European cash equity markets are broadly lower ahead of the midway stage (FTSE -0.5%, DAX -0.6%, CAC -0.5%, FTSE MIB -0.3%). Trade sensitive stocks including autos and basic resources are among the worst performers as Chinese growth concerns persist, while the latter was also hit by lower copper prices and a broker downgrade for mining heavyweight Rio Tinto. Euro Zone banks stocks are in red ahead of the ECB decision having jumped higher yesterday on a sources report that suggested policymakers would cut their economic forecasts and signal fresh bank loans. In fixed, core EU bonds are slightly higher for the day with little reaction shown to macro data released this morning, including Euro Zone Q4 GDP that was revised one-tenth lower to +1.1%. Spain did fall short of its maximum target amount in a triple tranche bond offering but investors appear to be keeping to the side-lines ahead of the aforementioned policy decision. Turning to currencies, the Dollar Index has edged down -0.1% to 96.8 in recent trade. The Antipodeans are the weakest on some mild profit taking although soft Aussie retail sales will also have played its part. We also saw some weakness in the Swedish Krona after Riksbank Governor Ingves said the repo rate path is a forecast and not a promise. Elsewhere, oil prices are ahead with US crude futures up around +0.7% while spot gold is flat. Looking ahead, futures are pointing to a lower open on Wall Street. North American data releases include US unit labor costs, non-farm productivity and jobless claims plus Canadian building permits. More interest will likely be paid however to the European Central Bank ‘Monetary Policy Decisions’ and ‘Press Conference’ with President Mario Draghi due at 12:45 GMT and 13:30 GMT respectively.
Key Headlines/Data:
* European Corporate News:
– Continental (-1.1%): FY19 EBIT €4.03 Bln versus €3.94 Bln expected
– Merck (-0.3%): Q4 Adj. EBITDA €0.95 Bln versus €0.98 Bln expected
– JCDecaux (+1.5%): FY18 Net Profit €219.9 Mln versus €193.7 Mln
– Aviva (-4.7%): FY18 Adj. Operating Profit £3.12 Bln
– Lufthansa (+2.4%): Upgraded to ‘buy’ at Citigroup
– Rio Tinto (-0.3%): Downgraded to ‘sell’ at Societe Generale*
* EU Is Pessimistic That a Brexit Breakthrough Is in Reach (Bloomberg):
– European officials are pessimistic about the chances of a breakthrough in Brexit talks this week, as negotiators suspect that whatever they offer won’t be enough to get Parliament to back Theresa May’s deal.
* Brexit deal ‘will be defeated by 100 votes’, ministers believe, after talks in Brussels collapse (Telegraph):
– Theresa May’s Cabinet is resigned to her Brexit deal being defeated by up to 100 votes next week after talks in Brussels collapsed without progress on Wednesday.
* UK Finance Minister Hammond said he is still hopeful a Brexit deal can be reached in the next few days.
* Swiss Unemployment Rate SA (Feb) 2.4% versus 2.4% expected, previous 2.4%
* Norwegian Manufacturing Production M/M (Jan) -0.2% versus +0.5% expected, previous +0.5% revised to +0.6%
* Riksbank Governor Ingves said the need for highly expansionary monetary policy has decreased slightly. He did add they should not focus too much on the January inflation data. He also noted that the repo rate path is a forecast and not a promise.
* UK Halifax House Price Data (Feb):
– House Price Index M/M +5.9% versus +0.1% expected, previous -2.9% revised to -3.0%
– House Price Index 3M/YoY +2.8% versus +1.0% expected, previous +0.8%
* Bank of England’s Tenreyro said a disorderly Brexit would more likely require a loosening of monetary policy than tightening.
* Italian Retail Sales Data (Jan):
– Retail Sales M/M +0.5% versus +0.3% expected, previous -0.7% revised to -0.6%
– Retail Sales Y/Y +1.3%, previous -0.6%
* Euro Zone GDP Data (Q4 F):
– GDP Q/Q +0.2% versus +0.2% expected, previous +0.2%
– GDP Y/Y +1.1% versus +1.2% expected, previous +1.2%
* Euro Zone Employment (Q4):
– Employment Change +0.3% versus +0.3% expected, previous +0.3%
– Employment Change +1.3% versus +1.2% expected, previous +1.2%
* UK Foreign Minister Hunt said he hoping for a breakthrough in Brexit talks over the weekend in time for next week’s parliament vote.
* Spain sold €3.26 Bln in a triple-tranche offering versus €2.5-3.5 Bln expected
* France sold €9.5 Bln at its triple-tranche bond offering versus €8.0-9.5 Bln expected
