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.
Key Headlines/Data:
* European Corporate News:
– Deutsche Bank (-3.1%): Q4 Net Loss -€409 Mln versus -€268 Mln expected | Not involved in recent bond cartel allegations
– Danske Bank (+3.0%): Sees FY19 Net Profit 14-16 Bln crowns versus 15 Bln crowns expected | To invest another €2.0 Bln in anti-money laundering efforts
– BBVA (-0.9%): Q4 Net Profit €1.00 Bln versus €0.98 Bln expected | Q4 Gross Income €6.15 Bln versus €588 Bln expected
– Caixabank (-8.0%): Q4 Net Profit €217 Mln versus €335 Bln expected
– Novo Nordisk (+4.3%): Q4 Net Profit Bln DK versus €8.90 Bln DK expected
– Electrolux (+9.6%): Q4 Net Profit 1.58 Bln SK versus 1.37 Bln SK expected
– JC Decaux (+9.2%): FY18 Revenue rose +3.6% to €3.62 Bln
– Suez (-1.7%): Cut to ‘hold’ from ‘buy’ at Jeffries
– Adidas (-2.8%): Cut to ‘neutral’ from ‘buy’ at UBS
* China says Washington trade talks were ‘frank’ and made ‘important progress’ (South China Morning Post):
– China said on Friday it had made “important progress” towards settling trade disputes with the United States after the countries wrapped up what it called “frank, concrete and constructive” talks in Washington.
* Sajid Javid admits Brexit may be delayed as clock ticks for May (Telegraph):
– Sajid Javid warned a Cabinet colleague that Brexit is likely to be delayed, a source told The Telegraph as it emerged that nearly a third of the Cabinet now believe Article 50 may have to be extended.
* Swiss SECO Consumer Confidence (Q1) -4, previous -6
* Swiss Retail Sales Y/Y (Dec) -0.3% versus +0.1% expected, previous -0.5% revised to -0.6%
* French Governor Budget Balance (Dec) -€76.1 Bln, previous -€95.6 Bln
* Swedish Manufacturing PMI (Jan) 51.5 versus 51.5 expected, previous 52.0
* Norwegian Manufacturing PMI (Jan) 58.3 versus 55.1 expected, previous 55.9
* Spanish Manufacturing PMI (Jan) 52.4 versus 50.5 expected, previous 51.1
* Austrian Finance Minister said there are lots of signs we are heading towards a hard Brexit.
* Irish Europe Minister said technology is not the answer to the backstop issue. He did add that a request to extend Article 50 would most likely be approved if there was a clear direction for the Brexit process.
* Swiss Manufacturing PMI (Jan) 54.3 versus 55.8 expected, previous 57.8 revised to 57.5
* Italian Manufacturing PMI (Jan) 47.8 versus 48.8 expected, previous 49.2
* French Manufacturing PMI (Jan F) 51.2 versus 51.2 flash/expected
* German Manufacturing PMI (Jan F) 49.7 versus 49.9 flash/expected
* Euro Zone Manufacturing PMI (Jan F) 50.5 versus 50.5 flash/expected:
– Output up marginally, but sharpest fall in new work recorded since April 2013
– Growth sustained via reduction in backlogs and fastest accumulation of stocks in survey history
* Commenting on the final Euro Zone Manufacturing PMI data, Chris Williamson, Chief Business Economist at HIS Markit said: “The January PMI adds to the likelihood that the manufacturing sector is in recession and will act as a drag on the economy in the first quarter.
* Norwegian Unemployment Rate (Jan) 2.6% versus 2.4% expected, previous 2.3%
* UK Manufacturing PMI (Jan) 52.8 versus 53.5 expected, previous 54.2:
– Stocks of purchases rise at survey-record rate
– Employment falls for only the second time in past 30 months
* Euro Zone CPI Data (Jan P):
– CPI Y/Y +1.4% versus +1.4% expected, previous +1.6%
– Core CPI Y/Y +1.1% versus +1.0% expected, previous +1.0%
* Italy’s Confindustria said it is highly likely that growth will be slightly above zero this year.
