European cash equity markets are broadly lower ahead of the midway stage (FTSE -0.2%, DAX -1.1%, CAC -0.6%, FTSE MIB -1.2%). Media stocks are among the worst performers, dragged lower by Publicis after the French advertising company posted weaker revenue which has since prompted a downgrade at Deutsche Bank. We have also seen heavy declines in TUI and Societe Generale after their respective updates while Unicredit surged almost six-percent at the highs on solid Q4 profit. Risk sentiment was on the back foot from the open but did deteriorate in recent trade after the EU Commission slashed their growth forecasts for the region. The EU27 economies are now expected to grow +1.5% this year, down from +1.9% while Italy was cut to just +0.2%. Earlier macro releases also played their part, including weaker-than-expected German and Spanish industrial production. As such, core EU bonds are firmly in the green while Treasuries have extended above the overnight highs as investors flocked to perceived safe-haven assets. This was also evident in the currency markets where the Japanese Yen is the best performer among the G10’s closely followed by the Swiss Franc and US Dollar. Elsewhere, oil prices are in the red with US crude futures down around -0.6% while spot gold is flat. Looking ahead, the Bank of England policy statement, meeting minutes and inflation report are all due for release at midday, followed by a press conference with Governor Carney from 12:30 GMT. Meanwhile, futures are pointing to a lower open on Wall Street with earnings expected from Kellogg and Twitter before the open. On the data front, we await US initial jobless claims.
Key Headlines/Data:
* European Corporate News:
– Societe Generale (-1.3%): Q4 Net Profit €0.624 Bln versus €0.450 Bln expected | Lowered ROTE target to 9-10% in 2020 from 11.5%
– Pernod (+2.3%): H1 Net Profit rose 11% to €1.1 Bln | Raises FY guidance
– ArcelorMittal (-2.6%): Q4 Net Profit $1.19 Bln | Raises dividend and launches buyback
– Unicredit (+2.1%): Q4 Adj. Net Profit €0.840 Bln versus €0.719 Bln expected | Proposes €0.27 dividend
– Norsk Hydro (-8.5%): Q4 Operating Profit 0.53 Bln versus 1.45 Bln expected
– Publicis (-13.1%): Q4 Revenue soft at €2.49 Bln | Downgraded to ‘hold’ from ‘buy’ at Deutsche Bank
– TUI (-16.8%): Lowered FY profit outlook
– Total (-0.9%): Q4 Adj. Net Profit $3.16 Bln versus $3.04 Bln expected
* Theresa May preparing to delay vote on deal until month before Brexit amid warnings Article 50 extension is inevitable (Telegraph):
– Theresa May is preparing to delay a second vote on her deal until the end of February, a month before Britain is scheduled to leave the EU, in a move which ministers believe means an extension of Article 50 is now inevitable.
* @BBCNormanS (BBC Assistant Political Editor) – Am told PM will not put a specific proposal to eu on backstop but will seek eu acceptance that backstop has to change.
* German Industrial Production (Dec):
– Industrial Production M/M -0.4% versus +0.7% expected, previous -1.9% revised to -1.3%
– Industrial Production Y/Y -3.9% versus -3.4% expected, previous -4.7% revised to -4.0%
* Norwegian Manufacturing Production M/M (Dec) +0.5% versus +0.3% expected, previous 0.0% revised to +0.1
* French Trade Balance (Dec) -€4.65 Bln versus -€4.00 Bln expected, previous -€5.10 Bln revised to -€4.81 Bln
* French Current Account Balance (Dec) -€1.1 Bln, previous -€2.8 Bln
* Spanish Industrial Production Y/Y (Dec) -6.2% versus -2.3% expected, previous -2.6% revised to -3.2%
* UK Cabinet Officer Minister Liddington said he may meet with opposition lawmakers to try and reach a compromise on Brexit.
* UK Halifax House Prices (Jan):
– House Price Index M/M -2.9% versus -0.5% expected, previous +2.2% revised to +2.5%
– House Price Index 3M/YoY +0.8% versus +1.5% expected, previous +1.3%
* ECB Economic Bulletin:
– Risks surrounding the euro area growth outlook have moved to the downside
– Ample degree of monetary accommodation is still necessary
* Italian Retail Sales (Dec):
– Retail Sales M/M -0.7%, previous +0.7% revised to +0.6%
– Retail Sales Y/Y -0.6%, previous +1.6% revised to +1.7%
* EU Commission Economic Forecasts – The pace of growth overall is projected to moderate compared to the high rates of recent years and the outlook is subject to large uncertainty:
– EU27 GDP: 2019 cut to +1.5% from +1.9% | 2020 cut to +1.7% from +1.8%
– Euro Zone GDP: 2019 cut to +1.3% from +1.9% | 2020 cut to +1.6% from +1.7%
– Italy GDP: 2019 cut to +0.2%
* UK government are said to be sticking to their plan to present the Brexit motion on 14th of February although no date has been set for a vote on the revised Brexit deal.
* Spokesman for UK PM May said the government position on a customs union with the EU has not changed and May is focused on securing changes to the backstop.
