Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
EXECUTIVE SUMMARY:
- ITALY SET TO EASE RESTRICTIONS IN MOST OF COUNTRY...
- ...WHILE GERMANY'S MERKEL CLASHES WITH REGIONAL LEADERS OVER STRICTER LOCKDOWN
- FRENCH HEALTH BODY RECOMMENDS MESSENGER RNA AS 2ND SHOT FOR UNDER-55s
- U.K. SETS PLAN FOR TRAVEL RETURN WITH COSTLY TEST REQUIREMENTS
- ITALY ACCELERATING PLANS FOR UP TO $48 BILLION MORE BORROWING
Fig. 1: Feb German and French Industrial Production Comes In Below Expectations
BBG, MNI
NEWS:
ITALY/COVID (BBG): Italy is set to ease lockdown restrictions, lifting some curbs that have been weighing on the economy in the region surrounding Milan and across the country as the latest virus resurgence slows, officials said. Health Minister Roberto Speranza will likely sign a decree on Friday evening to shift many regions classified as high-risk "red" areas to medium-risk "orange" status, said the officials, who asked not to be named discussing a confidential issue. The development would mean that from early next week more retail businesses could open and people would be given more freedom to move around within their municipalities. Bars and restaurants would remain open only for takeout orders while travel to other regions would still be mostly banned.
GERMANY/COVID (BBG): Chancellor Angela Merkel's next round of talks with regional leaders on Monday are likely to be considerably scaled back amid deep disagreement over pandemic strategy, according to the mayor of Berlin. Merkel has been calling for a stricter lockdown to check a "third wave" of infections, but has faced opposition from some of the 16 state premiers, who have wide-ranging powers under Germany's federal system. Some regions have failed to implement restrictions agreed with Merkel's government, prompting the German leader to threaten to seize central control of pandemic policy.
GERMANY/COVID (RTRS): Germany's top public health official said on Friday that it would not be possible to halt a third wave of the coronavirus pandemic that is causing a worrying increase in patients landing in hospital intensive care units. "We cannot prevent this third wave but my hope is that we can flatten it - we can only do this together," Lothar Wieler, head of the Robert Koch Institute for infectious diseases, told a news conference. Wieler said he expected hospitals to be massively burdened with incoming patients infected with the the now-dominant variant of the COVID-19 virus first discovered in Britain that is more infectious and deadly than earlier strains.
FRANCE/COVID VACCINE (RTRS): French health body Haute autorite de la sante, or HAS, Friday confirmed it advises against using AstraZeneca's vaccine against coronavirus infection as a second shot for the approximately 500,000 people aged under 55 years old who received a first shot before age restrictions were decided. France's HAS recommends the use of a messenger RNA vaccine for the second shot, with a 12 week interval; says it doesn't yet have sufficient arguments to change its current recommendations on ageHAS still studying data on thrombosis risk. HAS restricted the use of AstraZeneca's vaccine to people aged 55 and over on March 19.
U.K./COVID (BBG): The U.K. said it will decide by early next month whether Britons can resume taking international holidays on May 17, while implementing coronavirus testing rules that airlines criticized as too costly.Countries will be rated according to their Covid-19 risk in a traffic light system, the Department for Transport said Friday. At a minimum, travelers will need to buy a two-test package, including a so-called PCR assessment, that typically costs around 220 pounds ($300) per person and can range much higher."The framework announced today will help allow us to reopen travel safely and sustainably, ensure we protect our hard-won achievements on the vaccine roll-out and offer peace of mind to both passengers and industry," Transport Secretary Grant Shapps said in an emailed statement.
ITALY FISCAL (BBG): Italian Prime Minister Mario Draghi is bringing forward plans for as much as 40 billion euros ($48 billion) in new borrowing as the cost of keeping the economy afloat drains the state's coffers and street protests heap pressure on the government, according to two people familiar with the matter.The government will need between 35 billion and 40 billion euros to cover all of the country's needs, from maintaining furloughs to sustaining help for businesses and families, the people said, asking not to be identified as discussions are confidential. A spokesperson for Draghi declined to comment.
ECB (BBG): "It is too soon. We don't have any evidence that things will turn so benign in the third quarter" to remove PEPP at that time, European Central Bank Governing Council member Yannis Stournaras says in interview with Bloomberg TV's Francine Lacqua."I don't see any reason why we should withdraw the monetary stimulus" that's currently being provided; PEPP should only be unwound when there's concrete evidence that inflation is improving on a permanent basis.
ECB (BBG): "We see the light at the end of the tunnel but we have to find a way to accelerate the exit from the tunnel," European Central Bank Governing Council member Ignazio Visco says in interview with Bloomberg TV's Francine Lacqua. Monetary policy measures have to be maintained as long as necessary; postponing exit is possibly less worrisome than unwinding too early.
E.U./U.S. (BBG): The U.S. proposal for a global tax deal in corporate taxes "goes in the right way" and is "very interesting", EU commissioner Thierry Breton said on France Info radio on Friday.
DATA:
German IP Fell in Feb Against Expectations
GERMANY FEB IND PROD -1.6% M/M, -6.4% Y/Y; JAN -2.0% M/M
- German industrial production declined by 1.6% in Feb, in contrast to markets looking for a rebound after Jan's decline (BBG: +1.5%).
- This marked a second successive decrease following eight consecutive months of increases.
- Jan's reading was revised up to -2.0% from -2.5% reported previously.
- Annual production fell by 6.4%, indicating that IP was lower than before the pandemic hit.
- While the production of consumer goods increased by 0.2%, output of capital and intermediate goods declined by 3.2% and 1.0%, respectively.
- Energy output fell by 1.0% in Feb, while construction output declined by 1.3%.
- Nevertheless, survey evidence continues to signal strong business activity growth in the manufacturing sector with the manufacturing PMI surging to a record high in Mar.
- The truck toll mileage index, which is closely connected to industrial production, fell further in February, but data published today showed an increase by 4.7% in Mar, which bodes well with IP going forward.
French IP At 10-Month Low In Feb
FRANCE FEB IP -4.7% M/M, -6.6% Y/Y; JAN +3.2% M/M
FRANCE FEB Manuf. Output -4.6% M/M, -7.1% Y/Y; JAN +3.3% M/M
- M/M French IP fell 4.7% in Feb, following Jan's increase, falling short of markets looking for a small uptick (BBG: +0.5%).
- Feb's decline marked the steepest fall since Apr 2020 where IP plummeted by -20.5%.
- Annual IP plunged by 6.6%, its lowest level since September after falling by 0.2% in Jan.
- Monthly mfg output decreased 4.6% in Feb, showing the lowest reading since Apr 2020, while annual mfg output fell to a six-month low of 7.1%.
- Feb's decrease was broad-based with capital goods production recording the largest decline (-6.8%), followed by consumer non-durable goods (-5.2%).
- While energy output dropped by 4.6%, production of intermediate and consumer durable goods was down 2.3% and 2.0%, respectively.
- While hard data showed a decline of IP in Feb, surveys continue to suggests solid business activity expansion in the French manufacturing sector.
- The manufacturing PMI rose to the highest level since 2000 in Mar, while Insee's business climate indicator for the manufacturing industry ticked up in Feb and remained stable in Mar, although it remained below the pre-crisis level .
MNI: SPAIN FEB IND PRD 0.0% M/M, -2.1% Y/Y; JAN -0.8% M/M
MNI: GERMANY FEB SA TRADE BALANCE +EUR19.1BN
MNI: SWISS MAR UNEMPLOYMENT -5.9% M/M; +16.5% Y/Y
FIXED INCOME: BTPs fall after wires suggest more issuance needed
Core fixed income has been under some pressure this morning, largely just reversing the moves higher seen yesterday.
- The most market moving news of the day has been a sell-off in BTPs following the release of a Bloomberg story that suggested Prime Minister Draghi was "rushing through" stimulus plans that would require an additional $48bln of borrowing. BTP futures saw a knee jerk fall from 149.03 to 148.63 but have at the time of writing recovered a little over 10 ticks. Our technical analyst notes that initial support comes in at 148.57, the March 30 low, with key short-term support at 148.33, the March 18 low.
- US PPI and an appearance from Kaplan are the only calendar highlights for the remainder of the day.
- TY1 futures are down -0-8+ today at 131-23+ with 10y UST yields up 4.0bp at 1.661% and 2y yields up 0.8bp at 0.158%.
- Bund futures are down -0.27 today at 171.62 with 10y Bund yields up 2.1bp at -0.315% and Schatz yields up 0.7bp at -0.712%.
- Gilt futures are down -0.21 today at 128.27 with 10y yields up 2.9bp at 0.777% and 2y yields up 0.8bp at 0.049%.
FOREX: Morning Dollar Buying
Most of the action this morning has been in FX, with broader base buying interest of the Dollar, after the currency was leaning in the red during the overnight session.
- The USD trades in the green against all majors, and leads against the NOK in G10s.
- Immediate resistance in USDMOK comes at 8.5184 (printed 8.5180 high so far), ahead of 8.5300 (38.2% short term retracement).
- The Aussie is the second worst performer against the USD, although off the worst levels at the time of typing.
- Further pressure on the Aussie would open to the April low at 0.7532, which is also the lowest level since 12th of December.
- AUDUSD is off the low (0.7588), at 0.7612.
- Long were seen bailing out as we cleared below the 1.3700 handle in Cable.
- We tested support noted at 1.3670/63 Low Mar 25/Low Feb 5 (traded 1.3671 low), now at 1.3710.
- The move in Cable helped EURGBP towards next initial target at 0.8705 High Mar 1, but the cross just fell short to 0.86975 high.
- Looking ahead, US PPI is the only notable data, as Wholesale Inventories will be final reading.
- Speakers: ECB de Giundos, Riksbank's Ingves and Breman at IMF, and Fed Kaplan
EQUITIES: EuroStoxx 50 Touches Post-Financial Crisis High
- Asian equities closed mixed, with Japan's NIKKEI up 59.08 pts or +0.2% at 29768.06 and the TOPIX up 7.61 pts or +0.39% at 1959.47. China's SHANGHAI closed down 31.878 pts or -0.92% at 3450.677 and the HANG SENG ended 309.27 pts lower or -1.07% at 28698.8
- European stocks are mixed, with the German Dax down 13.35 pts or -0.09% at 15190.72, FTSE 100 down 20.18 pts or -0.29% at 6942.22, CAC 40 up 15 pts or +0.24% at 6165.72 and Euro Stoxx 50 up 1.14 pts or +0.03% at 3977.15 (earlier hit post-2008 high of 3,984.07).
- U.S. futures are trading fairly flat, with the Dow Jones mini up 46 pts or +0.14% at 33436, S&P 500 mini up 2.5 pts or +0.06% at 4091.5, NASDAQ mini down 18 pts or -0.13% at 13729.75.
COMMODITIES: Dollar Strength Sinks Precious Metals
- WTI Crude down $0.17 or -0.29% at $59.34
- Natural Gas down $0.02 or -0.67% at $2.506
- Gold spot down $9.55 or -0.54% at $1748.56
- Copper down $3.25 or -0.79% at $406.1
- Silver down $0.24 or -0.96% at $25.2245
- Platinum down $15.71 or -1.27% at $1217.42
LOOK AHEAD:
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.