Comment

European Midday/US Morning Report 05 Apr 2018

European cash equity markets joined the global equity rally this morning as fears of a trade war continue to ease (FTSE +1.3%, DAX +1.8%, CAC +1.8%).

European Midday/US Morning Report (by Sigma Squawk)

US officials have struck a more conciliatory tone on their dispute with China over the last twenty-four hours and signalled a willingness to negotiate before the proposed import tariffs are introduced. Basic resources are leading the Stoxx 600 higher in response while the German banking sector has seen outsized gains after the German regulator warned against large mergers. 

In fixed, core EU bonds and Treasuries are both in the red while other perceived safe haven assets such as the Japanese Yen and gold prices have also moved lower. Weaker data will have provided some support to bonds however with soft readings for Euro Zone retail sales and UK service PMI – on the latter, Markit said the UK economy iced up in March, suffering the weakest increase in business activity since the Brexit vote although attributed it to the inclement weather. Sterling saw minor losses in response. Elsewhere in FX, the Dollar Index has inched higher while the Norwegian Krone sits at the top of the G10 pile. 

In energy space, oil prices are little changed on the day with the Qatari Oil Minister al-Sada arguing that it is too soon to exit the OPEC output deal as investment is still low. On the political front, League adviser Siri said the League and Five Star Movement have narrowed their policy differences. Looking ahead, futures are pointing to a higher open on Wall Street with the US trade balance, jobless claims and Canadian trade balance all due.

Key Headlines/Data:

* European Corporate News:
– Commerzbank (+2.4%) | Deutsche Bank (+2.9%): German regulator has warned against big mergers.
– Telecom Italia (+3.0%): Italian state lender CDP to buy a 5% stake in the firm.
– Unicredit (+1.9%): Plans to sell €2.0 Bln of gross non-performing loans.

* German Factory Orders (Feb):
– Factory Orders M/M +0.3% versus +1.5% expected, previous -3.9% revised to -3.5%.
– Factory Orders Y/Y +3.5% versus +6.5% expected, previous +8.2%.

* Swedish Swedbank/Silf Service PMI (Mar) 59.2, previous 59.0.

* Citigroup have upgraded UK equities to overweight citing recent underperformance and market management.

* Qatar Oil Minister al-Sada has argued that it is too soon to exit the OPEC output deal as investment is still low.

* Spanish Markit Service PMI (Mar) 56.2 versus 56.1 expected, previous 57.3.

* Swiss CPI Data (Mar):
– CPI M/M +04% versus +0.2% expected, previous +0.4%.
– CPI Y/Y +0.8% versus +0.7% expected, previous +0.6%.

* Italian Markit/ADACI Service PMI (Mar) 52.6 versus 53.9 expected, previous 55.0.

* French Markit Service PMI (Mar F) 56.9 versus 56.8 flash/expected, previous 57.4.

* German Markit/BME Service PMI (Mar F) 53.9 versus 54.2 flash/expected, previous 55.3.

* Euro Zone Markit Service PMI (Mar F) 54.9 versus 55.0 flash/expected, previous 56.2.

* Chris Williamson, Chief Business Economist at IHS Markit said: “The eurozone economy came off the boil in March, though continued to run hot. Although the final PMI numbers showed the weakest rise in business activity since the start of last year, adding to signs that the growth spurt has peaked, the surveys are still indicative of the economy growing at an impressive 0.6% quarterly rate in March, down from a clearly unsustainably rapid 0.8-0.9% rate around the start of the year.

* UK Markit Service PMI (Mar) 51.7 versus 54.0 expected, previous 54.5.
– Modest upturns in business activity and new work.
– Employment growth slips to three-month low.
– Strong rate of input cost inflation continues in March.

* Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey: “The UK economy iced up in March, suffering the weakest increase in business activity since the Brexit vote amid widespread disruptions caused by some of the heaviest snowfall in years. As a result, first quarter economic growth will likely have been adversely affected. The PMI surveys collectively signal a quarterly GDP growth rate of just under 0.3%, down from 0.4% in the fourth quarter, albeit with the rate of growth sliding to just 0.15% in March alone.

* Euro Zone Retail Sales Data (Feb):
– Retail Sales M/M +0.1% versus +0.5% expected, previous -0.1% revised to -0.3%.
– Retail Sales Y/Y +1.8% versus +2.1% expected, previous +2.3% revised to +1.5%.

* Euro Zone PPI Data (Feb):
– PPI M/M +0.1% versus 0.0% expected, previous +0.4%.

– PPI Y/Y +1.6% versus +1.5% expected, previous +1.5% revised to +1.6%.

* Greek Industrial Production Y/Y (Feb) -2.0%, previous -1.7% revised to -1.2%.

* Reserve Bank of India left the repo-rate unchanged at 6.00%.

* Spain sold €4.02 Bln of 2021, 2028 & 2048 bonds versus €4.0-5.0 Bln target:
– Sold €1.01 Bln of a 2021 bond: Bid to Cover 3.1 | Yield -0.232%.
– Sold €1.36 Bln of a 2028 bond: Bid to Cover 1.5 | Yield 1.148%.
– Sold €1.65 Bln of a 2048 bond: Bid to Cover 1.3 | Yield 2.225%.

* France sold €6.569 Bln of 2028, 2034 & 2048 OAT’s versus €7.5-8.5 Bln target:
– Sold €4.197 Bln of a 2028 OAT: Bid to Cover 1.94 | Yield 0.74%.
– Sold €1.091 Bln of a 2034 OAT: Bid to Cover 1.80 | Yield 1.14%.
– Sold €1.281 Bln of a 2048 OAT: Bid to Cover 1.85 | Yield 1.58%.

* League adviser Siri said the League and Five Star Movement have narrowed their policy differences.

* Nikkei: North Korean leader Kim Jong Un has told the Chinese President of his intent to re-join the six party talks. 








 

























































































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