Sun, May 22, 2022 @ 23:24 GMT
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Market Update – European Session: May Day Holiday Keeps Participation Light

Notes/Observations

European Markets closed for May Day holiday

US congressional negotiators said to have hammered out a bipartisan agreement on a spending package to keep the federal government funded through the end of the current fiscal year on Sept. 30th

Fed will meet on Wednesday this week, with no policy change expected

Overnight:

Asia:

China Apr Manufacturing PMI (Govt official) hits a 6-month low (51.2 v 51.6e); Non-Manufacturing also at 6-month low (54.0 v 55.1 prior

Japan Apr Final PMI Manufacturing confirmed its 8th straight month of expansion (52.7 v 52.8 prelim

South Korea Apr Trade Balance registered its 63rd consecutive month of surplus ($13.3B v $8.6Be; as exports rose for the 6th straight month. South Korea Fin Min Yoo noted that it was already working with US on reducing trade surplus

US National Security Advisor McMaster said to have spoken with South Korea chief Kim Kwan-jin and assured him that US would pay for THAAD system deployment Summary of EU Leader Summit on Brexit

EU sets out its core positions on Brexit ; backed a phased approach to negotiations

Wants Britain agreeing to settle its outstanding liabilities to the EU and other divorce issues before talks turn to trade

Calculates the UK could owe it €55-60B to settle commitments made to the EU budget but not yet paid.

PM May: Britain won’t agree to pay an exit bill for leaving the European Union without also agreeing a new trade deal with the block

Europe:

UK PM May to impose new restrictions on corporate takeover to better protect worker pensions

UK ORB Poll: Ssupport for UK’s Conservatives at 42%; Labour’s 31%

Former-PM Renzi wins Italy’s Democratic Party primaries; regains party leadership

S&P affirmed Germany sovereign rating at AAA; outlook Stable

S&P affirmed UK sovereign rating at AA; outlook remains Negative

Fitch affirmed Netherlands sovereign rating at AAA, Outlook Stable

Americas:

(US) Congress negotiators from both parties said to have reached a tentative deal on $1.1T omnibus spending bill to fund the govt through Sept 30th

(US) President Trump signed Congressional stopgap funding to keep the govt open until Friday, May 5th

House Rules committee to meet on Tuesday, May 2nd to consider spending bill

Energy:

Weekly Baker Hughes US Rig Count: 870 v 857 w/w (+1.5%) (15th straight weekly rise)

Economic Data

(JP) Japan Apr Domestic Vehicle Sales Y/Y: 5.4 v 13.8% priori

(PE) Peru Apr CPI M/M: -0.3% v 0.0%e; Y/Y: 3.7% v 4.0%e

(NL) Netherlands Apr Manufacturing PMI: 57.8 v 57.8 prior (45th month of expansion)

(CH) Swiss Mar Real Retail Sales Y/Y: 2.1% v 0.7% prior

(DK) Denmark Apr PMI Manufacturing Survey: 46.4 v 56.3 prior (1st contraction since 2014)

Fixed Income Issuance:

None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

European markets closed for May Day holiday

Speakers

EU Commission President Juncker said to be more skeptical on Brexit talks after meeting UK PM May in London last week; Commission sees over 50% change that negotiations will fail. PM May showed no willingness to compromise and has unrealistic expectations on how the negotiations would proceed

PBOC official Xu Zhong (research bureau chief): China should deleverage properly; excessive economic stimulus is harmful for the country and could lead to high leverage ratio. China should maintain prudent and neutral monetary policy and play down GDP target

Japan PM Abe: Will take step toward constitutional reform for right of collective self-defense in 2017

North Korea said to be planning to speed up steps to bolster nuclear deterrence in response to higher US pressure against the country. To continue to bolster its military capabilities for self-defense and preemptive nuclear attack unless the US withdraws its hostile policy

Currencies

The FX markets were quiet as numerous markets were closed in both the Far East and Europe for the May Day holiday.

The USD was trying to re-find its mojo after losing some luster last week. EUR/USD was off its recent 5-month highs of 1.0950 established last week. The pair was hovering just under the 1.09 handle as the NY morning approached . Dealers noted that solid European inflation data currently was underpinning the euro price action and could prompt the ECB to take a more hawkish tone in its June statement.

The USD/JPY pair was edging closer towards the 112 area. Dealers continued to watch for any developments around North Korea that could bring some perceived safe-haven flows to the yen

Looking Ahead

07:00 (CA) Canada Mar MLI Leading Indicator M/M: No est v 0.4% prior

08:30 (US) Mar Personal Income: 0.3%e v 0.4% prior; Personal Spending: 0.2%e v 0.1% prior; Real Personal Spending: +0.3%e v -0.1% prior

08:30 (US) Mar PCE Deflator M/M: -0.2%e v +0.1% prior; Y/Y: 1.9%e v 2.1% prior

08:30 (US) Mar PCE Core M/M: -0.1%e v +0.2% prior; Y/Y: 1.6%e v 1.8% prior

09:30 (CA) Canada Apr Manufacturing PMI: No est v 55.5 prior

09:45 (US) Apr Final Markit Manufacturing PMI: 52.8e v 52.8 prelim

10:00 (US) Apr ISM Manufacturing: 56.5e v 57.2 prior; Prices Paid: 67.5e v 70.5 prior

10:00 (US) Mar Construction Spending M/M: 0.5%e v 0.8% prior

11:30 (US) Treasury to sell 3-Month and 6-month Bills

16:00 (US) Weekly Crop Progress Report

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