EU CREDIT UPDATE: CK Hutchison (CKHH: A2/A/A-*+): Fitch place on Positive Watch
Fitch state:
- Sale of Ports will improve credit profile
- Process will take longer than 6 months - Fitch will resolve when complete
- Cash proceeds of >$19bn expected
- Expects EBITDAR net leverage to fall well below 3.1x sensitivity level
- No assumption about use of proceeds has been made (we would consider that a key determinant)
Note that an upgrade would only put Fitch in line with Moody's / S&P at mid single A
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MNI: NORWAY Q4 MAINLAND GDP -0.4% Q/Q
- MNI: NORWAY Q4 MAINLAND GDP -0.4% Q/Q
NORWAY: Q4 Mainland GDP Much Weaker Than Expected
Mainland GDP at -0.4% Q/Q was quite a bit weaker than both consensus and the Norges Bank December MPR projections of 0.3% Q/Q. Further details to follow.
- NOSEK is around 10 pips below pre-release levels at typing.
- A 25bp Norges Bank cut in March has already been well-signalled, but the weak reading may have dovish implications for the rate path further out the curve.
BOE: Mann confirms she may not vote for a long succession of rate cuts
Catherine Mann gave an interview to the FT yesterday (the article was posted overnight, see here), ahead of her speech this morning (8:45GMT release time). The article notes that she saw her 50bp vote for a cut as what the FT paraphrases as a "desire for a one-off step-change rather than a longer-term succession of ongoing rate reductions". This is in line with our view that we noted in our BOE Review, that she is a dove for now but it is unclear for how long (we expect her to vote for cuts in March and May - but without much conviction beyond that and with little conviction on the magnitude of the cuts that she will favour).
- She describes the inflation outlook: “I can see pricing coming very close to [2 per cent] target-consistent [levels] in the year ahead,”
- And she describes part of the rationale for the 50bp cut vote as a communication device: “To the extent that we can communicate what we think are the appropriate financial conditions for the UK economy, a larger move is a superior communication device, in my view.”
- She is worried about "non-linear adjustments" to employment and real incomes coming under pressure: “If there is a non-linear adjustment in employment, that causes less demand because fewer people are employed. And then that leads to moderating pricing power of firms.”
- Mann's speech at 8:45 is likely to shed further light on her wider views. But the most important takeaway here is that the FT article confirms that Mann may not be a long-standing dove (as we suspected - and as hinted by her description in the Minutes that rates need to remain restrictive).
- What we still don't know from the FT article is how much further she will want to cut Bank Rate, what she would need to see for Bank Rate to not remain restrictive, and whether she agrees with the wider BOE's new model-based estimate that the neutral rate is in a 2.25-3.75% range.
