European Outlook: Japanese stock markets headed south despite a weaker Yen, as investors held back ahead of tomorrow’s meeting between Trump and Abe. ASX, Hang Seng and Chinese bourses meanwhile moved higher after U.S. equities managed to claw back losses and close with gains on Wednesday. In Europe markets also came up from lows in late trade and markets closed narrowly mixed, with FTSE 100 and Italian MIB outperforming. FTSE 100 futures are posting marginal gains at the moment and U.S. futures are narrowly mixed, as investors await further guidance on U.S. policies. Yields continued to head south in Asia but after Bund and Gilt futures rallied yesterday and Eurozone spreads narrowed markedly as peripherals outperformed it remains to be seen how far down yields can go. Already released the U.K. RICS house price balance improved slightly. Still to come Germany releases December trade data, Switzerland has unemployment numbers and Norway Q4 GDP.
New Zealand: RBNZ held rates at 1.75%, matching widespread expectations. The statement by Governor Wheeler was cautiously upbeat as he said “Growth in New Zealand has increased as expected…” and “The outlook remains positive…” As for inflation, it has returned to the target band as past oil prices declines fall-out of the annual calculation. They remain of the view that inflation will gradually return to the midpoint of the target band. On the currency, he said that “A decline in the exchange rate is needed.” But while the growth and inflation outlook may be looking somewhat better, Wheeler ended his statement with “Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly.”
US: WTI crude has rallied to session highs following the EIA inventory report which revealed a large 13.8 mln bbl increase in crude stocks. The contract has topped at $52.65 after bottoming at $51.51 after the data. The market had sold off on the API report on Tuesday, and with today’s EIA report’s corroborating, it appeared short covering was the driver behind the fairly sharp rally. In addition, gasoline and distillate stocks came in lower than expected, a bullish development.
Canada: Yields have extended declines amid risk off trades, with the firm January housing starts report overlooked in favour of global developments, since they have been improved slightly to a 207.4k rate in January from a revised 206.3k clip in December (was 207.0k). Also, the government’s measures to temper the housing market are projected to gradually slow sales and construction. Hence, a firm starts report to begin the year is not likely to worry the BoC. The 10-year GoC has fallen to a session low 1.652%, leaving a 3.5 bp drop from Tuesday’s close. The 2-year is at 0.724%, also a session low, which is good for a 1 bp decline relative to yesterday’s close. Equities have turned (slightly) negative, according to the S&P/TSX 60 index futures after a nearly unchanged perch earlier.
Germany reported: a sa trade surplus of EUR 18.4 bln in December, down from EUR 21.8 bln in the previous month, as exports slumped 3.3% m/m, after a very strong November rise of 3.9% m/m, while imports were unchanged in December. after rising 3.5% m/m in November. Unadjusted data show a total trade surplus of EUR 252.9 bln in 2016, up from EUR 244.3 bln in 2014, as imports rose 1.2% and imports 0.6%. Imports as well as exports stood at record highs, but this is nominal data and impacted by exchange rate and oil price developments and official estimates for 2016 GDP reported a negative contribution from net exports to overall growth last year, which highlights the impact of price movements, but also that for once it wasn’t actually export strength that underpinned the recovery last year.
Main Macro Events Today
- US Jobless Claims – Initial claims data for the week of February 4 is out today and should reveal a slight headline increase to 250k from 246k last week and 260k the week prior to that. Claims have been striking a tight path lately and we expect a February average of 250k, up slightly from 248k in January but down from 258k in December.
- Canada NHPI – A 0.1% increase in the new housing price index is anticipated following the 0.2% gain in November. Bank of Canada Deputy Governor Schembri speaks today at Western University, London, Ontario.
- BOE Gov. Carney – BOE Governor Carney speaks at the Bank of England Reception in London.
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