European cash equity markets are broadly lower ahead of the midway stage having pared back from a positive open (FTSE +0.7%, DAX 0.0%, CAC +0.2%, FTSE MIB -0.2%). Bank stocks are among the worst performers, dragged lower by Deutsche Bank and Caixabank who both saw their shares drop sharply post earnings. Basic resources have outperformed meanwhile on renewed trade optimism after US officials offered an upbeat assessment overnight of Trump’s meeting with Chinese Vice Premier Liu He. The positive comments have also boosted broader risk sentiment, as did reports that the Chinese delegation have invited Trump to meet with the Chinese President later this month. The mood was tempered however by soft Chinese macro data. There has been plenty of macro data for investors to work with this morning, including Euro Zone manufacturing PMI although it prompted minimal reaction as the January print was unrevised from the flash reading of 50.5. Euro Zone headline CPI was also in line with expectations at +1.4% YoY but a slightly stronger core rate of +1.1% YoY (f/c. +1.0%) pushed the Euro higher in currency space. Sterling went in the opposite direction after UK manufacturing PMI fell to 52.8 (f/c. 53.8) which pushed Eur/Gbp to its highest level since last Tuesday. There was also a weaker print for Italian manufacturing PMI which, coupled with downbeat comments from Confindustria and yesterday’s GDP print, weighed heavily on Italian government bonds – the 10-year yield is up fourteen basis points to 2.73%. Elsewhere, oil prices are little changed on the day with Brent crude futures up +0.1% while spot gold is flat. Looking ahead, futures are pointing to a relatively flat open on Wall Street with earnings to come from Merck & Co, Exxon Mobil and Chevron. On the data front, the US jobs report is due at 13:30 GMT (08:30 ET) followed by manufacturing PMI, ISM manufacturing, Michigan Sentiment and construction spending.
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