European equities opened higher after fresh record peaks from their US counterparts, but have pared initial gains, with both the FTSE and the DAX now treading water marginally above parity. As such, core EU debt has pushed ahead, led by German paper, with another record low for the Schatz and the 10-year yield at its lowest since early January. This despite firm IFO numbers, with all components topping expectations while pan-Eurozone CPI matched expectations. An underwhelming German July 2044 auction, which was covered just 1.3 times and only raised €583 Mln with a hefty 41.7% retention, had little impact. In the UK, Q4 GDP was the morning highlight, and despite marginally stronger than forecast growth at 0.7% q/q (f/c +0.6%), soft business investment figures weighed on the Pound. The Euro was also under pressure this morning due to the political uncertainty surrounding the EU as anti-euro candidates like Marine Le Pen make strong inroads. Looking ahead, the release of the FOMC minutes will be the main event today, though before that existing home sales and the Fed’s Powell are due. The US Treasury will also auction $13 Bln of 2-year FRNs and $34 Bln 5-year notes.
Key Headlines/ Data:
* Latest Opinionway poll showed France’s former economy minister Macron is to beat right-wing Le Pen 59/41% in the second round.
* German IFO Data (Feb):
- Business Climate 111.0 versus 109.6 expected, previous 109.8
- Current Assessment 118.4 versus 116.6 expected, previous 116.9
- Expectations 104.0 versus 103.0 expected, previous 103.2
* Eurozone CPI Data (Jan):
- CPI M/M -0.8% versus -0.8% expected, previous +0.5%
- CPI Y/Y F +1.8% versus +1.8% expected, previous +1.8%
- CPI Core Y/Y F +0.9% versus +0.9% expected, previous +0.9%
* ECB Governing Council member Vasiliauskas said that it’s too soon to discuss tapering or changes to the central bank’s forward guidance. He added that the ECB could consider renewing its offer of free long-term liquidity to banks though it cannot be a permanent stimulus measure.
* UK GDP Data (Q4 P):
- GDP Q/Q +0.7% versus +0.6% expected, previous +0.6%
- GDP Y/Y +2.0% versus +2.2% expected, previous +2.2%
- Exports Q/Q +4.1% versus +2.0% expected, previous -2.6%
- Imports Q/Q -0.4% versus +0.3% expected, previous +1.4% revised to +1.3%
- Total Business Investment Q/Q -1.0% versus +0.1% expected, previous +0.4% revised to +0.7%
- Total Business Investment Y/Y -0.9% versus +0.3% expected, previous -2.2% revised to -2.3%
* UK Index of Services Data (Dec):
- Index of Services M/M +0.2% versus +0.1% expected, previous +0.3%
- Index of Services 3M/3M +0.8% versus +0.8% expected, previous +1.0% revised to +0.9%
* Germany sold €583 Mln of 2.5% Jul 2044 Bund: Avg. yield 1.04% (prev. 1.20%) | Bid-to-cover 1.3 (prev. 1.4) | Retention 41.8% (prev. 19.0%)
* There have been reports of a man armed with weapons is inside Mendener school, Germany. Huge police activity reported.
* Italian CPI Data (Jan F):
- CPI M/M +0.3% versus +0.3% expected, previous +0.2%
- CPI Y/Y +1.0% versus +0.9% expected, previous +1.0%
- CPI EU Harmonized M/M -1.7% versus -2.0% expected, previous -1.7%
- CPI EU Harmonized Y/Y +1.0% versus +0.7% expected, previous +1.0%
* Irish PPI Data (Jan):
- PPI M/M +0.2%, previous +0.5%
- PPI Y/Y +1.6%, previous +1.3%
* Swiss Credit Suisse Survey Expectations (Feb) 19.4, previous 18.5