2018Feb

FC: EUROPEAN MIDDAY/US MORNING REPORT: MONDAY – 5TH – FEBRUARY – 2018 February 05, 2018 at 11:30AM

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European cash equity markets are nursing heavy losses ahead of the midway stage (FTSE -1.2%, DAX -1.0%, CAC -1.1%). The Euro Stoxx 600 has shed 1.1% versus Friday’s close, falling to a fresh two-month low this morning and on course for a sixth straight day of declines. Corporate updates have provided little support meanwhile with Ryanair and Randgold Resources in the red after their respective numbers. In fixed, we have seen some minor divergence in core EU debt with Gilts posting minor gains while German government bonds nurse minor losses after some mixed data impulses – Euro Zone service PMI was revised higher in January to 58.0 from 57.6 in the flash while UK service PMI missed at 53.0 (f/c. 54.1). Moves in the currency markets have been relatively muted although Sterling plays the laggard after the soft PMI print and renewed political uncertainty. The Dollar Index is offside but holding above 89.00 while the Japanese Yen and Swiss Franc have benefitted from the risk adverse trading. Elsewhere, oil prices are offside with Brent losing over one-percent at the lows while gold prices have added around 0.4%. Looking ahead, futures are pointing to a lower open on Wall Street with triple digit losses for the DJIA. Data wise, US service PMI and ISM non-manufacturing are both due.

 

Key Headlines/Data:

*  European Corporate News:

  • RyanAir (-2.7%): Q4 net profit €105.6 Mln, up from €94.7 Mln a year ago  |  Revenue €1.40 Bln, up from €1.35 Bln a year ago
  • Randgold Resources (-.9%): Q4 pre-tax profit $114.3 Mln, down from $127.8 Mln a year ago  |  Full-year production +5% to 1.32 Mln oz
  • Sandvik (+0.2%): Q4 operating profit 4.07 Bln versus 3.72 Bln expected
  • Fiat Chrysler (-1.0%): Reuters – The U.S. Justice Department is seeking “substantial” civil fines from Fiat Chrysler Automobiles NV after the government filed suit accusing the company of illegally using software that led to excess emissions in 104,000 U.S. diesel vehicles sold since 2014, a person briefed on the matter said Friday.

*  BBC: Downing Street has insisted Britain will leave the EU customs union after Brexit amid claims of Tory disunity over the UK-EU future relationship.

*  Sunday Times: Theresa May will face a coup that would install a “dream team” of “three Brexiteers” if she persists with plans to keep Britain in a customs union with the European Union, Tory MPs warned last night.

*  German media reported that the CDU/CSU and SPD parties want to present a formal coalition agreement by tomorrow.

*  Swedish Service PMI (Jan) 61.3, previous 64.6

*  Spanish Service PMI (Jan) 56.9 versus 55.0 expected, previous 54.6

*  French Service PMI (Jan F) 59.2 versus 59.3 flash/expected, previous 59.1

*  German Service PMI (Jan F) 57.3 versus 57.0 flash/expected, previous 55.8

*  Euro Zone Service PMI (Jan F) 58.0 versus 57.6 flash/expected, previous 56.6

*  Euro Zone Sentix Investor Confidence (Feb) 31.9 versus 33.2 expected, previous 32.9

*  UK Service PMI (Jan) 53.0 versus 54.1 expected, previous 54.2:

  • Services output rises at slowest pace since September 2016
  • New order growth weaker than 2017 average
  • Price pressures remain elevated, but wane as costs show smallest rise for 16 month

*  Euro Zone Retail Sales (Dec):

  • Retail Sales M/M -1.1% versus -1.1% expected, previous +1.5% revised to +2.0%
  • Retail Sales Y/Y +1.9% versus +1.9% expected, previous +2.8% revised to +3.9%

*  EU Brexit Minister Barnier said the UK must respect the red lines of the EU.

*  German SPD leader Schulz said the prospective German coalition partners have reached an agreement on the European section of talks

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