2018Feb

FC: EUROPEAN OPENING REPORT : WEDNESDAY – 28TH – FEBRUARY – 2018 February 28, 2018 at 05:49AM

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Both US government bond yields and the Greenback gained after relatively hawkish remarks from Fed Chair Powell as he testified to the House Financial Services Committee. In his opening remarks, Powell reiterated the view that further gradual rates increases will be required but also noted that they will have to strike a balance between avoiding an overheated economy and bringing PCE inflation to 2%. He went on to say in the Q&A session that his own outlook for the economy has strengthened since December while recent data has increased his confidence that inflation will rise. Powell’s remarks also weighed on US cash equity markets, notably the admission that they do see high asset prices. Bourses closed firmly in the red although financials outperformed amid the prospect of higher rates. Elsewhere, oil prices held in negative territory with US crude futures settling at $63.01 (-$0.90). Meanwhile, gold prices also continued losses, lower by $14.47 at the closing bell. Also of note, No. 2 Republican Cornyn in US Senate says Congress may not have time to address infrastructure this year.

Following the US close, NBC, citing Senior Intel Officials, reported the US is said to have evidence Russia compromised 7 states in 2016 election (Alaska, Arizona, California, Florida, Illinois & Wisconsin).

Following the red close in the US, Asian bourses followed suit while investors were also digesting the manufacturing and non-manufacturing PMIs out of China which fell to 50.3 (f/c 55.1) and 54.4 (f/c 55.0), respectively, in February. Data wise elsewhere, Japanese retail sales for January fell 1.8% (f/c -0.6%) m/m and rose 1.4% (f/c +2.4%) y/y, while preliminary industrial production figures for January also misses, down 6.6% (f/c -4.0%) m/m and rising 2.7% (f/c +5.3%) y/y. Despite the data misses, the Japanese Yen remained little changed. The Yen did, however, strengthen after the BoJ trimmed purchases of JGBs with 25-40 years to maturity to ¥70 Bln from ¥80 Bln in the previous operation. Down under, New Zealand’s ANZ business confidence rose to -19.0 in February, while activity outlook climbed to +20.4. In Europe, the UK’s GfK consumer confidence fell to -10, as expected, in February, while the BRC shop price index declined 0.8% (f/c -0.6%) y/y. Elsewhere, the PBoC set the yuan mid-point at 5.3294 against the Dollar and skipped OMOs.

Looking ahead, we get German consumer confidence, Swiss consumption indicator, Norwegian retail sales, Turkish trade balance and Danish GDP, followed by French GDP, CPI, PPI and consumer spending at 07:45 GMT. Next at 08:00 GMT, we get Switzerland’s leading indicator, followed by Swedish GDP, retail sales, PPI and wages at 08:30 GMT. Then at 08:55 GMT, we get German unemployment, followed by Swiss ZEW surveys and Spain’s current account balance at 09:00 GMT. At 09:30 GMT, we get Portuguese CPI, followed by Euro Zone CPI, Italian CPI and Greek retail sales & PPI at 10:00 GMT. At 10:30 GMT, we get the ECB LTRO result, followed by Irish retail sales and Portuguese GDP at 11:00 GMT. Also of note, Germany auctions €3.0 2028 bonds at 10:30 GMT.

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