European cash equity markets are broadly higher ahead of the midway stage although the Euro Stoxx 600 has yet to yet to challenge yesterday’s three-month peak (FTSE +0.5%, DAX +0.8%, CAC +1.1%, FTSE MIB +0.6%). Earnings season continues to play its part with notable gains for Allianz, RBS and Vivendi post-earnings leading to outperformance in their respective sectors – banking and media. Basic resources are also firmer following the latest round of US-China trade talks despite the lack of a joint communique as officials agreed to meet again in Washington next week. In fixed, core European bonds are nursing minor declines with stronger-than-expected UK retail sales data adding to the downside pressure. Headline retail sales rose +4.2% YoY (f/c. +3.4%) while the core rate gained +4.% YoY (f/c. +3.0%). Data elsewhere saw Spanish CPI unrevised from the flash readings and the Euro Zone trade surplus widen to €17.0 Bln from €19.0 Bln. Turning to currencies, moves have been relatively muted so far today with the Dollar Index up +0.1% to 97.1. The Euro is the weakest among the G10’s, closely followed by the Swiss Franc while the New Zealand Dollar sits atop the G10 pile. Sterling has inched higher despite yesterday’s defeat for UK PM May as stronger-than-expected data provided support. Elsewhere, oil prices are ahead with US crude futures and Brent both up around +0.5% while spot gold has also added +0.5%. Looking ahead, futures are pointing to a slightly high open on Wall Street. On the data front, we await US Empire manufacturing, imports prices, industrial production and Michigan Sentiment plus possible comments from Atlanta Fed President Bostic and Cleveland Fed President Mester.
Key Headlines/Data:
* European Corporate News:
– Allianz (+1.6%): Q4 Net Income €1.76 Bln versus €1.76 Bln expected | Boosts dividend and buybacks
– RBS (+2.0%): Q4 Net Profit £1.62 Mln versus £1.42 Bln expected
– EDF (-4.8%): FY18 Net Profit €1.18 Bln versus €2.19 Bln expected
– Vivendi (+6.5%): FY18 EBITA €1.29 Bln versus €1.31 Bln expected | To select advisors soon for UMG stake sale
– ENI (+1.1%): Q4 Ad. Net Profit €1.46 Bln versus €1.18 Bln expected
– Telecom Italia (+6.0%): Italian state lender CDP received authorization to increase stake to 10% – sources
– Pirelli (+0.4%): FY18 Adj. EBIT €955 Mln versus €960 Mln expected
* US House and Senate approve deal to avert shutdown, sending measure to White House (CNN):
– With little more than a day left before funding expires for key parts of the government, the House and Senate both voted on Thursday to approve a spending deal to avert a shutdown, sending the legislation to the White House for President Donald Trump’s signature.
– Trump will sign bill to avoid shutdown, then declare national emergency to free billions for border wall, official says
* Brexit: Theresa May pushes on with her deal after latest defeat (BBC):
– Theresa May will press on with efforts to secure a revised Brexit deal, despite another Commons defeat, and will return to Brussels “within days”.
– MPs voted against a motion endorsing the government’s strategy by 303 to 258, with 66 Tory MPs abstaining.
* Chinese New Yuan Loans (Jan) 3.230 Tln versus 2.800 Tln expected, previous 1.080 Tln
– Money Supply – M2 Y/Y +8.4% versus +8.2% expected, previous +8.1%
* Norwegian Trade Balance (Jan) 28.8 Bln, previous 25.0 Bln
* Spanish CPI Data (Jan F):
– CPI M/M -1.3% versus -1.3% expected, previous -1.3%
– CPI Y/Y +1.0% versus +1.0% expected, previous +1.0%
– CPI EU Harmonized M/M -1.7% versus -1.7% expected, previous -1.7%
– CPI EU Harmonized Y/Y +1.0% versus +1.0% expected, previous +1.0%
* Italian Trade Balance (Dec) €3.66 Bln, previous €3.84 Bln revised to €3.85 Bln
* Spanish PM Pedro Sanchez announces snap election for April 28 (EuroNews)
* UK Retail Sales Data (Jan):
– Retail Sales M/M +1.0% versus +0.2% expected, previous -0.9% revised to -0.7%
– Retail Sales Y/Y +4.2% versus +3.4% expected, previous +3.0% revised to +3.1%
– Core Retail Sales M/M +1.2% versus +0.2% expected, previous -1.3% revised to -1.0%
– Core Retail Sales Y/Y +4.1% versus +3.0% expected, previous +2.6% revised to +2.9%
* Euro Zone Trade Balance (Dec) €17.0 Bln, previous €19.0 Bln
* China and United States make ‘progress’ in Beijing but trade war talks to continue in Washington next week (South China Morning Post):
– China and the United States have agreed to continue talks in Washington next week after two days of negotiations in Beijing produced “progress” but not enough to seal a deal to end the trade war, a source who had been briefed on the talks told the South China Morning Post.
* @Lingling_Wei (WSJ Chief Chine Economic Correspondent) – Despite scant progress on structural issues, US, China negotiators are inching toward reaching an MOU–a bare-bones deal that could be finalized by Trump/Xi. Statement to be issued later today will mention the MOU. Stay tuned.
* US Negotiator said difficult issues remain after US-China talks.
* CCTV – Chinese President Xi said trade talks with the US will continue in Washington next week, he hopes they can reach a mutually beneficial agreement.
* According to Diplomats, UK Brexit Minister Barclay has told EU Brexit Minister Barnier that the UK could achieve its goals on the backstop without reopening the withdrawal agreement.
