Ipsen. Aegon shares drop as the company reported lower H2 profits y/y. On the M&A front, RIB Software rallying following a cash takeover offer of €29/shr from Schneider Electric, which is trading slightly higher. Notable earners today include PepsiCo, Alibaba, AIG, BorgWarner, Duke Energy and Kraft Heinz among others.

 

Equities

- Consumer discretionary: Stockmann [STCBV.FI] +8% (earnings), Airbus [AIR.FR] -0.5% (earnings), Metro [B4B.DE] -2% (earnings), Nestle [NESN.CH] -2% (earnings)

- Materials: Clariant [CLN.CH] +5% (earnings)

- Financials: Commerzbank [CBK.DE] +5% (earnings), Barclays [BARC.UK] -2% (earnings), Credit Suisse [CSGN.CH] -0.5% (earnings)

- Healthcare: Ipsen [ION.FR] -6% (earnings)

- Industrials: ThyssenKrupp [TKA.DE] +1% (earnings)

- Technology: RIB Software [RSTA.DE] +41% (earnings; cash offer), Logitech [LOGN.CH] -6% (analyst action)

- Telecom: Orange [ORA.FR] +3% (earnings)

 

Speakers

- ECB's De Cos (Spain) reiterated Council stance that monetary policy to remain highly accommodative for a prolong period of time. Coronavirus to keep balance of risks to the downside. Reiterated that ECB is prepared to adjust all tools

- Italy Fin Min Gualtieri: Concerned about economic slowdown in Italy during the latter part of 2019

- France Fin Min Le Maire: Saw China virus hurting France GDP growth by 0.1% in 2020

- EU Commission Winter Forecasts noted that the regional economy was well placed to navigate external risks but economic malaise was set to continue this year. Coronavirus was a key downside risk to growth outlook - Russia Fin Min Siluanov stated that he saw 2020 GDP growth at 1.9%

- Hungary Central Bank official Nagy: To use all monetary tools to reach inflation target. inflation risks had increased since December but saw inflation stabilizing in the next 5-8 quarters. The bulk of rise in Jan CPI was due to food and fuel and saw Feb CPI YoY reading of 4.2%

- Japan Banking Lobby chief Fujiwara: Profit decline in financial sector is caused by side effect of the BOJ's negative interest rate policy

- China Foreign Ministry spokesperson Geng Shuang: No new information on methodology in Wuhan nor any new information on virus cases in other regions

- China National Health Commission: 254 new deaths in mainland from coronavirus outbreak as of Feb 12th v 97 prior; Additional cases of the virus 15.2K v ~2.0K prior (includes methodology change related to Hubei). Total cases: 59.8K vs. 44.7K prior

- IEA Feb Monthly Oil Report cut the 2020 Global oil Demand growth forecast by 385K to 825K for it's lowest level since 2011 citing impact from the coronavirus

- Russia govt spokesperson: Decision to follow the OPEC+ proposal on deepening of oil production cuts to be made in a timely manner

 

Currencies/Fixed Income

- Safe-haven flows was the dominate theme in the session as new cases of coronavirus turn the market more cautious again after the Hubei province changed its methodology in determining what constituted conorna virus. JPY and CHF were the main beneficiaries.

- EUR/USD drifted off recent 3-year lows but remained under the 1.09 level. USD has benefited from a divergence in EU-US data recently. Pair steady at 1.0880 area in mid-session.

- USD/JPY lower by 0.4% to test 109.60 area on risk aversion flows. Pair continued to be locked within its 105-110 range.

- Safe haven flows also aided the core EU bond yields. Market speculation on prolonged central bank softness also contributed to a bond-friendly environment

 

Economic Data

- (NL) Netherlands Dec Retail Sales Y/Y: 3.9 v 3.5% prior

- (FI) Finland Dec Final Retail Sales Volume Y/Y: +0.8% v -1.7% prelim

- (FI) Finland Dec Current Account Balance: +€0.8B v -€0.1B prior

- (FR) France Q4 ILO Unemployment Rate: 8.1% v 8.5%e; Mainland Unemployment Rate: 7.9% v 8.2%e

- (DE) Germany Jan Final CPI M/M: -0.6% v -0.6%; Y/Y: 1.7% v 1.7%e

(DE) Germany Jan Final CPI EU Harmonized M/M: -0.8% v -0.8%e; Y/Y: 1.6% v 1.6%e

- (RO) Romania Jan CPI M/M: 0.4% v 0.4%e; Y/Y: 3.6% v 3.8%e (3rd straight reading above target range)

- (TR) Turkey Industrial Production M/M: 1.9% v 0.3%e; Y/Y: 8.6% v 6.8%e

- (CZ) Czech Dec Export Price Index Y/Y: -1.5% v -1.8% prior; Import Price Index Y/Y: -1.2% v -2.2% prior

- (HU) Hungary Jan CPI M/M: 0.9% v 0.6%e; Y/Y: 4.7% v 4.4%e (Annual pace moves out of target range for 1st time in 24 months)

- (NL) Netherlands Q4 Preliminary GDP Q/Q: 0.4% v 0.3%e; Y/Y: 1.5% v 1.6%e

- (NL) Netherlands Dec Trade Balance: €4.6 v €4.8B prior

- (CZ) Czech Dec Current Account Balance (CZK): -14.4B v -8.1Be

- (ZA) South Africa Dec Total Mining Production M/M: -2.4% v -2.4%e; Y/Y: +1.8% v -3.5%e; Gold Production Y/Y: 24.9% v 4.5% prior; Platinum Production Y/Y: -3.9% v-13.1% prior

Fixed Income Issuance

- (IT) Italy Debt Agency (Tesoro) sold total €5.0B vs. €4.0-5.0B indicated range in 3-year and 7-year BTP bonds

- Sold €2.25B vs. €1.75-2.25B indicated range in 0.05% Jan 2023 BTP bonds; Avg Yield: -0.10% v +0.18% prior; Bid-to-cover: 1.51x v 1.40x prior (Jan 14th 2020)

- Sold €2.75B vs. €2.25-2.75B indicated range in 0.85% 2027 BTP; Avg Yield: 0.48% v 0.94% prior; Bid-to-cover: 1.36x v 1.47x prior (Jan 14th 2020)

 

Looking Ahead

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)

- 06:00 (IE) Ireland Dec Property Prices M/M: No est v 0.1% prior; Y/Y: No est v 14% prior

- 07:00 (BR) Brazil Dec IBGE Services Sector Volume Y/Y: 1.5%e v 1.8% prior

- 08:00 (PL) Poland Dec Current Account Balance: -€0.4Be v +€1.5B prior; Trade Balance: -€0.8 v +€0.8B prior; Exports: €16.7Be v €20.2B prior; Imports: €17.7Be v €19.4B prior

- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 7th No est v $562.3B prior

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:30 (US) Jan CPI M/M: 0.2%e v 0.2% prior; Y/Y: 2.45e v 2.3% prior

- 08:30 (US) Jan CPI (ex-food/energy) M/M: 0.2%e v 0.1% prior; Y/Y: 2.2%e v 2.3% prior

- 08:30 (US) Jan CPI Index NSA: 257.863e v 256.974 prior; CPI Core Index: 266.427e v 265.921 prior

- 08:30 (US) Jan Real Avg Weekly Earnings Y/Y: No est v 0.1% prior (revised from 0.0%); Real Avg Hourly Earning Y/Y: No est v 0.6% prior

- 08:30 (US) Initial Jobless Claims: 210Ke v 202K prior; Continuing Claims: 1.74Me v 1.751M prior

- 08:30 (US) Weekly USDA Net Export Sales

- 10:00 (CO) Colombia Dec Retail Sales Y/Y: 5.5%e v 4.4% prior

- 10:00 (US) Senate panel on Fed nominee Shelton and Waller

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 12:00 (NO) Norway Central Bank (Norges) Gov Olsen's annual address

- 12:00 (IT) ECB's Panetta (Italy) on panel

- 13:00 (IE) ECB's Lane (Ireland, chief economist) in Dublin

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 7.00%

- 14:00 (AR) Argentina Jan National CPI M/M: 3.3%e v 3.7 % prior; Y/Y: 54.4%e v 53.8% prior

- 14:00 (CO) Colombia Dec Manufacturing Production Y/Y: No est v -1.5% prior; Industrial Production Y/Y: No est v -0.2% prior

- 14:00 (IT) ECB's Panetta (Italy) in Rome

- 16:00 (KR) South Korea Jan Export Price Index M/M: No est v 0.8% prior; Y/Y: No est v -3.1% prior

- 16:00 (KR) South Korea Jan Import Price Index M/M: No est v 1.6% prior; Y/Y: No est v 3.4% prior

-16:45 (NZ) New Zealand Jan Food Prices M/M: No est v -0.2% prior

- 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 2.25%

- 20:05 (NZ) New Zealand to sell NZD50M in 2.5% 2040 Bonds

- 22:00 (KR) South Korea Dec M2 Money Supply M/M: No est v 0.7% prior; "L" Money Supply M/M: No est v 0.8% prior

- 22:00 (CN) China to sell 3-month Bills

- 22:30 (JP) Japan to sell 3-Month Bills

- 23:30 (JP) Japan Dec Tertiary Industry Index M/M: 0.1%e v 1.3% prior