UK parliament to debate its preferred options on the path of Brexit

Notes/Observations

- European confidence data mixed in session (Sweden beats, Italy Misses; France in-line)

- UK parliament to debate its preferred options on the path of Brexit; PM May still trying to arrange a 3rd meaningful vote

- Plethora of ECB speak only echoed views entrenched at its most recent policy meeting with concerns over the growth outlook

- RBNZ kept its policy steady but signaled its next rate move would be a cut

- US/China due to hold trade talks in China on March 28-29th (Thursday-Friday)

Asia:

- New Zealand Central Bank (RBNZ) left its Official Cash Rate (OCR) unchanged at 1.75% (as expected). Reiterated to keep cash rate expansionary for considerable period but revised its forward guidance to more likely that next rate adjustment is down (prior view was neutral with next move in OCR could be up or down); money markets now pricing in rate cut in Nov 2019 (vs June 2020 prior)

- China Feb YTD Industrial Profits YoY: -14.0% V -1.9% prior

- China Q1 Beige Book notes Q1 recovery is unmistakable, profits, investment and hiring improved

Europe:

- Pro-Brexit MPs write to PM May questioning her legal right to delay leaving the EU. To ask PM May to fully explain actions taken by government to delay Brexit

- The 1922 Chairman Brady said to have told the PM May in a 1 to 1 meeting on Tuesday (Mar 26th) that she should set a departure timetable to go before summer stage of Brexit

- PM May said to be preparing to bring Meaningful Vote 3 to the Commons by the end of the week as prominent Leavers say she is within sight of victory

- UK lawmaker proposed motion for EEA-EFTA Norway option to be voted on in parliament on Wednesday

- Boles Common Market 2.0 motion: UK would stay in Single Market and enter 'comprehensive customs arrangement' with common external tariff. The Northern Irish Backstop superceded. EU migrants must be 'genuinely seeking work' and have 'sufficient resources' so they are not a 'burden'

- MP Boris Johnson: if we vote down PM May's deal again there is an 'appreciable risk' that Brexit won't happen

- France govt might cut 2019 deficit outlook to 3.0% in next few days from 3.2%

- Italy's to revise 2019 GDP to 0.1%; its planned growth boosting package may lift 2019 GDP to 0.2% and trim budget deficit to 2.3% of GDP

Americas:

- Fed's Daly (dove, non-voter): Right now appropriate policy was being patient, wait to see if data would indicate whether up or down move is needed; wage growth coming up, had not stalled out

- President Trump's nominee for Fed Stephen Moore: Fed should immediately cut rates by 50bps

Energy:

- Weekly API Oil Inventories: Crude: +1.9M v -2.1M prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.11% at 377.62, FTSE +0.14% at 7,206.30, DAX +0.07% at 11,427.47, CAC-40 +0.04% at 5,309.37, IBEX-35 +0.16% at 9,197.67, FTSE MIB +0.43% at 21,229.50, SMI -0.12% at 21,229.50, S&P 500 Futures +0.20%]

Market Focal Points/Key Themes: European Indices trade mixed in range bound trade as bond yields continue to go lower. US Index futures point to another higher open while Asian Indices traded mixed. On the corporate front shares of Debenhams rise sharply for a second straight day after Sports Direct confirmed a possible 5p/shr offer; RDI Reit rises following an approach from Cromwell Property Group. Renault, Fiat and PSA Group all rise following reports Renault planing to restart merger talks with Nissan within the next year, and plans to acquire another car manufacturer following the merger. On the earnings front Commerzbank trades over 3% higher after comments at its investor day, Elringklinger trades higher on earnings and affirmed guidance, with Hilton Food Group, SGL Carbon and HolidayCheck among other names rising on earnings. Meanwhile Accesso, Neopost and Epigenomcs among the names declining after earnings. Elsewhere shares of Swedbank fall on reports that the bank may have misled investigators on money laundering investigations. Looking ahead notable earners include Paychex, Lennar Corp, At Home Group and Titan Machinery among others.

 

Equities

- Consumer discretionary: HolidayCheck [HOC.DE] +8.5% (earnings)

- Consumer staples: Imperial Brands [IMB.UK] -1% (trading update)

- Financials: Commerzbank [CBK.DE] +3% (outlook in Annual Report), Swedbank {SWEDA.SE] -4% (Swedish TV update on investigation), Bellway [BWY.UK] +2% (earnings), RDI REIT [RDI.UK] +17% (confirms it was approached)

- Industrials: Renault [RNO.FR] +4%, Fiat Chrysler [FCA.IT] +4% (merger speculation), Diploma [DPLM.UK] -0.5% (trading update)

- Technology: Avast [AVST.UK] -6% (placing), accesso Technology Group [ACSO.UK] -15% (earnings; outllook)

 

Speakers

- ECB's Draghi: Euro Zone economy had remained relatively resilient but risks have risen in recent months. eiterates General Council view that risks to outlook still tilted to downside but had seen a more persistent deterioration in external demand. Reiterated that current soft patch did not necessary foreshadow a recession as latest surveys suggested some recovery in business sentiment. Remain confident of the sustained convergence of inflation and reiterated view that not short of instruments to deliver on mandate. TLTRO design to reflect evolving economic conditions

- ECB's Praet (Belgium, Chief Economist): TLTRO were flexible tools with parameters that can be re-calibrated; incentives to depend on bank lending outlook. Incentives to also look into cliff effects that were being created in the future. ECB was alert to downside risks but only so much that monetary policy could do

- ECB's Visco (Italy): Public finance outlook had worsened Italy's economic slowdown; urgent measures were needed to contrast the economic slowdown and rising poverty. Conditions of Italian public debt funding had worsened and reiterated that Italy needed credible medium-term strategy to reduce its debt

- UK Commons leader Leadsom reiterated govt stance that indicative votes gave cause for great concern; Govt should run the business for parliament. Govt looked very carefully at Parliament views. Issue of whether govt to instruct Tory members on how to vote on indicative votes was being considered. 3rd meaningful vote could return to parliament later this week (Thursday or Friday); still in discussions with Northern Irish DUP party

- UK Conservative MP Letwin: Parliament had been clear it does not want to leave EU without a deal. Unlikely that today's vote would reveal a majority for anything but perhaps would give light on what might emerge

- UK Labour official Gardner (opposition): Party would not revoke Article 50

- EU's Tusk reiterated that April 12th was the new Brexit cliff-edge date; EU Parliament should be open to a long Brexit extension

- Swiss KOF Institute Spring Economic Forecast cut its 2019 GDP growth from 1.6% to 1.0% while maintaining 2020 GDP growth at 2.1%. It noted that the economy had to contend with challenging conditions (cited Brexit uncertainty, economic slowdown in China, downturn in the euro area)

- Italy business lobby Confindustria said to raise its forecast for Italy 2019 budget deficit to GDP from 2.0% to 2.6%

- Japan Upper House formally passes record ¥101.5T budget for FY2019/20

- Japan Fin Min Aso: Fiscal year budget aimed at smoothing demand around the upcoming sales tax increase

- Fed's Kaplan (dove, non-voter): Too soon to consider lowering rates. Would need to see a larger, more pronounced yield curve inversion to consider a rate cut

 

Currencies/Fixed Income

- Overall FX price action was non-existent in the session.

- The GBP was little changed ahead of the UK parliament debate which would outline its preferred options on the path of Brexit. GBP/USD hovering around the 1.32 handle

- The mover in Asia was the NZD currency (Kiwi) which was markedly weaker after RBNZ kept its policy steady but signaled its next rate move would be a cut. NZD/USD lower by 1.3% to test 0.6810 just ahead of the US morning.

 

Economic Data

- (NO) Norway Jan AKU Unemployment Rate: 3.9% v 3.7%e

- (FI) Finland Mar Consumer Confidence Index: 16.1 v 15.5 prior; Business Confidence: +1 v -2 prior

- (FR) France Mar Consumer Confidence: 96 v 96e

- (FR) France Feb PPI M/M: 0.4% v 0.3% prior; Y/Y: 2.1% v 1.7% prior

- (ES) Spain Jan Total Mortgage Lending Y/Y: 16.2% v 23.1% prior; House Mortgage Approvals Y/Y: 22.5% v 0.9% prior

- (SE) Sweden Mar Consumer Confidence: 94.0 v 93.0e; Manufacturing Confidence: 107.5 v 112.1e; Economic Tendency Survey: 101.7 v 102.0e

- (SE) Sweden Feb Household Lending Y/Y: 5.3% v 5.4% prior

- (SE) Sweden Feb Trade Balance (SEK): 5.0B v 3.1B prior

- (IT) Italy Mar Consumer Confidence Index: 111.2 v 112.5e; Manufacturing Confidence: 100.8 v 101.4e prior; Economic Sentiment: 99.2 v 98.2 prior

- (CH) Swiss Mar Credit Suisse Expectations Survey: -26.9 v -16.6 prior

- (AT) Austria Mar Manufacturing PMI: 50.0 v 51.8 prior (38th month without a contraction)

**Fixed Income Issuance**

- (IN) India sold total INR100B vs. INR100B indicated in 3-month, 6-month and 12-month bills

- (RO) Romania opened its book to sell EUR-denominated 7-year, 15-year and 30-year bonds via syndicate

 

Looking Ahead

- (PT) Portugal Year-to-Date Budget Report

- (BR) Brazil Feb Total Federal Debt (BRL): No est v 3.808T prior

- (UK) Treasury report on co-op bank probe:

- 06:00 (IS) Iceland Mar CPI M/M: No est v 0.2% prior; Y/Y: No est v 3.0% prior

- 06:00 (DE) ECB's Lautenschlaeger (Germany) participates in Panel in Vienna

- 06:00 (EU) Daily Euribor Fixing

- 06:00 (ZA) South Africa announces details of next bond auction (held on Tuesdays)

- 06:00 (IT) Italy Debt Agency (Tesoro) to sell €6.0B in 6-month Bills

- 06:00 (SE) Sweden to sell combined SEK1.5B in 2029 and 2032 Bonds

- 06:00 (NO) Norway to sell NOK3.0B in 2.0% Apr 2028 bonds

- 06:30 (EU) ECB allotment in 3-month LTRO tender (prior €1.3B with 15 bids recd)

- 06:30 (DE) Germany to sell €3.0B in 0.25% Feb 2029 Bunds

- 06:45 (ES) ECB's de Guindos (Spain) speaks in Frankfurt

- 07:00 (US) MBA Mortgage Applications w/e Mar 22nd: No est v 1.6% prior

- 07:00 (UK) Mar CBI Retailing Reported Sales: 4e v 0 prior; Total Distribution: No est v 14 prior

- 07:00 (BR) Brazil Mar FGV Consumer Confidence: No est v 96.1 prior

- 07:00 (RU) Russia OFZ Bond auction results

- 07:45 (US) Daily Libor Fixing

- 08:00 (UK) Weekly PM May question time in House of Commons

- 08:30 (US) Jan Trade Balance: -$57.0Be v -$59.8B prior

- 08:30 (CA) Canada Jan Int'l Merchandise Trade (CAD): -3.6Be v -4.6B prior

- 09:00 (UK) Baltic Bulk Index

- 09:30 (BR) Brazil Feb Total Outstanding Loans (BRL): No est v 3.232T prior; M/M: No est v -0.9% prior; Personal Loan Default Rate: No est v 4.8% prior

- 09:30 (LX) ECB's Mersch (Luxembourg) speaks in Frankfurt

- 10:00 (US) Q4 Current Account Balance: -$130.0Be v -$124.8B prior

- 10:00 (MX) Mexico Feb Trade Balance: +$0.3Be v -$4.8B prior

- 10:00 (MX) Mexico Feb Unemployment Rate (Seasonally Adj): 3.6%e v 3.5% prior; Unemployment Rate (unadj): 3.5%e v 3.6% prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:30 (US) Treasury to sell $18B in 2-Year Floating Rate Notes Reopening

- 13:00 (US) Treasury to sell $41B in 5-Year Notes

- 13:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves

- 13:30 (FR) ECB's Villeroy (France) speaks in Geneva