European cash equity markets are mostly lower ahead of the midway stage with the Euro Stoxx 600 on course to snap a three-day winning streak (FTSE -0.9%, DAX -0.6%, CAC -0.3%, FTSE MIB +0.1%). Consumer staple stocks are among the worst performers, dragged lower by Beiersdorf after their CEO warned the sector is in turmoil. We also saw heavy declines in Air France and Metro Bank. From a regional perspective, the FTSE 100 has underperformed for a second day as the pound rose to a fresh seven-month high versus the Greenback. Trade weighted Sterling gained to its best level since April 2018 as investors become increasingly confident that the UK will avoid a no-deal Brexit. Overnight press reports suggested PM May was close to winning concessions from the EU that could persuade Eurosceptic MPs to back her. Elsewhere in currency space, the Norwegian Krone is the best performer among the G10’s, boosted by stronger-than-expected retail sales and higher oil prices. The Canadian Dollar has also gained on energy markets moves. The Euro meanwhile was relatively unfazed by Euro Zone confidence indicators which were mostly higher than expected. We also heard from the ECB’s Weidmann who said the ECB should look through short-term weakness and the next steps should depend on inflation developments over the medium-term. With respect to oil, US crude futures are up over one-percent following a surprise drawdown in API crude inventories overnight. Spot gold is down -0.1%. Looking ahead, futures are pointing to a lower open on Wall Street with earnings still to come from Best Buy and TJX. On the data front, we await US advance goods trade balance, factory orders and pending home sales plus Canadian CPI.
Key Headlines/Data:
* European Corporate News:
– Rio Tinto (+0.4%): FY18 Net Profit $13.64 Bln | To pay special dividend of $2.43/share
– Bayer (+4.0%): Q4 Loss -€3.92 Bln versus -€1.09 Bln expected | Q4 Sales €11.06 Bln versus €10.65 Bln expected
– Beiersdorf (-9.7%): Warned operating margin would fall in 2019 | CEO said “consumer goods industry is in turmoil”
– Air France (-11.5%): Dutch take stake in Air France-KLM to counter French influence
– Metro Bank (-19.3%): Revealed plans for a £350 Mln shareholder cash call
– Ocado (+4.7%) | Marks & Spencer (-9.6%): M&S agrees £750m food delivery deal with Ocado
* Theresa May today urges Parliament to ‘do its duty’ and vote through her Brexit deal (Daily Mail):
– Writing in the Daily Mail, she says she is close to winning concessions from the EU that could persuade Eurosceptic MPs to back her.
* Eurosceptic UK MP Rees-Mogg will back PM May’s deal if backstop has time limit (Reuters)
– The leader of a faction in British Prime Minister Theresa May’s Conservative party demanding a clean break from the European Union said he could support the government’s divorce deal if there is a time limit on the so-called Northern Irish backstop.
* Saudi Energy Minister al-Falih said he sees the likelihood of an output cut extension in the second half of the year.
* ECB’s Nowotny said it is only natural to have a slowdown in the Euro Zone economy after four-to-five years of remarkable expansion.
* Norwegian Unemployment Rate (Dec) 3.7% versus 3.8% expected, previous 3.8%
* Norwegian Core Retail Sales M/M (Jan) +1.6% versus +0.9% expected, previous -1.8% revised to -1.9%
* President Donald Trump’s former personal lawyer is preparing to tell a House committee Wednesday that Trump knew ahead of time that WikiLeaks had emails damaging to his rival Hillary Clinton’s presidential campaign and that he is a “racist,” a “conman” and a “cheat.” (AP)
* EU Brexit Minister Barnier repeated that the Irish backstop cannot be renegotiated.
* Swedish Consumer Confidence (Feb) 92.5 versus 93.8 expected, previous 92.0
* UK Brexit Minister Barclay said a no-deal scenario is still on the table.
* Swedish Trade Balance (Jan) 1.2 Bln, previous -4.7 Bln revised to -7.2 Bln
* Swedish Consumer Confidence (Feb) 92.5 versus 93.8 expected, previous 92.0 revised to 92.2
* Italian Consumer Confidence (Feb) 112.4 versus 113.0 expected, previous 114.0 revised to 113.9
* Euro Zone Money Supply – M3 Y/Y (Jan) +3.8% versus +4.0% expected, previous +4.1%
* Swiss ZEW Survey – Expectations (Feb) -16.6, previous +44.0
* @realDonaldTrump – All false reporting (guessing) on my intentions with respect to North Korea. Kim Jong Un and I will try very hard to work something out on Denuclearization & then making North Korea an Economic Powerhouse. I believe that China, Russia, Japan & South Korea will be very helpful!
* Euro Zone Consumer Confidence (Feb F) -7.4 versus -7.4 flash/expected:
– Business Climate Indicator 0.69 versus 0.60 expected, previous 0.69
– Economic Confidence 106.1 versus 106.0 expected, previous 106.2 revised to 106.3
– Services Confidence 12.1 versus 11.0 expected, previous 11.0
– Industrial Confidence -0.4 versus 0.1 expected, previous 0.5 revised to 0.6
* ECB’s Weidmann said there is no reason to be overly pessimistic about the economic slowdown. He added that the normalisation of monetary policy will be a gradual process and could last up to several years. He later said the ECB should look through short-term weakness and the next steps should depend on inflation developments over the medium-term.
