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Breakfast Bites - US Govt Shutdown chatter

China FDI Falls; German CB runs at loss; Aramco's new find; New Weight Loss drug contender

Rise and shine everyone and Happy Monday.

Today we have new home sales and a 5-year note auction. We have a busy week going into month end with US PCE Inflation data on Thursday 29 Feb, and US housing data throughout the week. Japan will report inflation data later this evening / early tomorrow morning and Euro ARea inflation numbers are also due on Thursday.

We have 12 Fed Speakers this week!

Discussions of a government shutdown are picking up as we head into the March 1 deadline for a partial shutdown and the March 8 deadline for a full shutdown. President Biden noted that a meeting with Congressional leaders on Tuesday, Feb 27th to discuss Ukraine and the government shutdown.

Only Japanese equities rose in early Asian trading (Nikkei + 0.5% to a fresh record ATH); The Nikkei had a holiday on Friday and also noteworthy over the weekend was confirmation from Berkshire Hathaway that it had further increased holdings in its 5 Japanese trading companies to ~9%. (Marubeni +5%, Mitsui +3%, Mitsubishi +2%, Sumitomo +1.3%, Itochu +1%).

European indices opened mixed with a downward bias that became dominant as the session wore on; better-performing sectors include communication services and technology; sectors leading the way lower include materials and energy; the oil and gas sub-sector was under pressure following a drop in crude prices.

China’s Foreign Direct Investment Falls

In January 2024, foreign direct investment (FDI) into China decreased by -11.7% from the previous year, totaling CNY 112.71 billion or approximately $15.66 billion. It should come as no surprise after the USD bond defaults from the property developers. China’s lack of government support has created a crisis of confidence, not just from citizens but foreign investors as well. This is also weighing on the currency.

Germany’s Bundesbank Operates at Loss

The German central bank utilized €19.2 billion from its provisions and €3.1 billion from its reserves last year to cover losses incurred from rising interest costs. It is anticipated that the Bundesbank will face another substantial loss this year, surpassing its remaining €700 million in reserves.

This situation poses a challenge for the nation's esteemed financial institution, particularly in light of the European Central Bank's bond-purchasing initiative, which was met with resistance from officials at the Bundesbank. The losses are attributed to the discrepancy between the higher interest rates paid to commercial banks and the yields from its extensive collection of government bonds. The bank intends to defer any deficits, planning to balance them against future earnings, similar to its approach in the 1970s.

Chart of the Day

While Germany languishes with weak manufacturing data, the stronger PMI data coming out of France may have changed the outlook for the ECB. “Swap contracts show less than four 25 basis-point cuts are priced through the end of 2024, down from as many as seven at the end of last year.”

  • Shares of Denmark’s Zealand Pharma shot 32% higher in morning trade after results showed success in its liver disease treatment survodutide, which is also on trial as a drug to treat obesity.

  • Saudi Aramco discovers 15 trillion cubic feet of gas at Jafurah field, boosting reserves to 229 trillion cubic feet of gas and 75 billion barrels of condensates. Saudi Arabia prioritizes unconventional gas development, employing advanced extraction methods.

  • Domino’s Pizza Reports Q4 $4.48 v $4.36e, Rev $1.40B v $1.42Be; Announces additional $1B share buyback; Raises Quarterly dividend 24.8% to $1.51 from $1.21 (indicated yield 1.39%). Affirms long-term (2024-2028) annual global retail sales growth (ex-FX) 7%+, 1.1K+ stores, annual operating income growth 8%+.

  • Former US Pres Trump beats former South Carolina Gov Nikki Haley in the Republican Primary of her home state (Sat Feb 24th local time); Haley pledges to continue running until Super Tuesday on Mar 5th - US press.

  • New Zealand Dollar falls -0.6% in early trading as NZIER Shadow Board recommends No Change to the RBNZ OCR (on Wed 28th).

  • Japan Jan Services PPI came in below estimates, adding to the list of soft economic data recently for BOJ to consider.

  • AT&T to reimburse customers struck by the outage. CEO John Stankey apologized and offered a full-day billing credit as compensation for those most affected

  • Ford Motor Company said Friday that it halted shipments of all 2024 model year F-150 Lightning electric pickup trucks so that the company could perform quality checks for an unspecified issue.

  • Qatar to host mediated Hamas/Israel truce talks this week.


(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)

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