2018Feb

FC: EUROPEAN CLOSING REPORT: TUESDAY – 6TH – MARCH – 2018 March 06, 2018 at 04:30PM

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Risk sentiment has soured somewhat this afternoon, reversing the broad improvement we saw earlier today after reports that North Korea expressed a willingness to talk to the US about denuclearization. European cash equity markets slipped to new lows although have still closed higher on the day while opening gains on Wall Street were swiftly wiped out. Meanwhile, perceived safe haven assets such as the Japanese Yen and US Treasuries, that had fallen on the North Korea headlines, are vmoving higher again. Elsewhere in currency space, the US Dollar has lost ground with the Dollar Index approaching 89.5 in recent trade despite comments from Dallas Fed President Kaplan that they should start tightening policy sooner rather than later. Data wise, US factory orders were a touch softer than expected at -1.4% MoM (f/c. -1.3%) while January’s advance durable goods figure was revised to -3.6% from -3.7%. Turning to recent trade developments, it was reported this afternoon that Trump believes economic adviser Cohn will leave his post if Trump decides to go forward with tariffs on steel and aluminium. US House speaker Ryan meanwhile said he is encouraging Trump to take a more surgical approach that planned on steel and aluminium tariffs. Still to come today, possible comments from the BoE’s Haldane at 18:15 GMT and earnings after the bell from Ross Stores.

 

Key Headlines/Data:

*  US Corporate News:

  • Target (%): Q4 EPS $1.37 versus $1.37 expected  |  Q4 Revenue $22.8 Bln versus $22.5 Bln expected  |  Sees FY18 EPS $5.15-5.45 versus $5.27 expecte

*  EU Parliament Brexit coordinator Verhofstadt said the problem is there is not a global architecture for the future relationship that Britain has outlined. He did say he wants a special and specific relationship with Britain post-Brexit after what he described were “very useful” meetings with UK government officials including May and Davis.

*  CVS Health have begun their corporate debt offering to help finance their $68.0 Bln takeover of Aetna with as many as nine parts, according to a person with knowledge of the matter.

*  Dallas Fed President Kaplan stuck with his base case for three rate hikes this year but added they should get started sooner rather than later.

*  China Lowers Banks’ Liquidity Requirement (WSJ):

  • Relaxation to a range of 120%-150% of their bad loans from the current minimum of 150% aims to release more credit into the economy

*  @realDonaldTrump – Possible progress being made in talks with North Korea. For the first time in many years, a serious effort is being made by all parties concerned. The World is watching and waiting! May be false hope, but the U.S. is ready to go hard in either direction!

*  UK Brexit Minister Davis says they are eleven areas of contention with the Brexit legal text. He also stressed that a final vote on the Brexit deal would not overturn the result of the referendum.

*  Fitch: The general election result in Italy (‘BBB’/Stable) makes the formation of a stable government difficult, increases the likelihood of some fiscal loosening and further weakens the prospects for structural economic reform, Fitch Ratings says.

*  US Factory Orders (Jan):

  • Factory Orders M/M -1.4% versus -1.3% expected, previous +1.7% revised to +1.8%
  • Ex. Transport M/M +0.4%, previous +0.7% revised to +0.9%

*  US Durable Goods Orders (Jan F) -3.6% versus -3.7% flash/expected, previous +2.6%

  • Ex. Transport -0.3% versus -0.3% flash/expected, previous +0.7%

*  Canadian IVEY PMI (SA) (Feb) 59.6, previous 55.2

*  Trump Is Convinced Cohn Will Leave If Tariffs Happen, Sources Say (Bloomberg):

  • President Donald Trump has told advisers that he believes economic adviser Gary Cohn will leave his White House job if Trump decides to go forward with tariffs on imported steel and aluminum, people familiar with the matter say

*  US House speaker Ryan said he is encouraging Trump to take a more surgical approach that planned on steel and aluminium tariffs. He did add that clearly there is steel and aluminium dumping by some.

*  US Treasury Secretary Mnuchin expects to move forward in the next few weeks with Russian sanctions. Regarding the steel/aluminium tariffs, he said they are trying to avoid undue harm to the economy.

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