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As trade war fears ease (again) following news late on Wednesday that the White House would consider tariff "carve outs" for Canada and Mexico, markets are modestly higher ahead of a fresh monetary policy catalyst from the ECB this morning. Mario Draghi will be the center of attention today as investors wait to see whether there will be any moves toward an exit from stimulus measures amid the threat of a potential trade war. That said, the ECB is unlikely to make major changes to guidance at today’s meeting as inflation remains far below a target of just under 2%, even with stronger economic growth.

Meanwhile, European stocks drift higher, led by technology shares following strong gains in Asia. Nasdaq futures climb steadily toward session highs, mirroring those gains, while the S&P has also found a bid in recent bid.

The European cash open mimicked the lead seen on Wall St. and overnight in Asia, with major bourses recouping prior losses (Eurostoxx 50 +0.2%) with the exception of the DAX 30 (-0.2%) which sees Merck (-3.0%) at the bottom of the index after the release of its earnings this morning. Material and Energy names are the session laggards, with BHP Billiton (-3.9%), Anglo American (-2.0%) underperforming in the FTSE and Arcelormittal (-1.0%) in the CAC. Elsewhere, the Telecom sector (+1.0%) outperformance has been supported by phone operators Vodafone (+1.3%), Orange (+0.54%) and DT Telekom (+0.7%).

The strong European open followed another green session out of Asia, with Australia's ASX 200 (+0.7%) and Nikkei 225 (+0.5%) higher with sentiment also underpinned by economic releases including encouraging trade figures in Australia and stronger than expected Japanese Final Q4 GDP. Elsewhere, Hang Seng (+1.5%) outperformed and Shanghai Comp. (+0.7%) initially lagged after the PBoC refrained from liquidity operations, before better than expected Chinese trade data provided some inspiration.

Bunds retrace some of yesterday’s advance as underperformance in the belly of the curve leads to bear flattening in the 5s30s; Italy outperforms with the rest of the periphery amid speculation of a coalition between euroskeptic and center-left parties.

The Bloomberg Dollar Spot Index rallies, pressuring EUR/USD below 1.2400 and pulling CAD, MXN back from overnight highs. WTI crude holds above $61/barrel amid bullish demand outlooks from Exxon Mobil and Goldman Sachs.

Market Snapshot

  • S&P 500 futures little changed at 2,729.50
  • STOXX Europe 600 up 0.4% to 374.01
  • MXAP up 0.7% to 175.10
  • MXAPJ up 0.9% to 576.15
  • Nikkei up 0.5% to 21,368.07
  • Topix up 0.4% to 1,709.95
  • Hang Seng Index up 1.5% to 30,654.52
  • Shanghai Composite up 0.5% to 3,288.41
  • Sensex up 1.2% to 33,433.90
  • Australia S&P/ASX 200 up 0.7% to 5,942.87
  • Kospi up 1.3% to 2,433.08
  • German 10Y yield rose 1.0 bps to 0.665%
  • Euro down 0.2% to $1.2388
  • Italian 10Y yield fell 4.2 bps to 1.687%
  • Spanish 10Y yield fell 0.5 bps to 1.445%
  • Brent futures little changed at $64.30/bbl
  • Gold spot little changed at $1,325.63
  • U.S. Dollar Index up 0.1% to 89.74


Top Overnight News

  • The ECB’s new forecasts will show growth and inflation similar to the picture of solid economic momentum seen three months ago, according to euro-area officials familiar with the matter
  • The EU’s top financial-services official has told member states and lawmakers to get on with plans to hand the bloc’s main markets regulator new powers over investment funds and derivatives clearinghouses
  • China’s Foreign Minister Wang Yi vowed a “justified and necessary response” to any efforts to incite a trade war, in the country’s most forceful response yet to Trump’s threatened tariff actions
  • Purchases of foreign bonds by Japanese banks’ trust accounts, often seen as a proxy for the nation’s pension funds, reached a record 841.7 billion yen in February
  • China Feb. exports rise 44.5% y/y in dollar terms, est. 11.0%; gain 36.2% y/y in yuan terms, est. 7.4%
  • Japan revised 4Q GDP rises annualized 1.6% q/q; est. +1%


Asian stocks recouped some of the prior day’s losses with gains across the region after trade protectionism concerns somewhat eased and amid a continued friendlier tone from North Korea, with the nation said to offer a conditional halt to its ICBM program. ASX 200 (+0.7%) and Nikkei 225 (+0.5%) were higher with sentiment also underpinned by economic releases including encouraging trade figures in Australia and stronger than expected Japanese Final Q4 GDP. Elsewhere, Hang Seng (+1.5%) outperformed and Shanghai Comp. (+0.7%) initially lagged after the PBoC refrained from liquidity operations, before better than expected Chinese trade data provided some inspiration. Finally, 10yr JGBs were subdued as demand lacked amid the improved risk appetite and following an uneventful enhanced-liquidity auction, while the BoJ also began their latest 2-day policy meeting which is not expected to provide any fireworks

Top Asian News

  • Hong Kong Seen Draining Liquidity as Currency Drops to 1984 Low; Hong Kong Stocks Rise as Volatility Builds in Topsy-Turvy Week
  • Coincheck to Start Paying Back Victims of $500 Million Heist
  • BNP Paribas Expects Noble Group to Skip March 9 Coupon Payment
  • L Catterton-Backed Brand GXG Is Said to Plan $300 Million IPO

As trade war fears are easing, the European cash open mimicked the lead seen on Wall St. and overnight in Asia, with major bourses recouping prior losses (Eurostoxx 50 +0.2%) with the exception of the DAX 30 (-0.2%) which sees Merck (-3.0%) at the bottom of the index after the release of its earnings this morning. Material and Energy names are the session laggards, with BHP Billiton (-3.9%), Anglo American (-2.0%) underperforming in the FTSE and Arcelormittal (-1.0%) in the CAC. Elsewhere, the Telecom sector (+1.0%) outperformance has been supported by phone operators Vodafone (+1.3%), Orange (+0.54%) and DT Telekom (+0.7%). So far, newsflow has been on the lighter side as participants await the ECB decision, in which there is rising speculation that the central bank could drop its QE easing bias.

Top European News

  • German Factory Orders Drop After Demand Surged at End of 2017
  • ECB Outlook Is Said to See Solid Growth Similar to December View
  • Aviva Falls After Claims Surge Hits Profit at Canadian Unit
  • John Lewis Warns of Further Profit Squeeze After a Tough Year
  • Adidas Leads DAX Gains; Discount to Peers Unwarranted, BofA Says

In FX, the DXY is mildly firmer within a relative narrow 89.770-545 band, as the Greenback ekes out relatively small gains vs all its  G10 rivals on more reports that Canada, Mexico and possibly other nations may be given exemptions from US import tariffs that are  expected to be officially signed off later today or on Friday. This has calmed global trade war fears to an extent, while North Korea  continues its charm initiative on the nuclear front by offering a conditional ICBM suspension. However, the impending ECB meeting provides potential more currency market activity with expectations very split on whether the QE easing bias will dropped or not.  Eur/Usd currently towards the lower end of a tight range around the 1.2400 level amidst reports that new ECB Staff forecasts will be  largely the same as in December, but latest forward guidance and the tone of President Draghi’s press conference/Q&A are key along with the aforementioned pledge to increase and/or extend asset buying if needed. Options break-even pricing assigns a circa +/- 67 pip move on the eventuality as a benchmark. Elsewhere, Usd/Jpy also remains largely anchored around a big figure – 106.00 where a hefty expiry runs off (1.1 bn), and now awaiting the BoJ for more independent impetus. The Aud and Nzd continue to underperform around 0.7800 and 0.7250 vs the Usd as the partial Dollar revival weighs on commodity prices, and the Aud fails to derive any sustained benefit from a big trade data beat overnight. Elsewhere, some Nok weakness vs the Eur after Stats Norway trimmed its 2018 inflation and growth forecasts (cross nudging towards 9.7300) and Usd/Hkd is close to the top of its peg tolerance ceiling with the HKMA indicating that 7.8500 is the line in the sand (vs 7.8300 at present). USD/TRY also firmer this morning, after Moody’s downgraded Turkey’s sovereign rating deeper into junk territory with the outlook negative.

In commodities, oil prices hovering around yesterday’s lows with WTI back at USD 61/bbl (-0.1%), while Brent is around the low  USD 60s (-0.2%) amid the slight firming of the USD index. Price action has been quiet, with crude futures trading within a tight  range thus far. In terms of newsflow, Platts reported that Libya could restart their 90k bpd Elephant field after reaching a deal with  guards. China Feb. iron ore imports 84.66mln tons vs. Prev. 100.3mln tons M/M, while crude oil imports 32.26mln tons vs. Prev.  40.6mln tons M/M. Saudi Energy Minister Al-Falih says energy demand is growing at a rate not seen for decades. Libya could restart  90k bpd Elephant field after reaching a deal with guards. Of note, The field was shut down on Feb. 23rd due to protests by local  guards over environmental concerns

US Event Calendar

  • 7:30am: Challenger Job Cuts YoY, prior -2.8%
  • 8:30am: Initial Jobless Claims, est. 220,000, prior 210,000
  • 8:30am: Continuing Claims, est. 1.92m, prior 1.93m
  • 9:45am: Bloomberg Consumer Comfort, prior 56.2
  • 12pm: Household Change in Net Worth, prior $1.74t