Notes/Observations
Emerging Europe inflation moves off multi-year highs (Czech and Hungary CPI below forecasts)
Overnight:
Asia:
China Apr CPI YoY reading hits a 3-month high (Y/Y: 1.2% v 1.1%e); PPI misses (Y/Y: 6.4% v 6.7%e)
BoJ summary of opinions from April 26-27th meeting. Should pursue easing as Japan needs more time than US to hit inflation target. Risks are balanced to downside due to risks posed by EU politics and US economic policy and geopolitical risks
BoJ Gov Kuroda reiterated there’s still distance to hit 2% inflation and continue current ‘powerful’ monetary easing. Yield Control (YCC) is main focus of BoJ monetary policy. JGB purchase amount and monetary base are merely guidelines; pace of JGB buys is now around ¥60T (official target is around ¥80T)
Europe:
Germany Fin Min Schaeuble predicted that ECB policy normalization would begin shortly; could assume that based on recent remarks of the ECB
IMF reiterated view that wants Germany to increase capital spending and infrastructure spending to strengthen inclusive growth and fight inequalities (**Note: comments following Germany Current Account Balance which hit a fresh record high at €30.2B)
National Institute of Economic and Social Research (NIESR) maintains 2017 GDP growth forecast at 1.7%. Reiterated view of expecting the first BOE rate hike in mid-2019. BOE probably won’t raise rates before Brexit negotiations were concluded
Americas:
President Trump fired FBI Director Comey
Fed’s Kaplan (moderate, voter): reiterates baseline expectation is still for 3 rate hikes this year
Fed’s Rosengren (moderate, non-voter): a drop below 4% in unemployment would overheat the economy and prompt higher rates
Fed’s George (hawk, non-voter): supports gradual interest rate increases; Fed should start reducing balance sheet this yea
Energy:
Weekly API Oil Inventories: Crude: -5.8M v -4.2M prior; 2nd straight draw and largest draw since Jan 4th
Economic Data
(JP) Japan Mar Preliminary Leading Index: 105.5 v 105.5e ior; Coincident Index: 114.6 v 114.7e
(NO) Norway Apr CPI M/M: 0.2 v 0.5%e; Y/Y: 2.2% v 2.5%e
(NO) Norway Apr CPI Underlying M/M: 0.3% v 0.5%e; Y/Y: 1.7% v 1.9%e
(SE) Sweden Apr PES Unemployment Rate: 3.8% v 3.9% prior
(FR) France Mar Trade Balance: -€5.4B v -€6.0Be
(FR) France Mar Industrial Production M/M: 2.0% v 1.0%e; Y/Y: 2.0% v +0.6%e
(FR) France Mar Manufacturing Production M/M: 2.5% v 0.9%e; Y/Y: 3.5% v 1.2%e
(CZ) Czech Apr CPI M/M: 0.0% v 0.3%e; Y/Y: 2.0% v 2.3%e
(CZ) Czech Apr Unemployment Rate: 4.4% v 4.4%e (lowest Since 2008)
(HU) Hungary Apr CPI M/M: 0.4% v 0.4%e; Y/Y: 2.2% v 2.3%e
(DK) Denmark Apr CPI M/M: 0.2% v 0.2%e; Y/Y: 1.1% v 1.1%e (highest annual pace since Feb 2013)
(IT) Italy Mar Industrial Production M/M: 0.4% v 0.3%e; Y/Y: +7.6% v -1.9% prior; Industrial Production WDA Y/Y: 2.8% v 2.5%e v 1.9% prior
Fixed Income Issuance:
(SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month bills; Avg Yield: % v -0.6795% prior; bid-to-cover: 2.17x v 2.75x prior
(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2026 bonds; Avg Yield: 1.56% v 1.36% prior; Bid-to-cover: 2.20x v 1.79x prior
(IT) Italy Debt Agency (Tesoro) sold €6.5B vs. €6.5B indicated in 12-month Bills; Avg Yield: -0.304% v -0.239% prior; Bid-to-cover: 1.73x v 1.76x prior
(EU) ECB allotted $35M in 7-day USD Liquidity Tender at fixed 1.41% vs $35M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.3% at 3640, FTSE +0.1% at 7347, DAX -0.1% at 12742, CAC-40 -0.2% at 5388, IBEX-35 -0.6% at 10985, FTSE MIB -0.4% at 21398, SMI -0.8% at 9047, S&P 500 Futures -0.2%]
Market Focal Points/Key Themes European indices trade mixed this morning with notable weakness in the Swiss SMI and out-performance in the FTSE. Insurance heavyweight AXA reported inline revenue and potential IPO of US unit helping lift shares, Hannover Re reported results which came light of views and as a result shares are trading lower. TalkTalk is one of the leading decliners in Europe after missing on Rev and cutting dividend. Earnings look set to continue as we approach the US morning with notable earnings from Coty, Time and Norweigen Cruise line.
Equities
Consumer discretionary [Just Eat [JE.UK] -1.0% (Hungryhouse acquisition referred to phase to by CMA), ITV [ITV.UK] -1.6% (Earnings)]
Consumer Staples [Compass [CPG.UK] flat (Earnings, Special div), Ahold Delhaize [AD.NL] +1.3% (Earnings), Air France [AF.FR] +3.0% (April Metrics)]
Industrials: [Barratt Developments [BDEV.UK] +3.9% (trading update), HeidebergCement [HEI.DE] -2.5% (Earnings)]
Financials: [Axa [CS.FR] +0.8% (Earnings, Intention to IPO US Unit), ING [INGA.NL] +1.8% (Earnings)]
Telecom: [TalkTalk [TALK.UK] -10% (Earnings, cuts div)]
Healthcare: [Roche [ROG.CH] -2.0% (Tecentriq Cancer drug fails to meet primary endpoint), Ion Beam [IBAB.BE] -11% (Earnings)]
Energy: [EDF [EDF.FR] -0.7% (Earnings)]
Speakers
Sweden Central Bank (Riksbank) Apr Minutes: Board in agreement on outlook for inflation; agreed that expansionary policy was still needed
Sweden Central Bank Gov Ingves noted that it was too early to change direction of policy. Economic activity continued to strengthen, but the political situation abroad was creating risks to economic development going forward. Inflation in Sweden had shown a rising trend for a few years, but was now expected to take slightly longer before stabilizing around 2%. Would continue to monitor the SEK currency (Krona)
Riksbank member Jansson: Inflation picture has deteriorated since Feb; possible to make a further rate cut; will wait-and-see if needed
Riksbank member Skingsley saw no convincing arguments for extending QE
Riksbank member Floden was opposed to more bond buying as current monetary policy was working
Greece Parliamentary speaker Voutsis: To table bailout prior actions bill by Sat, May 13th
UAE Oil Min Mazrouei: Optimistic about next OPEC meeting. To review several options at next OPEC meeting
Currencies
The FX markets saw little volatility in the session. A slightly softer USD was attributed to President Trump’s firing of his FBI director.
The EUR/USD was hovering just under the 1.09 area. Dealers noted that the Greek 10-year govt bond yield was at its lowest since 2012 debt restructuring
GBP was firmer in the session with dealers attributing the strength to potential M&A flows. GBP/USD was approaching the 1.30 level which was last tested back in late Sept.
Fixed Income
Bund futures trade at 160.53 up 13 ticks, after North Korea’s stated they will move ahead with a 6th nuclear test. A break of 160.15 support level could see lows target 159.01 followed by 157.50. Resistance lies at 160.81 level followed by 162.10.
Gilt futures trade at 127.08 modestly higher by 10 ticks, after a late gains from Treasuries and North Korea’s comment. A continuation of the pullback from the 129.14 April 18th high has price eyeing the 126.41 support level. An acceleration lower could test the 125.80 region. Resistance stands at 128.01 then 128.51 followed by 129.14.
Wednesday’s liquidity report showed Tuesday’s excess liquidity surged to €1.654T a gain of €11B from €1.643T prior. Use of the marginal lending facility rose to €342M from €291M prior.
Corporate issuance saw over $10.3B come to market via 6 issues headlined by Costco Wholesale Corp $3.8B in a 4-part senior unsecured note offering and CK Hutchison Holdings $1.0B subordinated perpetual non-call five. In Europe, General Electric announced a 4-part euro-denominated bond offering.
Looking Ahead
(MX) Mexico Apr ANTAD Same-Store Sales Y/Y: 3.2%e v 4.0% prior
(MX) Mexico May Nominal Wages: No est v 4.7% prior
(UR) Ukraine Apr CPI M/M: 0.7%e v 1.8% prior; Y/Y: 12.5%e v 15.1% prior
05:30 (DE) Germany to sell €3.0B in 0% Apr 2022 BOBL
05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2022 and 2027 OT bonds
06:00 (PT) Portugal Q1 Unemployment Rate: No est v 10.5% prior
06:00 (PT) Portugal Mar Trade Balance: No est v -€0.8B prior
06:00 (IE) Ireland Mar Property Prices M/M: No est v 1.5% prior; Y/Y: No est v 10.7% prior
06:45 (US) Daily Libor Fixing
07:00 (RU) Russia weekly OFZ bond auction
07:00 (US) MBA Mortgage Applications w/e May 5th: No est v -0.1% prior
07:00 (UK) PM May weekly question Time in House of Commons
07:30 (CL) Chile Central Bank’s Traders Survey
07:30 (CL) Chile Central Bank Economist Survey
08:00 (BR) Brazil Apr IBGE Inflation IPCA M/M: 0.2%e v 0.3% prior; Y/Y: 4.1%e v 4.6% prior
08:00 (HU) Hungary Central Bank (NBH) Apr Minutes
08:00 (EU) ECB’s Draghi in Dutch Parliament
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Apr Import Price Index M/M: +0.1%e v -0.2% prior; Y/Y: 3.6%e v 4.2% prior
08:30 (US) Apr Export Price Index M/M: 0.2%e v 0.2% prior; Y/Y: No est v 3.6% prior
09:00 (RU) Russia Apr Official Reserve Assets: $400.5Be v $397.9B prior
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE) Crop Report
12:00 (CA) Canada to sell 2-Year Bonds – 13:00 (US) Treasury to sell 10-Year Notes
14:00 (US) Apr Monthly Budget Statement: +$179.0Be v -$176.2B prior
15:00 (AR) Argentina Apr National CPI M/M: 2.0%e v 2.4% prior
17:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate unchanged at 1.75%
