2018Feb

FC: EUROPEAN MIDDAY/US MORNING REPORT: WEDNESDAY – 28TH – FEBRUARY – 2018 February 28, 2018 at 11:30AM

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European cash equity markets are broadly lower ahead of the midway stage (FTSE -0.3%, DAX -0.2%, CAC -0.3%). Stocks have followed their US and Asian counterparts lower following relatively hawkish remarks from Fed Chair Powell yesterday which have raised the likelihood of four rate increases at the Fed this year. Earnings are also at play with heavy losses for Bayer, ITV and Taylor Wimpey after their respective updates although Dialog Semiconductors has jumped over ten-percent. In fixed, both core EU bonds and US Treasuries are little changed on the day with little reaction shows to this morning’s macro releases – Euro Zone CPI  was in line at +1.0% YoY, as was French GDP at +0.6% QoQ while German unemployment fell -22K (f/c. -15K). The Dollar Index has inched higher in currency space, extending above yesterday’s peak while the Swedish Krona is among the weakest of the G10’s after GDP and retail sales figures fell short of expectations. With regards to Brexit, the EU have just published a legal draft of the withdrawal agreement with the UK amid speculation of hard border with Ireland. UK PM May is also facing growing opposition from her own lawmakers on her stance on the customs union. Elsewhere, oil prices are little changed on the day after API reported a smaller than expected build in crude stocks overnight. Looking ahead, futures are pointing to a slightly higher open on Wall Street amid a busy data slate –  US Q4 GDP, Chicago PMI and pending home sales are all due alongside Canadian producer prices and Belgium GDP.

 

Key Headlines/Data:

European Corporate News:

  • Bayer (-3.1%): Q4 net profit €148 Mln versus €475 Mln expected (took a €455 Mln hit from US fiscal reforms and Brazil issues)  |  Revenue €8.60 Bln versus €8.63 Bln expected  |  Sees 2018 earnings and sales at 2017 levels
  • ITV (-6.4%): FY17 pre-tax profit £500 Mln versus £558 Mln expected  |  Revenue rose to £3.13 Bln from £3.06 Bln  |  Declared dividend of 7.8p/share
  • Taylor Wimpey (-2.4%): FY17 Adj. pretax profit £812 Mln versus $814 Mln expected  |  Revenue £3.97 Bln versus £3.93 Bln expected
  • Repsol (+0.4%): FY17 Adj. net-profit €2.4 Bln versus €2.2 Bln expected
  • Admiral Group (-1.8%): FY 17 profit £404 Mln, up from £278 Mln a year ago  |  Announced a 13% increase to its final dividend
  • Dialog Semiconductors (+10.0%): Q4 operating profit rose 2% to $75.4 Mln  |  Revenue rose 27% to $464 Mln
  • Erste Group (+3.1%): Q4 net-profit €329 Mln, up from €85.6 Mln a year ago  |  Proposed dividend of €1.20/share

*  UK PM May ‘will refuse Brexit deal that threatens UK integrity’ (Guardian):

  • Theresa May was preparing to warn the EU that she would not sign up to “anything that threatens the constitutional integrity of the UK” as Boris Johnson was accused of hinting that a hard border could be reintroduced in Ireland.

*  German GFK Consumer Confidence (Mar) 10.8 versus 10.8 expected, previous 11.0

*  French GDP Q/Q (Q4 P) +0.6% versus +0.6% expected, previous +0.6%

  • CPI Y/Y (Jan) +1.2% versus +1.4% expected
  • CPI EU Harmonized Y/Y (Jan) +1.4% versus +1.5% expected, previous +1.5%
  • Consumer Spending M/M (Jan) -1.9% versus +0.5% expected, previous -1.2%
  • PPI M/M (Jan) +0.1%, previous 0.0%

*  Swiss KOF Leading Indicator (Feb) 108.0 versus 106.2 expected, previous 106.9 revised to 107.6

*  Swedish GDP (Q4)

  • GDP Q/Q +0.9% versus +1.0% expected, previous +1.2%
  • GDP Y/Y +3.3% versus +3.4% expected, previous +2.7%

*  Swedish Retail Sales (Jan):

  • Retail Sales M/M +0.1% versus +0.5% expected, previous +1.4% revised to +1.1%
  • Retail Sales Y/Y +1.2% versus +2.9% expected, previous +3.3% revised to +2.7%

*  German Unemployment Rate (Feb) 5.4% versus 5.4% expected, previous 5.4%

  • Unemployment Change -22K versus -15K expected, previous -25K

*  Swiss Credit Suisse ZEW Survey – Expectations (Feb) 25.8, previous 34.5

*  Euro Zone CPI Data (Feb A):

  • CPI Y/Y +1.0% versus +1.0% expected, previous +1.0%
  • Core CPI Y/Y +1.2% versus +1.2% expected, previous +1.3%

*  Italian CPI Data (Feb P):

  • CPI Y/Y +0.6% versus +0.7% expected, previous +0.7%
  • EU Harmonized Y/Y +0.7% versus +1.0% expected, previous +1.1%

*  Responding to details of a draft UK government treaty with the EU, the DUP said proposals for a hard border with Ireland are ludicrous and will not go anywhere.

*  Fitch: Italy Local And Regional Governments Face Challenges Regardless Of Election Outcome:

  • We think there are risks of post-election fiscal easing.

*  Ten lawmakers in UK PM May’s conservative party are now opposed to her stance on the customs union.

*  Germany sold €2.0 Bln of a 2028 bond versus €3.0 Bln target:

  • Bid to Cover: 1.2, previous 1.5
  • Yield: 0.67%, previous 0.69%

*  Portuguese GDP Data (Q4):

  • GDP Q/Q +0.7% versus +0.7% expected, previous +0.5%
  • GDP Y/Y +2.4% versus +2.4% expected, previous +2.5%

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