2018Feb

FC: EUROPEAN MIDDAY/US MORNING REPORT: THURSDAY – 1ST – MARCH – 2018 March 01, 2018 at 11:30AM

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European cash equity markets are broadly lower ahead of the midway stage, tracking losses late on Wall Street yesterday and Asia overnight (FTSE -0.5%, DAX -1.5%, CAC -1.0%). Earnings impulses have been mixed with heavy losses for WPP and Carrefour balanced by strong gains in AB-Inbev and PSA after their respective corporate updates. In fixed, core EU bonds are ahead along with US Treasuries amid the equity sell off while macro-releases failed to prompt much reaction. Euro Zone manufacturing PMI was revised a touch higher from the flash reading to 58.6 from 58.5 while the unemployment rate was unchanged at 8.6% (f/c. 8.6%). In the UK, mortgage approvals posted a decent beat at 67.5K (f/c. 62.0K) while manufacturing PMI stood at a healthy 55.2 (f/c. 55.1). Away from the macro data, Brexit headlines remain in focus with EU Council President Tusk reiterating that there could be a hard border in Ireland if the UK rejects a customs union. He said he would ask if the UK has a better idea for Ireland when he visits London today, and later added that there can be no frictionless trade outside of the customs union and single market. Sterling has lost some minor ground in currency space while the Dollar Index has nudged higher with moves across the major pairs relatively muted. The Australian Dollar is the laggard after weak capital expenditure data released overnight. Elsewhere, oil prices are in the red with US crude futures just about holding above $61/barrel as gold prices lose 0.5% at the lows. Looking ahead, futures are pointing to a relatively flat open on Wall Street as investors await the second Congressional appearance from Fed Chair Powell at 15:00 GMT. The US data slate is also packed and includes personal income/spending, PCE inflation, jobless claims, Markit PMI, ISM manufacturing and construction spending.

 

Key Headlines/Data:

European Corporate News:

  • Anheuser-Busch InBev (+5.1%): Q4 EBITDA $6.19 Bln versus $6.03 Bln expected  |  Revenue rose to $14.60 Bln from $14.2 Bln a year ago  |  Declared final dividend of €2.0/share
  • Schroders (+0.4%): FY17 net profit £760.2 Mln, up from £618 Mln a year ago  |  Assets under management rose 13% to £447 Bln  |  Will recommend final dividend of 79p/share
  • WPP (-13.6%): FY17 Adj. EBITDA £2.53 Bln versus £2.55 Bln expected  |  Revenue £15.27 Bln versus £14.7 Bln expected  |  Proposed dividend of 60p/share
  • Adecco (-8.4%): Q4 revenue €6.06 Bln versus €6.01 Bln expected  |  Announced €150 Mln share buyback
  • PSA (+7.0%): FY17 net profit rose 12% to €1.93 Bln  |  Revenue rose 21% to €65.2 Bln
  • Carrefour (-6.4%): FY17 net loss €531 Bln (took at €1.3 Bln charge)  |  To pay dividend of €0.46/share
  • Bayer (-1.6%): Sources say the EU Commission will approve their bid for Monsanto

*  Swiss GDP Data (Q4):

  • GDP Q/Q +0.6% versus +0.5% expected, previous +0.6% revised to +0.7%
  • GDP Y/Y +1.9% versus +1.8% expected, previous +1.2%

*  UK Nationwide House Price Index (Feb):

  • House Price Index M/M -0.3% versus +0.2% expected, previous +0.6% revised to +0.8%
  • House Price Index Y/Y +2.2% versus +2.6% expected, previous +3.2%

*  Swedish Manufacturing PMI (Feb) 59.9 versus 57.5 expected, previous 57.0

*  Spanish GDP Data (Q4 F):

  • GDP Q/Q +0.7% versus +0.7% expected, previous +0.7%
  • GDP Y/Y +3.1% versus +3.1% expected, previous +3.1%

*  Swiss Real Retail Sales Y/Y (Jan) -1.4%, previous +0.6% revised to +0.7%

*  Norway Manufacturing PMI (Feb) 57.5 versus 57.8 expected, previous 59.0 revised to 58.4

*  Spanish Manufacturing PMI (Feb) 56.0 versus 54.8 expected, previous 55.2

*  Swiss Manufacturing PMI (Feb) 65.5 versus 64.0 expected, previous 65.3

*  EU Council President Tusk said he was confident that all elements of the draft proposal will be accepted, adding that there could be a hard border in Ireland if the UK rejects a customs union. Tusk did say he will ask if the UK has a better idea for Ireland when he visits London today. He later added that there can be no frictionless trade outside of the customs union and single market.

*  Italian Manufacturing PMI (Feb) 56.8 versus 57.9 expected, previous 59.0

*  French Manufacturing PMI (Feb F) 55.9 versus 56.1 flash/expected, previous 58.4

*  German Manufacturing PMI (Feb F) 60.6 versus 60.3 flash/expected, previous 61.1

*  Euro Zone Manufacturing PMI (Feb F) 58.6 versus 58.5 flash/expected, previous 59.6

  • Broad-based expansion seen across all nations and sub-sectors in February
  • Selling price inflation accelerates to 82-month high, despite slower increase in input costs

*  Greek Manufacturing PMI (Feb) 56.1, previous 55.2

*  Italian Unemployment Rate (Jan P) 11.1% versus 10.8 expected, previous 10.8% revised to 10.9%

*  UK Manufacturing PMI (Feb) 55.2 versus 55.1 expected, previous 55.3:

  • Output growth slows despite improving demand and job creation
  • Price pressures remain elevated but moderate since January

*  UK Net Consumer Credit (Jan) £1.4 Bln versus £1.4 Bln expected, previous £1.5 Bln revised to £1.6 Bln

  • Mortgage Lending £3.4 Bln versus £3.6 Bln expected, previous £3.7 Bln revised to £3.5 Bln
  • Mortgage Approvals 67.5K versus 62.0K expected, previous 61.0K revised to 61.7K

*  Spain sold €3.8 Bln of 2021, 2022 & 2028 bonds versus €3.5-4.5 Bln target:

  • Sold €1.0 Bln of a 2021 bond: Bid to Cover 3.14, previous 2.57 |  Yield -0.34%, previous -0.02%
  • Sold €1.6 Bln of a 2022 bond: Bid to Cover 1.88, previous 4.62 |  Yield 0.35%, previous 0.38%
  • Sold €1.2 Bln of a 2028 bond: Bid to Cover 1.99, previous 2.47 |  Yield 1.50%, previous 1.58%

*  France sold €6.9 Bln of 2026, 2028, 2041 & 2048 OAT’s versus €7.0-8.0 Bln target:

  • Sold €1.9 Bln of a 2026 OAT: Bid to Cover 1.78, previous 2.74 |  Yield 0.61%, previous 0.57%
  • Sold €2.9 Bln of a 2028 OAT: Bid to Cover 1.86, previous 2.02 |  Yield 0.90%, previous 0.98%
  • Sold €0.9 Bln of a 2041 OAT: Bid to Cover 2.26, previous 1.90  |  Yield 1.47%, previous 1.35%
  • Sold €1.2 Bln of a 2048 OAT: Bid to Cover 1.96, previous 2.00 |  Yield 1.71%, previous 1.75%

*  Euro Zone Unemployment Rate (Jan) 8.6% versus 8.6% expected, previous 8.7% revised to 8.6%

*  ECB’s Nouy said Greek banks are still a bit weak, it will take time and determination to make a full recovery.

*  UK sold £2.75 Bln of a 2023 Gilt:

  • Bid to Cover: 2.37
  • Yield Tail: 0.2bp

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