European cash equity markets are broadly lower ahead of the midway stage (FTSE -0.6%, DAX -0.4%, CAC -0.5%, FTSE MIB -0.9%). Bank stocks are among the worst performers, led lower by Swiss lender UBS who posted weaker-than-expected fourth-quarter profit. Basic resource and oil stocks have also underperformed amid global growth concerns after the IMF cut their growth forecasts yesterday. In fixed, core EU bonds opened firmly in the green but gains proved short lived with Bunds and Gilts now back to flat after strong UK labour market data. For the record, the unemployment rate edged down to 4.0 from 4.1% as the UK economy added 141K jobs (f/c. 88K) and average earnings picked up to +3.4% YoY (f/c. +3.3%) from +3.3%. In Germany, the ZEW survey offered mixed results with the current situation index falling to 27.6 (f/c. 43.5) from 45.3 while expectation rose to -15.0 (f/c. -18.4) from -17.5. Turning to currency space, Sterling shot to the top of the G10 pile post-data although has some competition from the Japanese Yen which has been boosted by safe-haven demand. The Dollar Index is flat around 96.35 while the Antipodeans are the weakest. Elsewhere, oil prices are firmly in the red with US crude futures down over two-percent at the recent lows. Spot gold has added +0.3%. Looking ahead, futures are pointing to a lower open on Wall Street with earnings due from DJIA components Johnson & Johnson and Travelers. On the data front, we await US existing home sales plus Canadian manufacturing sales and wholesale sales.
Key Headlines/Data:
* European Corporate News:
– UBS (-4.1%): Q4 Net Profit $696 Mln versus $729 Mln expected
– Deutsche Bank (-3.6%): Facing lawsuit for manipulated property transactions in 2013
– Linde (+1.5%): To buy back $6.0 Bln in shares
– BHP Billiton (-2.1%): Q2 iron ore production down 9% | Maintained FY19 iron ore production guidance
– Shell (-2.1%): Downgraded to ‘underweight’ at Morgan Stanley Easyjet (+7.2%): Q1 Revenue/Seat fell to £53.63 from £55.99 a year ago | Maintained FY outlook
* The EU Commission will cut their Italian GDP forecast to +0.6% for 2019 from +1.2% – La Republica
* French Finance Minister said a hard Brexit is more likely that in was a few weeks ago.
* Spanish Trade Balance (Nov) -€2.569 Bln, previous -€3.837 Bln
* ECB Bank Lending Survey – Q4 2018:
– Credit standards remained broadly unchanged for loans to enterprises and housing loans
– Bank lending conditions continue to support loan growth
– Loan demand continued to increase across all loan categories
* UK ILO Unemployment Rate (Nov) 4.0% versus 4.1% expected, previous 4.1%
– Employment Change (3M/3M) +141K versus +88K expected, previous +79K
– Average Weekly Earnings 3M/YoY +3.4% versus +3.3% expected, previous +3.3%
– Average Weekly Earnings Ex. Bonus 3M/YoY +3.3% versus +3.3% expected, previous +3.3%
* UK Claimant Count Rate (Dec) 2.8%, previous 2.8%
– Jobless Claims Change +20.8K versus +20.0K expected, previous +21.9K revised to +24.8K
* UK Public Sector Net Borrowing (Dec) £2.11 Bln versus £1.05 Bln expected, previous £6.35 Bln revised to £6.25 Bln
* German ZEW Survey – Current Situation (Jan) 27.6 versus 43.5 expected, previous 45.3
– Expectations -15.0 versus -18.4 expected, previous -17.5
* Euro Zone ZEW Survey – Expectations (Jan) -20.9 versus -20.1 expected, previous -21.0
* EU spokeswoman said the EU has nothing to say on Brexit while there has been no news from the UK.
