Notes/Observations
OPEC officials signal that production cuts likely to be extended
Political developments have come back into focus (reduced political uncertainty in the UK vs still significant uncertainties in the Eurozone
GBP supported by the view that early elections in the UK diminished prospects of a messy exit from the European Union
Oil ministers posturing for an extension of OPEC/Non-Opec oil cuts
Overnight:
Asia:
Japan Fin Min Aso: Must eventually raise sales tax, cut healthcare and pension payments to pursue steps to raise inflation to slash Japan’s huge public deficit
China State Administration of Foreign Exchange (SAFE) spokesperson reiterated view that pressure on capital outflows eased significantly in Q1. Forex supply and demand were balanced in Q1. Expectations on yuan currency depreciation have weakened significantly so far this year
New Zealand Q1 CPI annual reading remained within the target range for the 2nd straight month and highest level since Q3 2011 (YoY: 2.2% v 2.0%e)
Europe:
ECB’s Villeroy (France): Current ECB policy stance remains fully appropriate; current macro environment doesn’t call for a re-calibration
Harris poll on upcoming France Presidential election: Le Pen would lose to either Macron, Fillion and Melenchon in 2nd round
Recent Polls on upcoming snap elections in UK puts Conservative well ahead of Liberals (44-48% vs. 24-26% range)
Americas:
Fed Vice Chairman Fischer: Gradual rate hikes will mitigate spillover risks abroad
Fed’s Rosengren (moderate, non-voter): Fed could start shrinking balance sheet "relatively soon"’
FED Beige Book: Economic activity increased in all 12 districts at a modest pace
Economic Data
(NL) Netherlands Mar Unemployment Rate: 5.1% v 5.3% prior
(NL) Netherlands Apr Consumer Confidence: 26 v 24 prior
(JP) Japan Mar Nationwide Dept Sales Y/Y: -0.9% v -1.7% prior; Tokyo Dept Store Sales Y/Y: -0.2% v -3.1% prior
(DE) Germany Mar PPI M/M: 0.0% v 0.2%e; Y/Y: 3.1% v 3.2%e
(JP) Japan Mar Convenience Store Sales Y/Y: 0.0% v -1.7% prior
(DK) Denmark Apr Consumer Confidence: 7.4 v 6.2 prior
(TR) Turkey Apr Consumer Confidence: 71.3 v 65.0e
(CZ) Czech Mar PPI Industrial M/M: -0.1% v 0.0%e; Y/Y: 3.0% v 3.1%e
(TW) Taiwan Mar Export Orders Y/Y: 12.3% v 8.8%e
(EU) Euro Zone Feb Construction Output M/M: +6.9% v -2.4% prior; Y/Y: +7.1% v -5.1% prior
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) sold total €4.9&B vs. €4.5-5.5B indicated range in 2022, 2027, 2029 and 2046 bonds
Sold €1.63B in 0.4% Apr 2022 Oblig; Avg yield: 0.439% v 0.548% prior; Bid-to-cover: 1.58x v 1.45x prior
Sold €1.42B in 1.5% Apr 2027 SPGB; Avg yield: 1.683% v 1.610% prior; Bid-to-cover: 1.55x v 1.65x prior
Sold €991M in 6% Jan 2029 SPGB; Avg Yield: 1.880% v 1.249% prior, bid-to-cover: 1.67x v 1.36x prior
Sold €937M in 2.90% Oct 2046 SPGB; Avg Yield 2.957% v 3.044% prior; Bid-to-cover: 1.70x v 1.56x prior
(FR)France Debt Agency(AFT) sold total €5.449B vs. €4.5-5.5B indicated range in 2020 and 2022 Oats
Sold €3.425B in 0.00% Feb 2020 Oat; Avg Yield: -0.32% v -0.29% prior; Bid-to-cover: 1.67x v 1.68x prior
Sold €2.074B in 0.00% May 2022 Oat; Avg yield: 0.09% v 0.18% prior; Bid-to-cover: 1.96x v 2.06x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 +0.5% at 3,440, FTSE -0.1% at 7,105, DAX +0.2% at 12,034, CAC-40 +0.9% at 5,048, IBEX-35 +0.9% at 10,461, FTSE MIB +0.4% at 19,907, SMI +0.4% at 8,564, S&P 500 Futures +0.3%]
Market Focal Points/Key Themes: European equity indices are trading generally higher as market participants continue to focus on the upcoming French presidential elections; Banking stocks generally higher but mixed across the board with shares of BNP Paribas, BBVA, and SocGen trading higher in the Eurostoxx, but with shares of ING and Deutsche Bank trading lower; shares of Schneider Electric trading notably higher in the index after releasing Q1 sales results; shares of Unilever trading notably higher in the FTSE 100 after releasing Q1 sales results and raising its dividend; energy, commodity and mining stocks trading lower in the index as oil prices consolidate after yesterday’s sell off in WTI and Brent; FTSE 100 underperforming against the board as a result.
A plethora of upcoming scheduled US earnings (pre-market) include Alliance Data Systems, AZZ Inc, BB&T, Bank of New York Mellon, Blackstone, Citizens Financial, Celestica, Quest Diagnostics, DR Horton, Danaher, Dover, GATX, Janus Capital, KCG Holdings, KeyCorp, Nucor, NVR, People’s United Financial, Philip Morris, Pool Corp, PPG Industries, Sherwin-Williams, Snap-On, Sonoco Products, SunCoke Energy, Syntel, Travelers Companies, and Verizon Communications.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Debenhams DEB.UK -4.2% (H1 results), Pandora PNDORA.DK +5.1% (updates financial reporting structure), Publicis PUB.FR +2.2% (Q1 sales), Pernod Ricard RI.FR +1.9% (Q3 sales), Sky SKY.UK +0.1% (9M results, partnership with HBO), Unilever UNA.NL +1.0% (Q1 sales, raises dividend)]
Financials: [Man Group EMG.UK +2.2% (Q1 FUM)]
Industrials: [ABB ABBN.CH +1.5% (Q1 results), Eurotunnel GET.FR +0.8% (Q1 sales), Kuehne & Nagel KNIN.CH -0.5% (Q1 results)]
Technology: [Schneider Electric SU.FR +2.5% (Q1 sales)]
Telecom: [Utility Warehouse TEP.UK +0.2% (trading update)]
Utilities: [Abertis ABE.ES +3.2% (Atlantia said to offer more than €17B)]
Speakers
Japan Cabinet Office (Govt) Monthly Report reiterated view that domestic economy was continuing a moderate recovery although with a delay in some areas
Saudi Energy Min Falih: Have yet to reach target to bring global inventories down. OPEC might have to extend production cuts to reduce oil supply
Kuwait Oil Min Al-Marzouk: Extension of oil production cuts are necessary. Compliance between OPEC and Non-Opec members on agreed upon production cuts was over 90% in March. There was a preliminary agreement from Russia to extend production cuts. Iran said to commit to freezing its oil production at 3.8M bpd for the remainder of 2017 (**Implies a 6-month extension of oil production cuts). If cuts were extended they might be less deep due to stringer demand in H2
Iraq Ruling Coalition: Supports extension of OPEC supply cuts
Russia Energy Ministry spokesperson reiterated view that was too early to consider OPEC cut agreement extension but leaning towards extension of cuts
Currencies
The USD remains soft against the G10 FX pairs that started with last Fiday’s soft retail sales and CPI data from the States.
Political developments remain in focus for Europe. Overall price action has seen a reduced political uncertainty in the UK while significant uncertainties remain within the Euro Zone
GBP/USD recovered from Wed’s decline and remained above the 1.28 level. GBP supported by the view that early elections in the UK diminished prospects of a messy exit from the European Union
EUR/USD back at a 3-week highs and above the 1.0770 area on some buy-stops being elected to offload shorts positions
NZD currency (Kiwi) was firmer after New Zealand Q1 CPI annual reading remained within the target range for the 2nd straight month and highest level since Q3 2011
Fixed Income
Bund futures trade at 162.74 down 51 ticks breaking 163 to the downside on Equity strength and auctions out of Spain and France. Following the break of 163 futures target support at 162.59 initially followed by 162.25. Resistance moves to 163.47 followed by 163.99.
Gilt futures trade at 128.21 down 30 ticks falling in sympathy with Bunds. Support moves to 127.94 followed by 127.82. A move higher targets 128.76 initially followed by 129.14. Short Sterling curve is steepening slightly with Jun17/Jun18 spread widening marginally to 10.5/11bp.
Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.566T a fall of €4B from €1.570T prior. Use of the marginal lending facility fell to €206M from €254M prior.
Corporate issuance saw $12B come to market via 4 issuers led once again by financial names with Bank of America $6.75B 4 part issuance following their earnings and Morgan Stanley $1.75B 7 year issuance accounting for the bulk of the issuance. In the pipeline China Southern Power and State Grid Corp of China have appointed book runners to raise debt. Issuance for the week stands at $23.8B and monthly issuance $56.2B.
Looking Ahead
(BR) Brazil Apr CNI Industrial Confidence: No est v 54 prior
(ID) Indonesia Central Bank (BI) Interest Rate Decision: Expected to leave Reverse Repo Rate unchanged at 4.75%
05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills
05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds
05:30 (UK) DMO to sell £2.75B in 0.5% 2022 Gilts
05:50 (FR) France Debt Agency (AFT) to sell €0.75-1.25B in I/L 2021, 2025 and 2047 Bonds (Oatei)
06:00 (CZ) Czech Republic to sell 6-month Bills
06:00 (PT) Portugal Monthly Economic Survey
06:00 (IL) Israel Q4 Final GDP Annualized: No est v 6.5% prelim
06:45 (US) Daily Libor Fixing
08:00 (PL) Poland Mar Sold Industrial Output M/M: +13.3%e v -0.9% prior; Y/Y: 7.4%e v 1.2% prior, Construction Output Y/Y: +1.0%e v -5.4% prior
08:00 (PL) Poland Mar PPI M/M: 0.0%e v 0.0% prior; Y/Y: 4.7%e v 4.4% prior
08:00 (PL) Poland Mar Retail Sales M/M: +15.4%e v -2.7% prior; Y/Y: 8.6%e v 7.3% prior, Real Retail Sales Y/Y: 6.6%e v 5.2% prior
08:00 (BR) Brazil Mid-Apr IBGE Inflation IPCA-15 M/M: 0.3%e v 0.2% prior; Y/Y: 4.5%e v4.7% prior
08:00 (US) Fed’s Powell (moderate, voter)
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Apr Philadelphia Fed Business Outlook: 25.5e v 32.8 prior
08:30 (US) Initial Jobless Claims: 240Ke v 234K prior; Continuing Claims: 2.02Me v 2.028M prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e Apr 14th: No est v $395.7B prior
09:00 (BE) Belgium Apr Consumer Confidence: No est v 0 prior
10:00 (US) Mar Leading Index: 0.2%e v 0.6% prior
10:00 (EU) Euro Zone Apr Advance Consumer Confidence: -4.8e v -5.0 prior
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (CO) Colombia Feb Trade Balance: -$0.7Be v -$0.8B prior, Total Imports: $3.6Be v $3.5B prior
11:00 (BR) Brazil to sell 2023 LFT
11:00 (BR) Brazil to sell 2018, 2019, 2020 LTN Bills LTN
13:00 (US) Treasury to sell 5-Year TIPS
15:00 (MX) Mexico Citibanamex Survey of Economists
