OPEC and non-Opec members to come to an agreement later this month on production freeze

Notes/Observations

- German Feb industrial production not as bad as expected

- Continued indications that OPEC and non-Opec members to come to an agreement later this month on a production freeze

- FOMC minutes on deck to gauge rate outlook

 

Overnight news

Asia:

- China Mar Caixin PMI Services: 52.2 v 51.2 prior

Europe:

- Iceland's PM resigns, first casualty of Panama Papers

Americas:

- Republican Cruz and Democrat Sanders score key victories in Wisconsin

- Atlanta Fed GDP Q1 forecast lowered to +0.4% from +0.7% prior

Energy:

- (US) Weekly API Oil Inventories: Crude: -4.3M v +2.6M prior; first draw in 7 weeks

- (EC) Ecuador President: Latin America oil producers to meet on Apr 8th to discuss an oil output freeze

 

Economic data

- (IN) India Mar PMI Services: 54.3 v 51.4 prior, PMI Composite: 54.3 v 51.2 prior

- (JP) Japan Feb Preliminary Leading Index: 99.8 v 99.8e; Coincident Index: 110.3 v 110.3e

- (DE) Germany Feb Industrial Production (beat) M/M: -0.5% v -1.8%e; Y/Y: 1.3% v 0.4%e

Fixed Income Issuance:

- (IN) India sold total INR150Bin 3-month and 6-month Bills

- (PT) Portugal Debt Agency (IGCP) opened its book to sell EUR-denominated 2022 and 2045 OT bonds

- (SE) Sweden sold total SEK15B vs SEK15B indicated in 3-month and 6-month Bills

- (NO) Norway sold NOK3.0B vs NOK3.0B indicated in 1.5% 2026 bonds; Yield 1.20% v 1.40% prior; Bid-to-cover: x v 2.23x prior

- (GR) Greece Debt Agency (PDMA) sold total €1.375B vs. €875M indicated in 26-week Bills; Avg Yield: 2.97% v 2.97% prior; Bid-to-cover: 1.3x v 1.3x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.4% at 2,907, FTSE +0.5% at 6,123, DAX flat at 9,566, CAC-40 +0.6% at 4,275, IBEX-35 +0.8% at 8,454, FTSE MIB +1.4% at 17,353, SMI +0.6% at 7,718, S&P 500 Futures +0.4%]

Market Focal Points/Key Themes: European equity indices opened higher and currently trading mixed across the board on the back of a rebound in the price of oil and as investors await the minutes of the Federal Reserves March meeting; Shares of Shire leading the gains in the FTSE 100 after speculation the company could become a potential acquisition target if Pfizer/Allergan deal falls through; Commodity stocks led the gains for most of the early morning session in the FTSE 100 before a sell off in oil over the course of the session caused commodity stocks to retreat; Total and ENI still trading higher in the Eurostoxx on the back of higher energy prices; Peripheral lenders Unicredit and Intesa Sanpaolo leading the gains in the Eurostoxx; upcoming US earnings include Acuity Brands, Global Payments, Monsanto, MSC Industrial Direct, RPM International, Schnitzer Steel Industries, and Constellation Brands.

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Auto Trader AUTO.UK -1.7% (current and former managers agree to sell stake in the company), Bang & Olufsen BO.DK -1.4% (Q3 results, FY15/16 outlook revised), Barry Callebaut BARN.CH +9.0% (H1 results), EasyJet EZJ.UK -2.7% (March statistics), Hennes & Mauritz HMB.SE +3.9% (Q1 results), Topps Tiles TPT.UK +0.5% (Trading update)]

- Energy: [Tullow Oil TLW.UK +2.8% (Norway well update)]

- Financials: [HSS Hire Group HSS.UK -3.2% (FY15 results)]

- Healthcare: [Shire PLC SHP.UK +2.4% (speculation company could become potential acquisition target if Pfizer/Allergan deal falls through)]

- Industrials: [Daimler DAI.DE -0.8% (Mercedes Benz deliveries), ThyssenKrupp TKA.DE +0.6% (JV with Tata Steel may plan for an IPO), UK Mail UKM.UK +0.8% (Trading update)]

- Materials: [Glencore GLEN.UK -0.9% (Confirms to sell 40% of Agricultural Unit to CPPIB for $2.5B)]

- Utilities: [A2A A2A.IT +2.0% (FY15 results)]

 

Speakers

- Spain Catalonia region excluded from ECB bond-buying program. Debt of all other Spanish regional governments, including Andalucia, Valencia, were included on list

- Ireland Fine Gael official English: New partnership govt in country was needed. Arrangement with FF would take a week or so to reach an accord

- Swedish National Financial Management Authority (ESV) saw budget deficits in 2015-18 period and a surplus in 2019. It raised its 2016 GDP growth forecast from 3.1% to 3.4% and 2017 GDP from 2.4% to 3.0%

- Turkey govt official Elitas: Central Bank should cut interest rates radically

- Japan Chief Gov't Spokesmans Suga reiterated that watching FX markets with vigilance and would act appropriately as needed

- Japan Fin Min Aso declined to comment about stronger yen currency

- RBA Assistant Gov Kent: Global conditions reinforced sentiment that inflation likely to remain low. Monetary policy stance might later if outlook change was significant. Link between forecasts and policy was not mechanical

- Russia said to expect to freeze oil production but not exports at upcoming meeting in Doha. Higher oil prices could trigger a recovery in shale oil production and saw $45-50 per barrel as acceptable for global oil market balance . Did not plan to curve production at new projects but use other tools to contain production while freeze was in place. Russia aimed to deepen cooperation with OPEC but does not expect to join the organization. Saw Iran struggling to reach pre-sanction output oil levels

- OPEC Gen Sec along with Saudi Oil Minister said to take part in oil meeting schedule for Apr 19-21st in Moscow (Note: Oil production freeze meeting in Doha is set for Apr 17th)

 

Currencies

- The USD was a touch firmer against the European pairs but still contained within recent ranges. No new themes emerged in the session. Overall Fed still viewed to be on course to make a further rate hike later in the year. Dealers eye the releasr of FOMC Mar minutes to gauge the rate outlook.

- GBP/USD was a tad softer as Brexit risk likely to remain in play through to the Jun-23rd referendum

- USD/JPY pair hovered just above the pivotal 110 level as numerous analysts saw little possibility of Japan stepping in to curb yen appreciation trend. Japan Chief Gov't Spokesmans Suga reiterated that watching FX markets with vigilance and would act appropriately while Fin Min Aso had no comments on the yen

Fixed Income:

- Bund futures trade at 163.93, down 26 ticks as Equities rebound slightly after yesterday's steep falls. Resistance now lies at 164.43 contract highs followed by 164.75 then 165.51. Analysts continue to see support at 163.74 gap fill with a move lower targeting 163.07 followed by 162.83 then 162.19.

- Gilt futures trade at 121.21 down 42 ticks leading the way lower as Equity markets stabilize. 121.86 marks yesterday's high with a move above eyeing resistance at 121.97 contract highs. Support remains at 120.99 gap fill with a move lower seeing 120.76 low with continuation targeting 120.22 low. Short Sterling futures trade lower down 1 to 3bp across the curve as spreads rebound slightly from the recent flattening seen. Mar17Mar18 spread trade 14/15s up 2 bp from yesterday's lows.

- Wednesday's liquidity report showed Tuesday's excess liquidity rose to €740.1B a rise of €0.1B from €740.0B prior. This was primarily due to AFs and MonPol portfolios falling to a record negative €329.5B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €38M from a prior €20M.

- Corporate issuance saw a further $8.3B come to market with Toyota's 4 part offering the highlight, with weekly volume standing above $20B, and YTD over $400B. Euro denominated issuance saw over €12B come to market yesterday , which put pressure on Bund yields putting it below the 0.1% mark before bouncing. Looking ahead Lagardere is looking to come to market for a 7 year €500M offering, with further issuance including Telefonica Emisiones, and L-Bank part of at least €5B to price.

 

Looking Ahead

- 05:30 (DE) Germany to sell €4.0B in 0.0% Mar 2018 Schatz

- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%

- 06:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves

- 06:00 (RU) Russia to sell combined RUB30B in 2025 and 2031 OFZ bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Apr 1st: No est v -1.0% prior

- 07:00 (IE) Ireland Mar Consumer Confidence: No est v 105.8 prior

- 08:15 (US) Baltic Dry Bulk Index

- 10:00 (CA) Canada Mar Ivey Purchasing Managers Index (Seasonally Adj): No est v 53.4 prior; PMI undj: No est v 56.7 prior

- 10:00 (PL) Poland Central Bank (NBP) Gov Belka post rate decision press conference

- 10:20 (BR) Brazil Mar Vehicle Production: No est v 131.3K prior; Vehicle Sales: No est v 146.8K prior; Vehicle Exports: No est v 36.5K prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:30 (BR) Brazil weekly Currency Flows

- 12:20 (US) Feds Mester (hawk, FOMC voter) -12:30 (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley

- 14:00 (US) FOMC Minutes from Mar 15-16 Meeting

- 18:00 (NZ) New Zealand Mar ANZ Truckometer Heavy M/M: No est v +1.6% prior

- 20:00 (US) Feds Kaplan (moderate, non-voter)

- 20:30 (JP) BOJ Gov Kuroda at branch manager meeting

- 20:30 (TW) Taiwan Mar CPI Y/Y: 1.3%e v 2.4% prior; WPI Y/Y: -4.5%e v -4.8% prior

- 23:30 (TH) Thailand Mar Consumer Confidence: No est v 74.7 prior, Economic Confidence: No est v 63.5 prior

- 23:35 (JP) Japan to sell 3-Month Bills