Two G7 economies enter technical recession

Notes/observations

- UK and Japan both enter technical recessions after preliminary Q4 GDP readings. GBP (sterling) and gilts fall, as expected, while JPY (yen) gains unusual strength as USD/JPY retargets test of 150 handle.

- EU Earnings Recap: Safran hits record high after strong FY24 guidance; Commerzbank rallies after largest FY net profit in 15 years; Airbus slightly lower after disappointing guidance, choose special div over buyback; Schneider Electric higher on mostly in line Q4 with optimistic guidance; Centrica higher after FY profit beats estimates and a boosted dividend.

- Upcoming US Premarket Earnings: ARCH, CBRE, CVE, DE, GPC, H, HBI, PENN, RS, SO, TRGP, WEN.

- Asia closed mixed with Nikkei225 outperforming at +1.2%. EU indices are +0.1-0.9%. US futures are +0.1-0.2%. Gold +0.2%, DXY -0.1%; Commodity: Brent -0.5%, WTI -0.6%, TTF +1.5%; Crypto: BTC +1.2%, ETH +1.5%.

Asia

- Japan Q4 Preliminary GDP reading saw the country enter a technical recession (Q/Q: -0.1% v +0.2%e; Annualized Q/Q: -0.4% v +1.1%e).

- Singapore Q4 Final GDP Q/Q: 1.2%e v 1.7% advance; Y/Y: 2.2%e v 2.8% advance.

- Australia Jan Employment Change: +0.5K v +25.0Ke; Unemployment Rate at a 2-year high (4.1% v 4.0%e).

- Australia Feb Consumer Inflation Expectation: 4.5% v 4.5% prior.

- Australia Jan Household Spending M/M: +3.1% v -3.5% prior; Y/Y: 3.6% v 3.6% prior.

Global conflict/tensions

- US intelligence expressed concerns that Russia wanted to put a nuclear weapon into space.

Europe

- ECB's Nagel (Germany) urged patience in setting monetary policy; Not worried about undershooting the inflation goal; History suggested worse to cut too soon than too late. Inflation was going in the right direction but not there yet. Saw inflation back at 2% in 2025 at the latest.

- ECB’s De Guindos (Spain) noted he was optimistic about the evolution of inflation; reiterated ECB will be data dependent in our decisions.

- German government said to cut 2025 GDP growth forecast from 1.5% to 1.0% (**Reminder: On Feb 14th German Econ Min Habeck confirmed government to revise 2024 growth forecast down to 0.2%).

- President Putin replied to a question over US elections and stated he preferred 'more predictable' Biden over Trump.

Americas

- Fed's Barr stated that FOMC planned in depth discussion of balance sheet issues soon; Needed more good inflation.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.60% at 488.14, FTSE +0.08% at 7,574.71, DAX +0.70% at 17,063.50, CAC-40 +0.90% at 7,746.76, IBEX-35 +0.10% at 9,926.74, FTSE MIB +0.96% at 31,630.00, SMI +0.30% at 11,247.30, S&P 500 Futures +0.15%].

Market focal points/key themes: European indices open higher across the board and remained upbeat through the early part of the session; among sectors leading the way higher are consumer discretionary and industrials; lagging sectors include health care and energy; oil & gas subsector under pressure after surprise build in US inventories and analyst action affecting the sector; automotive subsector supported following Renault and Stellantis’ earnings; focus on release of series of US macro data later in the day such as Empire Manufacturing and Retail Sales; earnings expected in the upcoming Americas session include Applied Materials, Deere, DraftKings and DoorDash.

Equities

- Consumer staples: Pernod Ricard [RI.FR] +4.0% (earnings).

- Financials: Commerzbank [CBK.DE] +4.5% (earnings, €1.0B capital distribution to shareholders; no exposure to US property market).

- Industrials: Airbus [AIR.FR] -0.5% (earnings, FY24 guidance, special dividend; CEO comments), Stellantis [STLA.FR] +4.0% (earnings; buyback), Renault [RNO.FR] +6.5% (earnings; outlook), Schneider Electric [SU.FR] +3.0% (earnings), Safran [SAF.FR] +4.0% (earnings, FY24 guidance).

- Technology: Ensurge Micropower [ENSU.NO] +35.5% (manufacturing breakthrough in world’s first commercial-scale solid-state lithium microbattery).

- Materials: DSM-Firmenich [DSMN.NL] +12.0% (earnings; unit spin off).

Speakers

- ECB chief Lagarde testified that services inflation had shown signs of persistence; Data continued to signal subdued activity in near term; Weakness in activity was broad based among sectors. Reiterated would continue to follow a data-dependent approach as ECB needed confidence that inflation was heading towards 2% target.

- ECB's De Cos (Spain) noted that projections saw inflation continuing to slow and be around the 2% target in 2025 and 2026.

- UK Chancellor of the Exchequer (Fin Min) Hunt commented that low growth was not a surprise but did see signs economy was turning a corner. Although times are tough, must stick to govt plan.

- Sweden Central Bank (Riksbank) Gov Thedeen stated that there was some probability that could cut rates during first half of 2024; Interest rates now seen at their peak. Any rate cuts should be made with caution as there were risks that could cause inflation to rise again.

- France Fin Min Le Maire stated that would revise 2024 GDP growth forecast in coming days.

- Czech Central Bank (CNB) Vice Gov Zamrazilova stated that rates to stay elevated until clear CPI would remain at 2%.

- German Association of Chambers of Trade and Industry (DIHK saw German 2024 GDP at -0.5% with CPI at 2.7%.

- Russia govt spokesperson refuted speculation that Russia had placed nuclear weapons in space.

- Japan Chief Cabinet Sec Hayashi stated that would mobilize all available policies to achieve higher growth and for wage increases that exceeded inflation.

- Philippines Central Bank Policy Statement noted that inflation expectations were firmly anchored. Appropriate to keep monetary policy unchanged in the near-term but ready to adjust policy setting as needed.

- Philippines Central Bank updated its Staff Projections which cut 2024 CPI forecast from 3.7% to 3.6% while maintaining 2025 CPI forecast at 3.2%.

- IEA Monthly Oil Report (OMR) maintained its 2024 global oil demand growth at 1.2M bpd while raising 2024 global oil supply growth from 1.5M bpd to 1.7M bpd. Noted that global oil demand growth was losing momentum.

- White house economic advisor Brainard stated that was expecting more progress on reducing inflation.

Currencies/fixed income

- GBP was softer as UK data paints a picture of discomfort with high restrictive BOE interest rates. BOE futures were now pricing approx 80bps in rate cuts following UK GDP data implying technical recession. The first 25bps cut scene by Aug 2024 with a 66% chance for first cut by June. Some analysts believed BOE not likely to pay much attention to contraction in the UK economy as it remained focused on concrete inflation numbers.

- EUR/USD holding above the 1.07 level.

- USD/JPY drifted away from recent highs after various Japanese govt officials continued to comment on FX. Pair at 150.05 by mid-session.

Economic data

- (NL) Netherlands Jan Unemployment Rate: 3.6 v 3.6% prior.

- (FI) Finland Dec Final Retail Sales Volume Y/Y: 0.7 v 0.1% prelim.

- (UK) Q4 Preliminary GDP Q/Q: -0.3% v -0.1%e; Y/Y: -0.2% v +0.1%e; Dec Monthly GDP M/M: -0.1% v -0.2%e.

- (UK) Q4 Preliminary Private Consumption Q/Q: -0.1% v +0.1%e; Government Spending Q/Q: -0.3% v -0.2%e; Gross Fixed Capital Formation Q/Q: 1.4% v 0.0%e; Exports Q/Q: -2.9% v -0.8% prior; Imports Q/Q: -0.8% v -1.8% prior.

- (UK) Q4 Preliminary Total Business Investment Q/Q: +1.5% v -0.1%e; Y/Y: 3.7% v 2.6% prior.

- (UK) Dec Industrial Production M/M: +0.6% v -0.1%e; Y/Y: +0.6% v -0.4%e.

- (UK) Dec Manufacturing Production M/M: +0.8% v -0.1%e; Y/Y: 2.3% v 0.6%e.

- (UK) Dec Construction Output M/M: -0.5% v -0.1%e; Y/Y: -3.2% v -1.4%e.

- (UK) Dec Index of Services M/M: -0.1% v -0.2%e; 3M/3M: -0.2% v +0.1%e.

- (UK) Dec Visible Trade Balance: -£14.0B v -£14.9Be; Overall Trade Balance: -£2.6B v -£2.4Be.

- (UK) Q4 Preliminary Output Per Hour Y/Y: -0.3% v +0.5% prior.

- (NO) Norway Jan Trade Balance (NOK): 72.9B v 77.3B prior.

- (DK) Denmark Jan PPI M/M: +2.5% v -0.9% prior; Y/Y: -0.2% v -3.6% prior.

- (PH) Philippines Central Bank (BSP) left the Overnight Borrowing Rate unchanged at 6.50% (as expected).

- (CH) Swiss Jan Producer & Import Prices M/M: -0.5% v -0.6% prior; Y/Y: -2.3% v -1.1% prior.

- (ES) Spain Jan Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 3.4% v 3.4% prelim- (ES) Spain Jan Final CPI EU Harmonized M/M: -0.2% v -0.2% prelim; Y/Y: 3.5% v 3.5% prelim.

- (ES) Spain Jan CPI Core M/M: -0.4% v +0.2% prior; CPI Core (final) Y/Y: 3.6% v 3.6% prelim.

- (CH) Swiss Jan SECO Consumer Confidence: -41.0 v -33.0e.

- (CZ) Czech Jan CPI M/M: 1.5% v 2.0%e; Y/Y: 2.3% v 2.9%e.

- (TR) Turkey Jan Central Govt Budget Balance (TRY): =150.7B v -842.5B prior.

- (IN) India Jan Trade Balance: -$17.5B v -$20.0Be; Exports Y/Y: 3.1% v 1.0% prior; Imports Y/Y: +3.0v -4.8% prior.

- (IT) Italy Dec Total Trade Balance: €5.6B v €3.9B prior; EU Trade Balance: -€2.8B v -€2.4B prior.

- (PL) Poland Jan CPI M/M: 0.4% v 0.5%e; Y/Y: 3.9% v 4.1%e.

- (IT) Italy Dec General Government Debt: €2.863T v €2.855T prior (record high).

- (EU) Euro Zone Dec Trade Balance: €13.0B v €15.6Be; Trade Balance NSA (unadj): €16.8B v €20.3B prior.

- (GR) Greece Jan CPI Y/Y: 3.1% v 3.5% prior; CPI EU Harmonized Y/Y: 3.2% v 3.7% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.9B vs. €5.0-6.0B indicated range in 2027, 2029 and 2033 SPGB bonds.

- Sold €1.862B in 2.50% May 2027 SPGB bonds; Avg Yield: 2.875% v 2.799% prior; bid-to-cover: 1.72x v 1.63x prior.

- Sold €2.186B in 3.50% May 2029 SPGB bonds; Avg Yield: 2.873% v 2.621% prior; Bid-to-cover: 1.63x v 1.66x prior.

- Sold €1.848B in 2.35% July 2033 SPGB; Avg Yield: 3.139% v 3.980% prior; Bid-to-cover: 1.86x v 2.33x prior.

- (FR) France Debt Agency (AFT) sold total €11.992B vs. €10.5-12.0B in 2027, 2029 and 2031 Bonds.

- Sold €4.703B in 2.50% Sept 2027 Oat; Avg Yield: 2.67% v 2.56% prior; Bid-to-cover: 2.66x v 2.05x prior.

- Sold €4.995B in 2.75% Feb 2029 Oat; Avg Yield: 2.62% v 2.55% prior; Bid-to-cover: 2.33x v 2.14x prior.

- Sold €2.294B in 0.0% Nov 2031 Oat; Avg Yield: 2.65% v 2.59% prior; Bid-to-cover: x v 1.74x prior.

Looking ahead

- (PE) Peru Jan Unemployment Rate: 6.9%e v 6.4% prior.

- (PE) Peru Dec Economic Activity Index (Monthly GDP) Y/Y: 0.4%e v 0.3% prior.

- (NG) Nigeria Jan CPI Y/Y: 29.5%e v 28.9% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:50 (FR) France Debt Agency (AFT) to sell €1.75-2.5B in inflation-linked 2028, 2029, 2032 and 2053 bonds (Oatei).

- 06:00 (CZ) Czech Republic to sell 3-month Bills.

- 06:00 (IE) Ireland Dec Trade Balance: No est v €4.1B prior.

- 06:00 (IE) Ireland Jan CPI M/M: No est v 0.5% prior; Y/Y: No est v 4.6% prior.

- 06:00 (IE) Ireland Jan CPI EU Harmonized M/M: No est v 0.4% prior; Y/Y (final): No est v 2.7% prelim.

- 06:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 06:30 (CL) Chile Central Bank (BCCh) Jan Minutes.

- 07:00 (US) USDA Outlook.

- 07:00 (IE) ECB's Lane (Ireland, chief economist).

- 07:00 (CZ) Czech Central Bank to comment on CPI data.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Feb 9th: No est v $586.4B prior.

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

- 08:00 (UK) BOE's Greene.

- 08:15 (CA) Canada Jan Annualized Housing Starts: 235.0Ke v 249.3K prior.

- 08:30 (US) Feb Empire Manufacturing: -12.5e v -43.7 prior.

- 08:30 (US) Feb Philadelphia Fed Business Outlook: -8.1e v -10.6 prior.

- 08:30 (US) Jan Advance Retail Sales M/M: -0.2%e v 0.6% prior; Retail Sales (ex-auto) M/M: 0.2%e v 0.4% prior; Retail Sales (ex-auto/gas) 0.2%e v 0.6% prior; Retail Sales (control group): 0.2%e v 0.8% prior.

- 08:30 (US) Jan Import Price Index M/M: 0.0%e v 0.0% prior; Y/Y: -1.3%e v -1.6% prior; Import Price Index (ex-petroleum) M/M: 0.0%e v 0.0% prior.

- 08:30 (US) Jan Export Price Index M/M: -0.2e v -0.9% prior; Y/Y: No est v -3.2% prior.

- 08:30 (US) Initial Jobless Claims: 220Ke v 218K prior; Continuing Claims: 1.88Me v 1.871M prior.

- 08:30 (CA) Canada Dec Manufacturing Sales M/M: -0.6%e v +1.2% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:50 (UK) BOE's Mann.

- 09:15 (US) Jan Industrial Production M/M: 0.2%e v 0.1% prior; Capacity Utilization 78.8%e v 78.6% prior; Manufacturing Production: 0.0%e v 0.1% prior.

- 10:00 (US) Feb NAHB Housing Market Index: 46e v 44 prior.

- 10:00 (US) Dec Business Inventories: +0.4%e v -0.1% prior.

- 10:20 (SE) Sweden Central Bank (Riksbank) Breman.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (CO) Colombia Q4 GDP Q/Q: -0.5%e v +0.2% prior; Y/Y: +0.8%e v -0.3% prior; 2023 GDP Y/Y: No est v 7.5% prior.

- 11:00 (CO) Colombia Dec Economic Activity Index (Monthly GDP) Y/Y: 0.8%e v 2.3% prior.

- 11:30 (IL) Israel Jan CPI M/M: +0.1%e v -0.1% prior; Y/Y: 2.7%e v 3.0% prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 4% 2029 Bonds.

- 12:00 (NO) Norway Central Bank (Norges) Gov Bache Annual Address.

- 13:40 (NZ) RBNZ Gov Orr.

- 16:00 (US) Dec Net Long-term TIC Flows: No est v $126.1B prior; Total Net TIC Flows: No est v $260.2B prior.

- 16:00 (KR) South Korea Jan Import Price Index M/M: No est v -1.7% prior; Y/Y: No est v -4.1% prior.

- 16:00 (KR) South Korea Jan Export Price Index M/M: No est v -0.9% prior; Y/Y: No est v -2.3% prior.

- 16:30 (NZ) New Zealand Jan Manufacturing PMI: No est v 43.1 prior.

- 18:00 (KR) South Korea Jan Unemployment Rate : No est v 3.3% prior.

- 19:00 (US) Fed's Bostic.

- 19:30 (SG) Singapore Jan Non-oil Domestic Exports M/M: +0.5%e v -2.8% prior; Y/Y: N+4.3%e v -1.5% prior; Electronic Exports Y/Y: No est v -11.7% 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 1.2% prior.

- 23:00 (MY) Malaysia Q4 GDP Q/Q: -1.6%e v 2.6% prior; Y/Y: 3.4%e v 3.4% advance; 2023 GDP Y/Y: 3.8%e v 3.8% advance.

- 23:00 (MY) Malaysia Q4 Current Account Balance (MYR): 4.9Be v 9.1B prior.

- 23:30 (JP) Japan Dec Tertiary Industry Index M/M: +0.2%e v -0.7% prior.

- 22:30 (JP) Japan to sell 3-Month Bills.