European cash equity markets are broadly higher ahead of the midway stage with the Euro Stoxx 600 touching its best level since early-December (FTSE +0.4%, DAX +1.4%, CAC +1.0%, FTSE MIB +0.8%). Trade sensitive sectors including basic resources and automobiles have outperformed the broader market following on from gains on Wall Street and Asia overnight. From a regional perspective, the FTSE 100 has struggled to keep pace with its French and German counterparts as the impact of a stronger currency weighed. Cable rallied to a fresh eleven-week high overnight amid reports the DUP have agreed to support Theresa May’s ‘Plan B’ Brexit deal. Elsewhere in FX, the Euro has also gained versus the Greenback and moved to the top of the G10 pile despite some negative impulses including weaker-than-expected German IFO – the business climate index dropped to 99.1 (f/c. 100.7) from 101.0. This came alongside the ECB ‘Survey of Professional Forecasters’ which lowered real GDP and HICP estimates for the next few years and over the longer-term. We earlier heard from the ECB’s Villeroy who said they will probably downgrade their growth forecasts in March. Elsewhere, oil prices have edged higher with US crude futures up around +0.2%. Spot gold is up +0.3%. Looking ahead, futures are pointing to a higher open on Wall Street with earnings due from Abbvie and Colgate Palmolive. On the data front, we await US durable goods and new home sales plus Belgium business confidence.
Key Headlines/Data:
* European Corporate News:
– Ericsson (+5.6%): Q4 operating loss of -1.9 Bln versus -3.0 Bln expected | Q4 Revenue 63.8 Bln versus 61.0 Bln expected
– Vodafone (-2.2%): Service Revenue €9.79 Bln versus €9.82 Bln expected | Reiterated FY guidance
– Renault (+4.1%): Confirmed Thierry Bolloré as CEO
* DUP privately agree to support Theresa May’s ‘Plan B’ Brexit deal when she ‘toughens it up’ ahead of crunch Commons vote (The Sun):
– THE DUP have privately decided to back Theresa May’s Brexit deal next week when she toughens it up, in a major breakthrough for No10. The Sun can reveal that delicate deliberations are now ongoing between the Ulster unionist party’s leaders and the PM.
* Norwegian Industrial Confidence (Q4) 9.0, previous 9.0
* Spanish PPI Data (Dec):
– PPI M/M -1.1%, previous -1.1%
– PPI Y/Y +1.6%, previous +2.9%
* ECB’s Villeroy said the ECB are committed to keeping rates low while the reduction of stimulus will be very gradual. He did later add that they will probably downgrade their GDP forecasts in March.
* Swedish PPI Data (Dec):
– PPI M/M -0.6%, previous 0.0%
– PPI Y/Y +5.6%, previous +7.9%
* Swedish Retail Sales (Dec):
– Retail Sales M/M -1.4% versus +0.2% expected, previous +0.8% revised to +1.0%
– Retail Sales Y/Y -1.1% versus +1.2% expected, previous +1.1% revised to +1.4%
* German IFO Data (Jan):
– Business Climate 99.1 versus 100.7 expected, previous 101.0
– Current Assessment 104.3 versus 104.2 expected, previous 104.7
– Expectations 94.2 versus 97.0 expected, previous 97.3
* ECB Survey of Professional Forecasters (Q1 19):
– Real GDP: 2019 +1.5% versus +1.8% previous | 2020 +1.5% versus +1.6% previous | 2021 +1.4% | Longer Run +1.5% versus +1.6% previous
– HICP: 2019 +1.5% versus +1.7% previous | 2020 +1.6% versus +1.7% previous | 2021 +1.7% | Longer Run +1.8% versus +1.9% previous
– Core HICP: 2019 +1.3% versus +1.4% previous | 2020 +1.5% versus +1.7% previous | 2021 +1.6% versus % previous | Longer Run +1.7% versus +1.8% previous
* ECB’s Vasiliauskas said the balance of risks has a negative outlook but there is no reason to change guidance at this point. He also said TLTRO’s could potentially play a role.
* UK Mortgage Approvals (Dec) 38.78K versus 38.90K expected, previous 39.40K revised to 39.21K
* Riksbank Deputy Governor Skinglsey said she has no regrets about raising rates and is comfortable with the rate forecast. She added that the inflation outlook is what matters for policy.
* According to sources, the German government cut their 2019 growth forecast to +1.0% from +1.8% and see 2020 at +1.6%.
* Fed Officials Weigh Earlier-than-Expected End to Bond Portfolio Runoff (WSJ):
– Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight.
* Irish PM Varadkar said they are not getting any sense of alternatives from the UK on Brexit. He added that they are open to changes on the political declaration and would be open to a Norway plus solution.
* UK CBI Retailing Reported Sales (Jan) 0 versus +3 expected, previous -13
* Swiss National Bank President Jordan said there really is no need to change current monetary policy, adding that an expansive stance is still necessary.
* Moody’s Brexit Monitor: UK economic growth decelerates as consumption, housing market and financial conditions all weaken
* UK government spokesman said they are not ready for further talks with Brussels.
