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The EUR takes a hit as ECB is dovish - EMEA brief 08 March

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DanielaIG

  • The Euro was nearing a 21-month low yesterday as the ECB was perceived to be dovish after its speech, ahead of US jobs data to be released today. During Thursday's session the EURUSD hit $1.1176, its lowest since June 2017, as the ECB announced it had pushed back the first rate increase to at least 2020 and announced a new round of TLTRO funding for European Banks.
  • China has reported worse than expected trade data for the month of February. Its dollar-denominated exports fell by 20.7 per cent, much below expectations of a fall of just 4.8 per cent. The overall trade surplus was reported as $4.12 billion, much weaker than the $26.38 surplus expected.
  • Asian stocks were trading lower on Friday after the ECB cut its growth forecasts and initiated a stage of monetary stimulus. Japan's Nikkei hit 3-week lows at 21,102.79, adding up to a 2.2 per cent decline in the past week. The Shanghai Composite was down 4.4% to 2,969.86 and the ASX200 closed at 6,203.80, down by 0.96%.
  • Airbus is unlikely to pay back hundreds of millions of loans it received to develop the superjumbo A380, even after it decided to stop its production. Airbus CEO, Tom Enders, said that governments knew that when financing this project they were putting their capital at risk if the development of the plane was not successful. Airbus decided an early wind-down of the A380 after major airlines like Emirates and Eithad Airways cancelled their orders of the superjumbo.

Asian overnight: Sharp declines throughout Asia saw the Chinese Shenzhen composite lose 3%, the biggest one-day fall since October. Growth concerns remain key to this recent selloff, with Chinese trade data overnight providing yet another clue of the impact trade wars are having upon business in the world’s second biggest economy. The huge switch from 9.1% growth in exports, to 20.7% contraction certainly grabbed the headlines, with some attributing this move to the impact of the Lunar new year. Meanwhile, the Japanese Yen enjoyed a positive session, gaining ground from the risk-off mood, alongside an improved an improved Q4 GDP figure; rising from 0.3% to 0.5%.

UK, US and Europe: Britain is running out of time to secure a Brexit deal if their exit from the European Union is to take place on March 29. The second meaningful vote on the exit agreement is to take place on Tuesday March 12, but MPs are expected to be shown the agreement the day before the vote, which means that crucial talks will have to continue over the weekend as the EU has confirmed no amendment to the backstop has yet been reached. If the deal is unsuccessful in Parliament on Tuesday, MPs will be asked to vote if they wish remove the option to have a Hard Brexit on Wednesday. If a no-deal Brexit is rejected, then MPs will vote on Thursday March 14 whether they wish to extend article 50 and ask Brussels if they can have an short extension to approve an exit deal.

Looking ahead, all eyes will be on the US, with the jobs report expected to bring substantial volatility. With the German factory orders already released this morning, the European session is likely to see traders looking towards the overnight session for a lead as they prepare for the jobs report. Also keep an eye out for the Canadian jobs figures, which are released alongside their more widely heralded US counterparts.

Economic calendar - key events and forecast (times in GMT)

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Source: Daily FX Economic Calendar

1.30pm – US non-farm payrolls (February): 170K jobs expected to have been created, from 304K a month earlier. Meanwhile, the unemployment rate is expected to fall to 3.8% from 4%, while average hourly earnings rise 0.3% MoM from 0.1%. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • SIG reported pre-tax profit of £28.5 million for 2018, up from a £54.7 million loss a year earlier. The total dividend was 3.75p per share, unchanged compared to 2017.
  • Bodycote said that annual pre-tax profit for 2018 rose 13% to £132.2 million, and revenue rose 6.7% to £728.6 million.
  • RPC said that it agreed to be acquired to be Apollo Global, with the company valued at £3.34 billion.

Azimut upgraded to buy at Kepler Cheuvreux
Covestro upgraded to overweight at Barclays
Eiffage upgraded to neutral at MainFirst

Bunzl downgraded to neutral at Credit Suisse
Europcar downgraded to neutral at Goldman
Saga downgraded to underweight at JPMorgan
Just Eat downgraded to neutral at Citi

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