European cash equity markets are mostly higher ahead of the midway stage with the Euro Stoxx 600 reaching its best level since mid-November (FTSE +0.3%, DAX +0.4%, CAC +0.7%, FTSE MIB -0.2%). Earnings season continues to play its part with notable gains for AstraZeneca, Airbus and Nestle post earnings which has led to outperformance in their respective sectors. Bank stocks have lagged meanwhile as Credit Agricole and Credit Suisse have moved lower since their fourth-quarter updates. Investors are also keeping an eye on the US-China trade negotiations with reports this morning suggesting that Trump is considering a sixty-day extension to the tariff deadline. The FT followed with reports that Trump will likely take his time regarding auto tariffs. In fixed, core European bonds slightly higher on the day with a soft German GDP print providing support – German growth was flat QoQ in the fourth quarter versus expectations of a +0.1% increase. Dovish remarks from the Bank of England’s Vlieghe will have underpinned Gilts meanwhile after he said the appropriate pace of monetary tightening is somewhat slower than he judged it to be a year ago. Turning to currency space, the Dollar Index is little changed around 97.2 while the New Zealand Dollar is the best performer among the G10’s. Sterling has softened ahead of a series of UK parliament votes later today which could see another defeat for UK PM May as the ERG group fear her motion would rule a no-deal scenario – something they are keen to avoid. Elsewhere, oil prices are higher with US crude futures up +1.0% and holding above $54 a barrel. Spot gold is flat. Looking ahead, futures are pointing to a slightly higher open on Wall Street with earning due from Coca-Cola and Kraft Heinz. On the data front, we await US retail sales, producer prices, jobless claims and business inventories plus Canadian manufacturing sales and house prices.
Key Headlines/Data:
* European Corporate News:
– AstraZeneca (+5.8%): Q4 Core EPS $1.58 versus $1.48 expected | Q4 Revenue $6.42 Bln versus $6.32 Bln expected | Sees FY19 sales growth
– Credit Agricole (-0.7%): Q4 Net Profit €1.01 Bln versus €0.88 Bln expected
– Airbus (+4.7%): Q4 Adj. EBIT €5.83 Bln versus €5.12 Bln expected | To halt sales of A380 jet
– Renault (+2.9%): FY18 Net Profit fell to €3.30 Bln from €5.21 Bln | FY18 Revenue €57.4 Bln versus €57.7 Bln expected
– Credit Suisse (-1.8%): Q4 Net Profit F292 Mln versus F202 Mln expected
– Nestle (+3.2%): FY18 Net Profit F10.1 Bln versus F11.3 Bln expected
* Trump Considers 60-Day Extension for China Tariff Deadline (Bloomberg):
– President Donald Trump is considering pushing back the deadline for imposition of higher tariffs on Chinese imports by 60 days, as the world’s two biggest economies try to negotiate a solution to their trade dispute, according to people familiar with the matter.
* Donald Trump likely to take his time regarding auto tariffs (FT)
* Hardline Brexiters threaten to vote down Theresa May’s motion (Guardian):
– Hardline Brexit supporters are threatening to inflict yet another Commons defeat on Theresa May because they fear the government is effectively ruling out leaving the EU with no deal.
* Spanish Budget Minister said the budget block does not necessarily mean consequences:
– Economy Minister said election will take place at some point this year
* French ILO Unemployment Rate (Q4) 8.8% versus 9.1% expected, previous 9.1%
* German GDP Data (Q4):
– GDP M/M 0.0% versus +0.1% expected, previous -0.2%
– GDP Y/Y +0.9% versus +0.9% expected, previous +1.1%
* Swiss Producer Price Data (Jan):
– PPI M/M -0.7%, previous -0.6%
– PPI Y/Y -0.5%, previous +0.6%
* Swedish Unemployment Rate (Jan) 6.5%, previous 6.0%
* Russian Energy Minister Novak said there are no current proposals to raise oil production. He added that they could sign a new OPEC+ agreement in April.
* Bank of England’s Vlieghe:
– I judge that the net balance of economic news has been to the downside. I therefore consider that the appropriate pace of monetary tightening is somewhat slower than I judged it to be a year ago
– A path of Bank Rate that involves around one quarter point hike per year seems a reasonable central case.
* Euro Zone GDP Data (Q4 P):
– GDP Q/Q +0.2% versus +0.2% expected, previous +0.2%
– GDP Y/Y +1.2% versus +1.2% expected, previous +1.2%
* Euro Zone Employment Data (Q4 P):
– Employment Q/Q +0.3% versus +0.2% expected, previous +0.3%
– Employment Y/Y +1.2% versus +1.2% expected, previous +1.3%
* UK sells £2.25 Bln of a 2028 Gilt:
– Bid to Cover: 2.06
– Yield Tail: 0.3
* Spokesman for UK PM May said no-deal Brexit remains on the table.
