Optimism surrounding the US-China trade negotiations has cooled somewhat from yesterday as investors await further details of what was agreed at the Washington talks. As such, European cash equity markets are broadly lower ahead of the midway stage (FTSE -1.1%, DAX -0.1%, CAC -0.2%, FTSE MIB -0.1%). The FTSE 100 has underperformed by a wide margin as the pound rallied on reports that UK PM May is considering a delay to Brexit. In individual moves, we saw declines for Standard Chartered, Peugeot and Fresnillo after their respective updates. In the bond markets, German Bunds opened to the upside while Gilts were little changed but both have slipped to new session lows in recent trade. There has not been much data for investors to work with – German GFK Consumer Confidence was unchanged at 10.8 (f/c. 10.8) while French consumer confidence improved to 95 (f/c. 92) from 92. We did also hear from the ECB’s Lane who said he only expects reasonably small adjustments to the economic forecasts. Turning to currencies, as mentioned, the pound has surged to the top of the G10 pile on talk of a Brexit delay while comments from Bank of England officials at the Inflation Report hearings provided few surprises – Gbp/Usd topped out at $1.3238, its best level since mid-October. The Dollar Index has lost -0.1% to 96.35 while the Australian Dollar and Canadian Dollar are the weakest. Elsewhere, oil prices are little changed for the day with US crude futures down -0.1% while spot gold is down -0.1%. Looking ahead, futures are pointing to a slightly lower open on Wall Street. Data wise, we await US housing starts, building permits, house prices and consumer confidence. Fed Chair Jerome Powell will also testify to Congress from 15:00 GMT.
Key Headlines/Data:
* European Corporate News:
– BASF (+3.8%): Q4 Adj. EBIT €630 Mln, previous €552 Mln | Sees FY19 Sales/EBIT up slightly
– Persimmon (+3.6%): FY18 Pretax Profit £1.09 Bln versus £1.06 Bln expected
– Travis Perkins (+13.9%): FY18 Adj. Pretax Profit £346.8 Mln versus £334.0 Mln expected
– Fresnillo (-7.5%): FY18 Pretax Profit $483.9 Mln | Warned of a challenging year ahead
– Standard Chartered (-2.3%): FY19 Profit £3.9 Bln versus £3.9 Bln expected | To cut $700 Mln in costs
– Peugeot (-1.9%): FY18 Sales €74.03 Bln versus €74.76 Bln expected
– BT (-2.7%): Cut to ‘hold’ from ’buy’ at Berenberg
– IAG (-3.6%): MSCI to drop IAG from Spanish index
* U.K.’s Theresa May to Consider Delay to Brexit Date (Bloomberg):
– May is considering a plan to delay Brexit and stop the U.K. leaving the European Union with no deal next month, according to people familiar with the situation.
* May buckles: PM to rule out no-deal Brexit – media reports (Reuters):
– British Prime Minister Theresa May will on Tuesday propose formally ruling out a no-deal Brexit in a bid to avoid a rebellion by members of parliament who are threatening to grab control of the divorce process, The Sun and Daily Mail newspapers reported.
* Norwegian Consumer Confidence (Q1) 12.7, previous 14.6 revised to 14.2
* Italian Deputy PM Salvini ruled out a budget correction this year.
* German GFK Consumer Confidence (Mar) 10.8 versus 10.8 expected, previous 10.8
* French Consumer Confidence (Feb) 95.0 versus 92.0 expected, previous 91.0 revised to 92.0
* UK Attorney General Cox said Brexit talks are going very satisfactorily.
* ECB’s Lane said there has been a sequence of negative shocks in recent times but only expects reasonably small adjustments to the forecasts.
* Bank of England Governor Carney said gradual hikes will be needed if the economy performs as expected. He also said that a no-deal scenario would be inflationary, adding that they would provide all possible stimulus after no-deal, subject to price stability:
– Vileghe said a quarter percentage point increase in the Bank Rate each year seems a reasonable base case.
– Ramsden said he agreed that some limited and gradual tightening is needed over the forecast period. He also reiterated the collective view that policy could move in either direction in the event of no-deal
* Germany sold €4.0 Bln of a 2021 bond versus €5.0 Bln target:
– Bid to Cover: 1.6, previous 1.6
– Yield: -0.54%, previous -0.58%
