European cash equity markets are broadly higher ahead of the midway stage (FTSE +0.6%, DAX +0.2%, CAC +0.2%, FTSE MIB +0.2%). We have seen notable outperformance in the banking sector, led higher by Deutsche Bank and Commerzbank after merger speculation intensified over the weekend. French engine maker Safran has fallen sharply meanwhile after a Boeing with one their engines crashed on Sunday. From a regional perspective, the FTSE 100 is the top gainer as UK exporters benefit from a weaker pound. Sterling hit a three-week low versus the Greenback overnight at $1.2949 after Downing Street described Brexit talks as “deadlocked”. The UK House of Commons is expected to vote on PM May’s Brexit deal tomorrow and it is expected to be rejected in its current form although there is chatter of possible amendments to garner more support. Elsewhere in FX, the Dollar Index is flat at 97.3 while the Norwegian Krone surged to the top of the pile after stronger-than-expected CPI data. In commodity space, oil prices are ahead with US crude futures up around +0.6% after the Saudi Energy Minister signalled the Kingdom was stick to the output cuts. Spot gold is down -0.3%. Looking ahead, futures are pointing to a relatively flat open on Wall Street while US data releases include retail sales, business inventories and the Conference Board employment trends index.
Key Headlines/Data:
* European Corporate News:
– Commerzbank (+5.1%) | Deutsche Bank (+2.6%): Merger speculation intensified over the weekend
– Safran (-2.2%): Boeing 737 that crashed over the weekend had a Safran made engine
– Pandora (-4.5%): Downgraded to ‘sell’ at Carnegie
* China Trade War Update: Does Anybody Know What’s Going On? (Forbes):
– The China trade war is on pause again. New tariffs, which were supposed to double on March 2, are part of a new ceasefire agreement between Beijing and Washington. Is it a 60-day trade truce? Is there no timeline on it? Nobody knows.
– This Chinese trade war is a moving target. Market insights on the subject seem to change every third day. We went from Trump and Xi Jinping ready to sign a “great deal” at the Mar-a-Lago resort in Florida in March to Trump and Xi ready to sign something that looks kind of like a deal at the Mar-a-Lago resort in April to maybe Xi is not coming after all … in a matter of 72 hours.
* Brexit talks deadlocked’, says Downing Street (Guardian):
– Downing Street has described the Brexit talks in Brussels as “deadlocked” after negotiations over the weekend failed to find a breakthrough on the Irish backstop.
– Theresa May and Jean-Claude Juncker, the European commission president, spoke on the telephone on Sunday evening, but plans for the prime minister to visit the Belgian capital to sign off on any compromise are on hold.
* ECB’s Coeure said the Governing Council are adjusting to the new reality rather than reversing course and do not see sings of a recession at present.
* Handelsblatt reported the German government see economic growth of +0.8% this year.
* German Industrial Production Data (Jan):
– Industrial Production M/M -0.8% versus +0.5% expected, previous -0.4%
* German Trade Balance (Jan) €18.5 Bln versus €21.2 Bln expected, previous €19.4 Bln revised to €19.9 Bln
* Norwegian CPI Data (Feb):
– CPI M/M +0.8% versus +0.7% expected, previous -0.5%
– CPI Y/Y +3.0% versus +2.8% expected, previous +3.1%
* Bank of France Business Sentiment (Feb) 101 versus 100 expected, previous 99.0:
– Sees Q1 GDP at +0.3% versus +0.4% previous
* Spanish Retail Sales Y/Y (Jan) +0.8, previous +0.8% revised to +0.6%
* Bank of Japan Board Member Kataoka said the probability of inflation rising towards two-percent is low at the moment and considers it necessary to strengthen monetary easing.
* @tnewtondunn (Political Editor – The Sun): Brexit latest: PM meeting with senior aides in No10 now to plot a way through this week’s carnage. I’m told it’s most likely she will decide to change tomorrow’s vote from a meaningful one to a provisional one – ie her deal, plus Cox’s change.
* UK lawmaker Cooper said she would seek to force parliament to hold votes on no-deal and a Brexit delay is the government decided not to hold them.
* EU Commission said they have made new assurances that the backstop is temporary.
* Spokesman for UK PM May confirmed the meaningful vote will take place tomorrow and the commitment to hold the three Brexit votes this week still holds.
