European cash equity markets are mixed ahead of the midway stage (FTSE +0.6%, DAX -0.4%, CAC -0.1%, FTSE MIB +0.4%). Bank stocks have underperformed as government bond yields declined in response to yesterday’s dovish tilt at the FOMC while the resulting decline in the Greenback has boosted commodity prices and subsequently the basic resource sector. US ten-year yield hit a fresh 14-month low this morning at 2.51% and core European yields followed suit with Gilts deriving little support from stronger-than-expected UK retail sales. Central banks were in focus and a hawkish hike at the Norges Bank drove the Krone to the top of the G10 pile while the Swiss Franc largely ignored the Swiss National Bank as they stood pat on policy. Sterling is the weakest meanwhile having slipped to new lows in recent trade as a spokesman for May said she intends to bring forward a third meaningful vote as soon as possible. Oil prices are in the red with US crude futures down -0.3% while spot gold has added +0.3%. Looking ahead, futures are pointing to a slightly lower open on Wall Street. The Bank of England policy statement is up next at 12:00 GMT with economists’ forecasting a 9-0 vote to leave the Bank Rate on hold. On the data front, we await US current accounts, Philly Fed and jobless claims, Canadian ADP and wholesale sales plus Euro Zone consumer confidence.
Key Headlines/Data:
* European Corporate News:
– Wirecard (-2.0%): Senior Wirecard executives approved transactions in fraud probe – FT
– Deutsche Bank (-3.0%) | Commerzbank (-3.1%):Deutsche Bank CEO sees strong case for merger with Commerzbank
– EssilorLuxottica (-5.2%): Largest shareholder accuses executives of being in “clear violation” of the merger agreement
– IG Group (-8.9%): Q3 Trading Revenue fell to £108 Mln from £153 Mln
– Bouygues (+2.0%): Raised to ‘outperform’ at MainFirst
– Lufthansa (-1.8%): Cut to ‘underperform’ at MainFirst
* Brexit: EU rejects May’s request for three-month delay (Guardian):
– The European Union is poised to take control of Britain’s exit by rejecting Theresa May’s request for a three-month delay and setting a new withdrawal date of no later than 22 May.
– The prime minister is seeking an extension of the negotiating period to 30 June to allow the necessary legislation to be passed should she finally get MPs to back her deal next week.
– But EU ambassadors at a meeting late on Wednesday night agreed that the risks of having the UK as a member state beyond 23 May, when European elections are due, were too high.
* UK Junior Brexit Minister said people are coming over to backing May’s deal. He added that the things they have a good shot at landing the deal next week.
* UK Foreign Minister Hunt said he does not know whether they can bring the Brexit deal to parliament next week
* DUP lawmakers Wilson said his party are no closer to backing May’s deal in any third vote.
* Chinese Commerce Ministry said USTR Lighthizer and Treasury Secretary Mnuchin are to visit China on March 28th/29th while Chinese Vice Premier Liu He will visit the US on early April for trade talks.
* Swiss National Bank left their benchmark rate on hold at -0.75% as expected:
– The Swiss franc has depreciated slightly on a trade-weighted basis. Overall, however, it is still highly valued, and the situation on the foreign exchange market continues to be fragile
– The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary therefore remain essential
– Sees 2019 GDP at +1.5% (unch.) | Sees 2019 inflation at +0.3% (-0.2%)
* Norges Bank raised their benchmark rate by twenty-five basis points to 1.00% as expected:
– The Norwegian economy is expanding at a solid pace, and capacity utilisation now appears to be slightly above a normal level. Underlying inflation is a little higher than the inflation target.
– “Our current assessment of the outlook and balance of risks suggests that the policy rate will most likely be increased further in the course of the next half-year”, says Governor Øystein Olsen.
* Norges Bank Governor Olsen said he sees an above 50% chance of a rate increase in June
* ECB Economic Bulletin:
– The weakening in economic data points to a sizeable moderation in the pace of the economic expansion that will extend into the current year
– The weaker economic momentum is slowing the adjustment of inflation towards the Governing Council’s aim
* UK Retail Sales Data (Feb):
– Retail Sales M/M +0.4% versus -0.4% expected, previous +1.0% revised to +0.9%
– Retail Sales Y/Y +4.0% versus +3.3% expected, previous +4.2% revised to +4.1%
– Core Retail Sales M/M +0.2% versus -0.4% expected, previous +1.2% revised to +1.1%
– Core Retail Sales Y/Y +3.8% versus +3.3% expected, previous +4.1% revised to +4.0%
* UK Public Sector Net Borrowing (Feb) -£0.7 Bln versus £0.1 Bln expected, previous -£15.8 Bln revised to -£14.1 Bln
* ECB President Mario Draghi said low bank profitability in 2018 is affecting the capacity to lend.
* UK Parliament leader Leadsom said she intends to bring forward proposals for a third meaningful vote. She added that the government would seek to delay Brexit through statutory instrument if a delay is agreed.
* Spokesman for May said she intends to bring forward a third meaningful vote as soon as possible.
* Looking ahead, the Bank of England policy statement is up next at 12:00 GMT with economists’ forecasting a 9-0 vote to leave the Bank Rate on hold. On the data front, we await US current accounts, Philly Fed and jobless claims, Canadian ADP and wholesale sales plus Euro Zone consumer confidence.
