EU growth data beating expectations

Notes/Observations

- Continued EU GDP data showing that economies have contracted by smaller amounted compared to last spring lockdowns (Euro Zone, Dutch, Romania all beat consensus)

- Signs that trade between the UK and EU was normalizing
Mid-West cold blast brings down power grids and upended energy markets

- Various oil refineries in Texas were shut due to weather conditions (including Motiva’s Port Arthur Complex, Marathon’s Galveston Bay and Exxon’s Baytown)

- US agricultural commodities rise with focus on the arctic temperatures in the US (particularly in the Midwest)

- Rekindled concerns about trade tensions between the US and China.

Asia:

- RBA Feb Minutes reiterated stance that Board concluded that very significant monetary support would be required for some time, as it would be some years before the bank’s goals for inflation and unemployment were achieved

- BOJ Gov Kuroda noted that it would carry on with its current policy to help the economy, Covid-19 was having major impact on domestic and overseas economies

- Japan Fin Min Aso had no comment on the rise in equity prices (Nikkei at highest level since 1990); Need to keep eye on bond yields, the fiscal situation was getting worse globally with Japan’s fiscal situation worsening greatly

- China said to be considering rare earth export curbs targeting US Defense Companies such as Lockheed Martin

Europe:

- Eurogroup chief Donohoe (Ireland) stated that supportive economic policy should remain in place as long as needed; should approach national budgets in a coordinated manner and looking for a common approach by the summer

- EU Commissioner for Economic and Financial Affairs Gentiloni (Italy): EU likely to decide in spring when and how govts would start tapering support to their economies as vaccination campaigns allowed the lifting of pandemic lockdowns and economic activity picks up (aka EU to issue guidance in the spring when to return to EU budget rules)

- Trade between EU and UK smoothing out with reports of fewer haulage companies pulling out of jobs in the past week and rejection rate for cargo between France and the UK fell to the lowest level since late Nov

Americas:

- Texas oil & gas regulator (RRC): Some producers (especially in the Permian Basin and Panhandle) were experiencing unprecedented freezing conditions which caused concerns for employee safety and affected production; Approx 5 million people experience rolling blackouts in Mid-West

Energy:

- Iran said to have informed the IAEA nuclear watchdog that it plans put an end to the sweeping inspection powers given to the agency under the 2015

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.20% at 420.30, FTSE +0.35% at 6,780.98, DAX +0.10% at 14,123.35, CAC-40 +0.14% at 5,794.50, IBEX-35 -0.05% at 8,199.00, FTSE MIB -0.01% at 23,602.50, SMI -0.10% at 10,930.00, S&P 500 Futures +0.51%]

Market Focal Points/Key Themes: European indices open modestly higher across the board but later traded mixed; energy and materials sectors among better performers; consumer discretionary and health care sectors among those trending to the downside; materials sector supported by Glencore reinstating dividend and BHP raising outlook; reportedly Santander and Caixabank are negotiating financing half of Naturgy takeover; earnings expected in upcoming US session include Agilent Technologies, Avis Budget and American International Group

Equities

- Consumer discretionary: Michelin [ML.FR] -1% (prelim earnings)

- Financials: Serco Group [SRP.UK] +6% (acquistion)

- Healthcare: Santhera Pharmaceuticals [SANN.CH] -18% (earnings)

- Technology: Lime Technologies [LIME.SE} +7% (earnings)

- Materials: Glencore [GLEN.UK] +3% (earnings)

Speakers

- ECB's Villeroy (France) stated that some companies would not survive the pandemic; other would need equity injections. Most of the €130B in State-backed loans would be paid back

- ECB's Makhlouf (Ireland) reiterated stance that recovery in region to be uneven and bumpy

- ECB SSM member McCaul stated that the worst case scenario of €400B in non-performing loans (NPLs) at the end of the pandemic seemed less likely” to occur

- EU Finance Ministers commented ahead of EcoFin meeting. Eurogroup chief Donohoe (Ireland) noted that the region economies had contracted less than feared

- EU's Sefcovic: Northern Ireland protocol only to protect the Good Friday Agreement - Irish Parliament comments

- German ZEW Economists expressed optimism about the future and confident that German economy would be back on growth track in the coming 6 months

- Singapore Fin Min Heng budget speech in which it would spend S$21B in FY21. To extend wage support scheme for 6 months for the key sectors (aviation and tourism). To set aside S$11.0B for COVID support package , S$4.8B of 2021 budget for public health and S$870M in support for the aviation sector

- BOJ Gov Kuroda stated during a Parliament Q&A that Yield Control (YCC) program and negative rates would not be changed at March review. Reiterated stance that will be hard to achieve CPI target by 2023 and also reiterated view that BOJ easing was not meant to finance the govt debt

- Hong Kong govt confirmed to ease social distancing rules from Thurs, Feb 18th which would allow gyms, cinemas and theme parks to open

Currencies/Fixed Income

- EUR/USD continued to creep higher in a quiet session with the pair at 1.2140 by mid-session. Dealers noted that gains in equities and other riskier assets weighed on the safe-haven instruments; Progress in rolling out coronavirus vaccinations was also aiding optimism

- GBP/USD hit fresh 3-year highs above the 1.39 level. Vaccination progress in the UK ramping up hope that the economic rebound. Also cable aided by signs that trade between the UK and EU was normalizing. Dealers noted that fewer haulage companies were pulling out of jobs in the past week and rejection rate for cargo between France and the UK fell to the lowest level since late Nov

Economic data

- (FI) Finland Dec GDP Indicator Y/Y: -1.8 v -0.8% prior

- (FR) France Q4 ILO Unemployment Rate: 8.0% v 9.1%e; Mainland Unemployment Rate: 7.7% v 8.9%e

- (RO) Romania Q4 Advance GDP Q/Q: 5.3% v 0.5%e; Y/Y: -1.5% v -6.3%e

- (NG) Nigeria Jan CPI Y/Y: 16.5% v 16.1%e

- (HU) Hungary Q4 Preliminary GDP Q/Q: +1.1% v -0.5%e; Y/Y: -3.7% v -5.6%e

- (NL) Netherlands Q4 Preliminary GDP Q/Q: -0.1% v +0.2%e; Y/Y: -2.9% v -2.4%e

- (NL) Netherlands Dec Trade Balance: €5.3B v €6.0B prior

- (NL) Netherlands Dec Consumer Spending Y/Y: -11.9% v -6.5% prior

- (IT) Italy Dec Total Trade Balance: €6.8B v €6.8B prior; Trade Balance EU: -€1.1B v +€0.1B prior

- (SG) Singapore 2021 Budget balance to GDP ratio: -2.2% v -4.0%e

- (DE) Germany Feb ZEW Current Situation Survey: -67.2 v -66.5e; Expectations Survey: 71.2 v 59.5e

- (EU) Euro Zone Q4 Preliminary GDP (2nd reading) Q/Q: -0.6% v -0.7%e; Y/Y: -5.0% v -5.1%e

- (EU) Euro Zone Q4 Preliminary Employment Q/Q: 0.3% v 1.0% prior; Y/Y: -2.0% v -2.3% prior

- (EU) Euro Zone Feb ZEW Expectations Survey: 69.6 v 58.3 prior

- (CY) Cyprus Q4 Preliminary GDP Q/Q: 1.4% v 8.9% prior; Y/Y: -4.5% v -4.3% prior

Fixed income Issuance

- (IT) Italy Debt Agency (Tesoro) opened book to sell new 10-year and 30-year bonds via syndicate

- To sell new Aug 2031 BTP; guidance seen +8bps to mid-swaps

- To sell new May 2051 inflation-linked bonds (BTPei); guidance seen +27bps to mid-swaps

- (ID) Indonesia sold total IDR30.0T vs. IDR35.0T target in bills and bonds

- (ES) Spain Debt Agency (Tesoro) sold total €2.59B vs. €2.0-3.0B indicated in 3-month and 9-month bills

- (ZA) South Africa sold total ZAR vs. ZAR6.6B indicated in 2035, 2040 and 2044 bonds

- (UK) DMO sold £3.25B in 0.125% Jan 2024 Gilts; Avg Yield: % v -0.025% prior; bid-to-cover: x v 2.56x prior; Tail: bps v 0.2bps prior

**Looking Ahead**

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 06:00 (IL) Israel Q4 Advance GDP Y/Y: -3.7%e v +39.7% prior

- 06:30 (UK) DMO to sell £1.25B in 1.75% July 2057 Gilts

- 06:30 (EU) ESM to sell 6-Month Bills

- 06:45 (US) Daily Libor Fixing

-07:00 (TR) Turkey to sell 2-year and 5-year Bonds

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:30 (US) Feb Empire Manufacturing: 6.0e v 3.5 prior

- 08:30 (CA) Canada Dec Int'l Securities Transactions (CAD): No est v 11.8B prior

- 09:00 (CA) Canada Jan Existing Home Sales M/M: No est v 7.2% prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:45 (UK) BOE to buy £1.48B in APF Gilt purchase operation (over 7-20 years)

- 10:00 (MX) Mexico Weekly International Reserve data

- 11:00 (RU) Russia Jan PPI M/M: 1.1%e v 1.5% prior; Y/Y: 4.4%e v 3.6% prior

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills

- 16:00 (US) Dec Total Net TIC Flows: No est v $214.1B prior; Net Long-term TIC Flows: No est v $149.2B prior

- 18:30 (AU) Australia Jan Leading Index M/M: No est v 0.1% prior

- 18:50 (JP) Japan Dec Core Machine Orders M/M: -6.1%e v +1.5% prior; Y/Y: -3.0%e v -11.3% prior

- 18:50 (JP) Japan Jan Trade Balance: ¥625.0Be v ¥749.6B prior (revised from ¥751.0B ); Adjust Trade Balance: ¥497.0Be v ¥477.1B prior; Exports Y/Y: 6.6%e v 2.0% prior; Imports Y/Y:

-5.5%e v -11.6% prior

- 19:30 (SG) Singapore Jan Non-oil Domestic Exports M/M: 6.8%e v 6.6% prior; Y/Y: 5.2%e v 6.8% prior; Electronic Exports Y/Y: No est v 13.7% prior

- 22:00 (KR) South Korea Dec M2 Money Supply M/M: No est v 0.9% prior; “L” Money Supply M/M: no est v 1.1% prior

- 23:30 (TW) Taiwan to sell TWD60B in 2-year Certificate of Deposits (NCD)