Sense of calm returns regarding the coronavirus outbreak

Notes/Observations

- Market asses that economic impact on China from coronavirus was likely to be transitory

- China announced nationwide screening to address the outbreak of a new respiratory virus. Assured the public and international community that they were moving swiftly. China confirms 9 dead from coronavirus and 440 infected (Note: Cases of the virus have been confirmed in the United States, Thailand, Japan and South Korea)

- World Health Organization (WHO) is expected to discuss the China virus later today, expected to assess whether the viral outbreak is an international emergency (briefing expected at 13:00 ET)

- Political theater returns to Italy as 5-Star leader said to be stepping down ahead of regional elections

Asia:

- South Korea Q4 Preliminary GDP registered its fastest quarterly pace in over two years (Q/Q: 1.2% v 0.9%e; Y/Y: 2.2% v 2.0%e)

Europe:

- Italy's Di Maio is preparing to resign as leader of Five Star party. Di Maio seen stepping aside ahead of regional elections on Sunday in which the Five Star party is expected to suffer a defeat

Brexit:

- EU said to be preparing to give UK worse trade deal terms than Canada or Japan. EU warned member states that it would be a mistake to allow some UK industry bodies to be allowed to certify that goods conform to EU standards.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.10% at 423.58, FTSE +0.18% at 7,624.55, DAX +0.08% at 13,567.13, CAC-40 -0.02% at 6,044.55, IBEX-35 -0.38% at 9,575.00, FTSE MIB -0.55% at 23,714.54, SMI +0.51% at 10,940.50, S&P 500 Futures +0.37%]

Market Focal Points/Key Themes: European Indices trade mixed following a higher Asian Indices and higher US Index futures. On the corporate front German Car giant Daimler trades under pressure as the company reported a plunge in EBIT as the company expects further €1.5B in costs related to dieslgate; UK fashion name Burberry declines despite raising guidance; ASML also declines on earnings as dissapointing Q1 guidance, whilst TED Baker, Antofagasta, Air Partner and Soitec are among other notable decliners on earnings and trading updates. Sage Group in the UK rises on strong Q1 Revs, with Zur Rose another gainer on full year Revenues; Gjensidige rises on a top and bottom line beat, while S&T, Tryg and PGS also gain on earnings and trading updates. In other news Stillfront Group gains on the acquisition of Storm8; Berkeley Group rises as the company announces the return of £1.0B to holders over the next two years, while Orpea declines as the founder to sell his entire stake, with Sainsbury's also declining on the stepping down of its CEO. Looking ahead notable earners include Johnson & Johnson, Abbott labs, Teledyne Tech and Amphenol among others.

Equities

- Consumer discretionary: Burberry [BRBY.UK] -2.5% (trading update), Ted Baker [TED.UK] -5% (discloses inventories overstatement), TUI [TUI.DE] -1.5% (Boeing warning)

- Healthcare: Moberg Pharma [MOB.SE] +29% (study data)

- Industrials: Alstom [ALO.FR] +1.5% (potential unit combination with Bombardier), Daimler [DAI.DE] -1% (prelim earnings; Trump comments on trade with EU)

- Technology: Sage Group [SGE.UK] +4% (trading update), ASML Holdings [ASML.NL] +3% (earnings, share buyback), Prosus [PRX.NL] -2% (placement)

- Materials: Antofagasta [ANTO.UK] -3% (production)

Speakers

- UK Chancellor of the Exchequer Javid: reiterates stance that a trade deal with EU could be done before end of 2020 and could also include services

- France Fin Min Le Maire stated that he hoped for a compromise on digital tax with US soon. Ready to postpone installments for digital tax in April but had not decided to withdraw French digital tax

- US Senate passed impeachment trial rules proposed by McConnell; adjourned trial for the day. Republicans blocked subpoenas for new evidence and documents related to Ukraine

- President Trump stated during a taped CNBC interview that he had a very good conversation with EU officials on trade. Would be surprised if tariffs needed on Europe. Reiterated view that Fed made mistakes on rate policy. US Dollar was strong and added he wanted the dollar to be strong and powerful

- China is in very good shape to deal with coronavirus. US has a plan to address the virus

- Treasury Sec Mnuchin at Davos reiterated that phase-1 trade agreement with China was very significant; no time limit on phase 2 - Davos panel. Focus was on phase-1 implementation

- Ukraine Central Bank member Churiy: To step up into interest cuts. Could relax currency controls in coming months

- Japan Cabinet Office (Govt) Monthly Economic Report for Jan maintained its overall economic assessment that the domestic economy was recovering at a moderate pace, while weakness, mainly among manufacturers, was increasing further; exports continued on a weak tone

- Malaysia Central Bank (BNM) Policy Statement noted that the current level of OPR was now seen as appropriate in sustaining economic growth with price stability. Today 25bps cut was a pre-emptive measure to secure growth. Expected growth to gradually improve in 2020 but downside risks remain

- Saudi Fin Min Mohammed al-Jadaan: Considering EUR-denominated debt sales. Confident that domestic economy was picking up

- Brazil Oil Min: 2020 oil production seen at 3.5M bpd vs. 3.1M bpd in 2019

Currencies/Fixed Income

- Major European FX pairs were little changed with attention turning to Friday's preliminary PMI data for France, Germany, Euro Zone and UK to gauge the stabilization of the data.

- The EUR/USD was steady at 1.1080 area despite renewed political turmoil in Italy as reports circulated that 5-Star leader Di Maio would be stepping down ahead of upcoming regional elections

Economic Data

- (NL) Netherlands Jan Consumer Confidence: -3 v -2 prior

- (NL) Netherlands Nov Consumer Spending Y/Y: No est v 1.7% prior

- (MY) Malaysia Central Bank (BNM) cut its Overnight Policy Rate by 25bps to 2.75% (not expected)

- (MY) Malaysia mid-Jan Foreign Reserves: $103.7B v $103.6B prior

- (FR) France Jan Business Confidence: 104 v 105e; Manufacturing Confidence: 100 v 101e; Production Outlook Indicator:-5 v -5e; Own-Company Production Outlook: 6 v 8e

- (FR) France Jan Business Overall Demand Survey: 3 v 3 prior

- (ZA) South Africa Dec CPI M/M: 0.3% v 0.3%e; Y/Y: 4.0% v 4.0%e

- (ZA) South Africa Dec CPI Core M/M: 0.3% v 0.2%e; Y/Y: 3.8% v 3.8%e

- (TW) Taiwan Dec Industrial Production Y/Y: 6.0% v 3.7%e

- (TW) Taiwan Dec Unemployment Rate: 3.7% v 3.7%e

- (TW) Taiwan Dec M2 Money Supply Y/Y: 4.1% v 4.1% prior; M1 Money Supply Y/Y: 7.4% v 7.5% prior

- (IT) Italy Nov Industrial Sales M/M: 0.0% v 0.6% prior; Y/Y: +0.1% v -0.2% prior

- (IT) Italy Nov Industrial Orders M/M: -0.3% v 0.6% prior; Y/Y: -4.3% v -1.6% prior

- (PL) Poland Dec Sold Industrial Output M/M: -9.4% v -7.0%e; Y/Y: 3.8% v 6.6%e

- (PL) Poland Dec PPI M/M: 0.1% v 0.0%e; Y/Y: 1.0% v 0.9%e

- (UK) Dec Public Finances (PSNCR): £16.6B v £9.5B prior; Public Sector Net Borrowing: £4.0B v £4.6Be; Central Government NCR: £15.6B v £9.6B prior; PSNB (ex-banking groups): £4.8B v £5.3Be

**Fixed Income Issuance**

- (IN) India sold combined INR130B vs. INR130B indicated in 3-month, 6-month and 12-month bills

- (UK) Ukraine to sell EUR-denominated 10-year bonds; yield guidance seen in 5% area

- (DK) Denmark sold total DKK2.73B in 2029 and 2030 DGB bonds

Looking Ahead

- (PT) Portugal Nov Current Account Balance: No est v €0.2B prior

- 06:00 (UK) Jan CBI Industrial Trends Total Orders: -25e v -28 prior; Selling Prices: 5e v 6 prior; Business Optimism: No est v -44 prior

- 06:00 (IL) Israel Nov Manufacturing Production M/M: No est v 2.6% prior

- 06:00 (IE) Ireland Dec PPI M/M: No est v 5.0% prior; Y/Y: No est v -2.9% prior

- 07:00 (US) MBA Mortgage Applications w/e Jan 17th: No est v 30.2% prior

- 07:00 (UK) Weekly PM question time in House of Commons

- 07:00 (RU) Russia to sell 2025 and 2028 OFZ bonds

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

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

- 08:30 (US) Dec Chicago Fed National Activity Index: 0.15e v 0.56 prior

- 08:30 (CA) Canada Dec CPI M/M: 0.0%e v -0.1% prior; Y/Y: 2.3%e v 2.2% prior; Consumer Price Index: 136.4e v v 136.4 prior; CPI Core- Median Y/Y: 2.4%e v 2.4% prior; CPI Core- Common Y/Y: 1.9%e v 1.9% prior; CPI Core- Trim Y/Y: 2.2%e v 2.2% prior

- 08:30 (CA) Canada Dec New Housing Price Index M/M: 0.0%e v -0.1% prior; Y/Y: -0.1%e v 0.0% prior

- 08:30 (CA) Canada Nov Wholesale Trade Sales M/M: -0.4%e v -1.1% prior

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

- 09:00 (US) Nov FHFA House Price Index M/M: 0.3%e v 0.2% prior

- 10:00 (US) Dec Existing Home Sales 5.43Me v 5.35M prior

- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged 1.75%

- (CO) Colombia Dec Retail Confidence: No est v 27 prior; Industrial Confidence: No est v 1.3 prior

- 13:00 (US) Trump Impeachment trial resumes in Senate

- 14:00 (CO) Colombia Nov Economic Activity Index (Monthly GDP) Y/Y: 2.7%e v 3.2% prior

- 16:30 (US) Weekly API Oil Inventories

- 16:45 (NZ) New Zealand Nov Net Migration: No est v 4.1K prior

- 18:50 (JP) Japan Dec Trade Balance: -¥170.0Be v -¥85.2B prior (revised from -¥82.1B); Adjusted Trade Balance: -¥236.0Be v -¥60.8B prior; Exports Y/Y: -4.2%e v -7.9% prior; Imports Y/Y: -2.6%ev -15.7% prior

- 19:00 (AU) Australia Jan Consumer Inflation Expectation Survey: No est v 4.0% prior

- 19:30 (AU) Australia Dec Employment Change: +11.0Ke v +39.9K prior; Unemployment Rate: 5.2%e v 5.2% prior; Full Time Employment Change: No est v +4.2K prior; Part Time Employment Change: No est v +35.7K prior; Participation Rate: 66.0%e v 66.0% prior

- 20:05 (NZ) New Zealand to sell NZD150M in 2.75% 2037 Bonds

- 20:10 (JP) BOJ Outright Bond Purchase operation for 5-10-year, 10-25-year and over 25-year maturities

- 21:00 (PH) Philippines Q4 GDP Q/Q: 1.9%e v 1.6% prior; Y/Y: 6.4%e v 6.2% prior; Overall 2019 GDP Y/Y: 5.9%e v 6.2% prior

- 22:00 (TH) Thailand Central Bank to sell THB30B in 2022 Bonds

- 23:30 (JP) Japan Nov All Industry Activity Index M/M: +0.4%e v -4.3% prior