HALISTER1: U.K. Pay Growth to Rise Toward 3% in Coming Year, JPMorgan Says

U.K. Pay Growth to Rise Toward 3% in Coming Year, JPMorgan Says

(Bloomberg) -- Falling inflation expectations may be reducing pay growth by up to a relatively modest 0.4ppt, JPMorgan economist Allan Monks writes in client note.
  • As the drag from the commodity price slide fades, a clearer uptrend in inflation is likely to emerge, supported by firmer Unit Labor Cost growth
  • Models show a period of low inflation that is expected to be transitory may not have a large influence on wage setting; even when inflation rose above 5% in the U.K., private sector regular pay growth remained stable and below 2%
  • Still waiting for all-important January data on pay deals although data through to December didn’t show much impact from low inflation
  • NOTE: Pay growth “seems likely to continue at modest rates,” Simon Caunt, David England and Imogen Shepherd say in post on the BOE’s staff blog earlier
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Allan Monks (JP Morgan Chase)

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UUID: 7947283

HALISTER1: India to Verify If $505b Left Country Between 2004–2013

India to Verify If $505b Left Country Between 2004–2013

(Bloomberg) -- Special Investigation Team has asked the Directorate of Revenue Intelligence to verify a Global Financial Integrity report that estimated “illicit” financial outflow of $505b: govt statement.
  • SIT to take action after getting DRI report
  • Trade-based money laundering major source through which illicit money is taken out of country: SIT
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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UUID: 7947283

HALISTER: HSBC Ready to Move 1,000 Bankers to Paris on ‘Brexit’, CEO Says

HSBC Ready to Move 1,000 Bankers to Paris on ‘Brexit’, CEO Says

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
HSBA LN (HSBC Holdings PLC)
BT/A LN (BT Group PLC)

People
Stuart Gulliver (Hongkong & Shanghai Banking Corp Ltd/The)
David Cameron (United Kingdom of Great Britain and Northern Ireland)
George Buckley (Deutsche Bank AG)
John McFarlane (Barclays PLC)
Michael Rake (Wellington College)

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UUID: 7947283

HALISTER1: EU RATES ROUNDUP: BTP Sentiment Sours; ECB Expectations Rise

EU RATES ROUNDUP: BTP Sentiment Sours; ECB Expectations Rise

(Bloomberg) -- Analysts lessen preference for Italian bonds, amid recent weakness in peripheries; more ECB easing expected in March as macro backdrop deteriorates.
  • Citigroup (strategists including Harvinder Sian)
    • Macro, risk backdrop for Europe has turned for the worse; ECB will need to be on more of a battle footing; widening credit spread, flat curves reflect economic risks as growth cycle looks increasingly mature
    • Raise the probability of March QE upsizing, moving away from capital key; should provide relief rally in peripherals into/out of ECB meeting; continue to favor lower for longer ECB trade; maintain long EUR 4Y1Y
    • Base case for March ECB: depo rate cut by at least 10bps to -40bps, front-loading monthly purchases by as much as an extra EU15b, at least for three months; technical adjustments to the PSPP also likely
  • JPMorgan (strategists including Jan Loeys)
    • Recommended short 5Y USTs vs Germany last week, given leveraged long positioning, poor carry; now unwind as broader risk-off move has continued; declining market depth suggesting worsening liquidity conditions
    • Macroeconomic backdrop, QE purchases supportive of periphery bonds vs Germany; positioning remains very overweight peripheral bonds vs core, turn more cautious on spread compression trades due to risk of further unwinds; close longs 8Y Italy vs Germany
  • Morgan Stanley (strategists including Anton Heese)
    • Recommend receiving 20Y EUR swaps on 10s20s30s at 20bps, target 10bps, stop 25bps; sector looks cheap vs historical relationship with 30Y, 10s30s slope
    • See value in long-end OATs; has underperformed recently vs semi-core, offers RV; should also benefit from recent BOJ moves; OATs remain Japanese investors favored EGB given liquidity, yield pick-up vs bunds, credit rating
      • Recommend buying 10s30s OAT flatteners boxed vs bund 10s30s steepeners; target 20bps, stop 34bps
    • Recommend short 30Y Spain vs bunds due to political uncertainty, worsening risk sentiment; Spain vulnerable to contagion from Portugal, potential long-dated SPGB issuance
  • RBS (strategists including Andrew Roberts)
    • Capital flows data confirms China’s likely devaluation is main theme, exporting deflation to the world; sell all risk assets, buy AAA 10Y bonds
    • Recommend entering roll trades across high quality markets; receive UK 5Y1Y, worth 6.6bps roll over 3-mo.; receive EUR 5Y1Y, worth 7.7bps roll over 3-mo.
    • Expect ECB to cut depo rate by 20bps in March, further 20bps in June; EU10b-15b uplift in QE program; two- tiered depo rate likely introduced at some point this year
    • 10Y bund yield hit 0.16% target on Feb. 11; given new ECB expectations, see fair value at -0.16%, stay long 10Y bunds, target -0.10%
    • Recommend new shorts in BTPs, given indigestion of 30Y BTP supply, hedges vs weakness in risk-assets, debt sustainability concerns; short 10Y Italy vs bunds at 138bps; target 170bps, stop 125bps
    • Recommend long 30Y France vs. Belgium in 30Y; greater liquidity in OATs, attractive value on the curve, Belgium more vulnerable to downturn in global growth; entry +1bp, target -6bps, stop +4bps
  • Deutsche Bank (strategists including Francis Yared)
    • Domestic risks to Euro zone economy have risen; should lead to less ECB reliance on depo rate cuts, more on credit easing measures such as increasing pace of QE, cutting the refinancing rate
    • Increasing pace of QE may involve removing minimum yield floor on purchases, increasing issue limit
    • Front-end Europe fairly priced given this outlook; market reluctant to price policy success as spreads remain wider; maintain long 10Y Italy, stop out of short bund ASW
  • SocGen (strategists including Vincent Chaigneau)
    • Enter small long G-4 duration as financial-market stress unlikely to abate ahead of G-20 meeting (Feb. 26-27); target 0.05% in 10Y bund
    • Re-weight toward soft core vs core, peripheral if 10Y BTP/Bund, SPGB/Bund spreads break above 2015 highs: MORE
  • Barclays (strategists including Cagdas Aksu)
    • Neutral on EGB spreads given poor global macro backdrop, reduced market impact of further ECB easing, domestic political risks, market positioning
    • Remain neutral EUR rates duration; bunds look toward rich end of range, though current resilience in duration unlikely to reverse quickly unless macro outlook changes convincingly: MORE
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Harvinder Sian (Citigroup Inc)
Andrew Roberts (Royal Bank of Scotland Group PLC)
Anton Heese (Morgan Stanley)
Cagdas Aksu (Barclays PLC)
Francis Yared (Deutsche Bank AG)

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UUID: 7947283

HALISTER1: U.K. Stocks May Fall 15%, Gilt Curve to Steepen on ‘Brexit’: DB

U.K. Stocks May Fall 15%, Gilt Curve to Steepen on ‘Brexit’: DB

(Bloomberg) -- U.K. stocks could fall 15% on a vote to leave the EU with a basket of domestically focused companies dropping as much as 26%, Deutsche bank analysts including George Buckley, Jack Di Lizia and Wolf von Rotberg write in client note dated Friday.
  • In the run up to the vote, stocks could fall 8% with a basket of companies which generate most of their revenues from the U.K. sliding 9% and a basket of firms with a large foreign revenue base down 7%
  • U.K. cash rates may underperform in the run-up to a vote, with the curve steepening even as the front end may stay well anchored; BOE unlikely to tighten until there’s more clarity on the referendum and not for two years after if the U.K. voted to leave
    • The issuance outlook may also be impacted, with the DMO possibly limiting duration into a June vote
    • If the vote keeps Britain in the EU, would expect a rapid return to the status quo, a flattening back of curves and a richening of U.K. cash
  • A U.K. exit is likely to negatively impact sterling and may see front-loading of Deutsche’s current forecasts that GBP/USD will reach 1.15 by end-2017, EUR/GBP 0.82 by end-2019
  • Weaker sterling and easier monetary policy should help limit the fallout on annual U.K.; nonetheless the impact on annual GDP could be 1pp or greater
  • A sovereign downgrade by S&P on Oct. 28 would be a clear risk, weighing on ratings for companies and banks; could raise financing costs and tighten credit conditions, exacerbating the GDP impact
  • S&P has the U.K. on negative outlook amid Brexit risk
  • NOTE: A U.K. exit would affect the whole region’s sovereign ratings, Moody’s said Friday, according to Reuters
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
George Buckley (Deutsche Bank AG)
Wolf Von Rotberg (Deutsche Bank Ag/london)
Jack Di-Lizia (Deutsche Bank AG)

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UUID: 7947283

HALISTER: LafargeHolcim Getting Strong Interest for India Plants (1)

LafargeHolcim Getting Strong Interest for India Plants (1)

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
LHN VX (LafargeHolcim Ltd)

People
Eric Olsen (LafargeHolcim Ltd)
Carl Herndon (Jupiter Marine International Holdings)
Ron Wirahadiraksa (LafargeHolcim Ltd)
Ute Haibach (Bank J Safra Sarasin AG)
Wolfgang Reitzle (LafargeHolcim Ltd)

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UUID: 7947283