European cash are broadly higher ahead of the midway stage although gains are relatively modest (FTSE +0.5%, DAX +0.1%, CAC +0.2%, FTSE MIB +0.5%, IBEX -0.1%). Basic resource and technology stocks are among the best performers in the Euro Stoxx 600 which is trading just shy of a one-week high, boosted by growing optimism surrounding this week’s US-China trade talks. Heineken and Akzo Nobel have also surged post earnings while Germany’s Wirecard have slumped after a class action lawsuit was filed in California District Court. From a regional perspective, the Spanish IBEX has lagged slightly amid reports that PM Sanchez may call a snap election after today’s budget vote. In fixed, core European bonds opened little changed versus yesterday’s close but have since moved to the upside after some weaker-than-expected macro data – UK headline CPI slowed to +1.8% YoY (f/c. +1.9%) from +2.1% while Euro Zone Industrial production slumped -4.2% YoY (f/c. -3.2%). In currency space, the aforementioned data releases weighed on their respective currencies with Eur/Usd and Gbp/Usd reversing earlier gains to trade slightly lower as the Dollar Index edges up +0.1% to 96.8. The New Zealand Dollar is the best performer among the G10’s after the RBNZ struck a less dovish tone than many had expected overnight. The Swedish Krone also jumped on the Riskbank policy statement. Elsewhere, oil prices are ahead with US crude futures up +0.8% after failing to hold above $54/barrel yesterday while spot gold is flat. Looking ahead, futures are pointing to a slightly higher open on Wall Street with earnings due from Hilton Worldwide and CBRE before the bell. On the data front, we await US consumer prices plus possible comments from Fed President/s Bostic, Mester and Harker.
Key Headlines/Data:
* European Corporate News:
– ABN Amro (-7.3%): Q4 Profit €316 Mln versus €440 Mln expected | Q4 Income €2.16 Bln versus €2.17 Bln expected
– Heineken (+4.8%): FY Adj. Profit €3.87 Bln versus €3.84 Bln expected | FY Organic Beer Volume +4.2% versus +4.0% expected |
– Akzo Nobel (+4.1%): Q4 Net Profit €5.85 Bln | To begin repurchase program worth up to €2.5 Bln
– Natixis (+1.5%): Q4 Net Income €252 Mln versus €249 Mln expected
– Wirecard (-3.4%): US class action lawsuit filed in California District Court
* Spanish media (SER) suggested PM Sanchez may look to call a snap election in the coming hours.
* UK Brexit Minister Barclays said PM May does not plan to offer MP’s her deal or a delay to Brexit.
* UK Shadow Brexit Minister Starmer confirmed the Labour party will officially back the Cooper amendment – the amendment seeks to avoid a no deal scenario by extending Article 50 if a deal is not within reach.
* Riksbank left the Repo Rate unchanged at -0.2% as expected:
– Although indicators point to sentiment in the household and corporate sectors having dampened in Sweden, the picture of strong economic activity remains.
– Conditions are good for inflation to remain close to the target in the coming years. This outlook has not changed to any great extent since December.
– Monetary policy needs to proceed with caution. As in December, the forecast for the repo rate indicates that the next increase will be during the second half of 2019
* IEA Monthly Oil Report:
– Our global demand estimate for 2018 is unchanged. Growth in 4Q18 was robust at 1.4 mb/d y-o-y and for 2018 as a whole growth was 1.3 mb/d.
– Growth in demand in 2019 is expected to be 1.4 mb/d, unchanged from our last Report.
– Global supply fell 1.4 mb/d to 99.7 mb/d in January as the Vienna Agreement and Alberta’s cuts took effect. Our non-OPEC growth estimates have increased to 2.7 mb/d in 2018 and to 1.8 mb/d in 2019. This is mainly due to higher US output.
* UK Inflation Data (Jan):
– CPI M/M -0.8% versus -0.7% expected, previous +0.2%
– CPI Y/Y +1.8% versus +1.9% expected, previous +2.1%
– Core CPI Y/Y +1.9% versus +1.9% expected, previous +1.9%
– RPI M/M -0.9% versus -0.8% expected, previous +0.4%
– RPI Y/Y +2.5% versus +2.7% expected, previous +2.7%
– PPI Output M/M 0.0% versus 0.0% expected, previous -0.3%
– PPI Output Y/Y +2.1% versus +2.2% expected, previous +2.5% revised to +2.4%
* UK ONS House Price Index Y/Y (Jan) +2.5% versus +2.6% expected, previous +2.8%
* Zone Industrial Production Data (Dec):
– Industrial Production M/M -0.9% versus -0.4% expected, previous -1.7%
– Industrial Production Y/Y -4.2% versus -3.2% expected, previous -3.3% revised to -3.0%
* Germany sold €1.2 Bln of a 2046 bond versus €1.5 Bln target:
– Bid to Cover: 1.2, previous 1.2
– Yield: 0.72%, previous 0.85%
