Notes/Observations
BOE expected to keep policy steady but the big question is whether more dissenters will join MPC member Forbes?
UK Mar Industrial and Manufacturing data misses; registers wider-than-expected trade deficits
EU Commission raises its GDP growth forecasts of euro zone for both 2017 and 2018
Overnight:
Asia:
New Zealand Central Bank (RBNZ) left its Official Cash Rate (OCR) unchanged at 1.75% (as expected). Monetary policy to remain accommodative for a considerable period. Numerous uncertainties remain and policy might need to adjust accordingly. Headline inflation to reach to midpoint of their target band over the medium term while growth overall remained positive. The Overall Cash Rate (OCR) seen steady at 1.8% over the two-year horizon period
RBNZ Gov Wheeler: Lack of inflation pressure is the main reason for maintaining neutral stance. Have not seen acceleration of wage pressures.
RBNZ’s McDermott: RBNZ saw as much chance of a rate cut as a hike adding that markets were ignoring downside risks
Europe:
UK Apr RICS House Price Balance beats expectations but still matched its 7-month low (22% v 20%e)
Americas:
Treasury official: Treasury Sec Mnuchin will discuss Russia and Iran sanctions issues with G7 as well as discuss Trump administration’s tax and regulatory reform efforts
Energy:
Saudis to inform OPEC that Saudi April output raised to 9.95M bpd (prior 9.90M bpd in March)
Economic Data
(JP) Japan Apr Eco Watchers Current Survey: 48.1 v 47.8e; Outlook Survey: 48.8 v 48.2e
(DE) Germany Apr Wholesale Price Index M/M: 0.3% v 0.0% prior; Y/Y: 4.7% v 4.7% prior
(TR) Turkey Mar Current Account Balance: -$3.1B v -$3.2Be
(CH) Swiss Apr CPI M/M: 0.2% v 0.2%e; Y/Y: 0.4% v 0.5%e
(CH) Swiss Apr CPI EU Harmonized M/M: 0.5% v 0.1% prior; Y/Y: 0.7% v 0.5% prior
(SE) Sweden Apr CPI M/M: 0.6% v 0.4%e; Y/Y: 1.9% v 1.7%e
(SE) Sweden Apr CPI CPIF M/M: 0.6% v 0.4%e; Y/Y: 2.0% v 1.8%e
(PH) Philippines Central Bank (BSP) left its Overnight Borrowing Rate unchanged at 3.00% (as expected)
(UK) Mar Industrial Production M/M: -0.5% v -0.4%e; Y/Y: 1.4% v 2.0%e
(UK) Mar Manufacturing Production M/M: -0.6% v -0.2%e; Y/Y: 2.3% v 3.0%e
(UK) Mar Visible Trade Balance: -£13.4B v -£11.6Be; Overall Trade Balance: -£4.9B v -£3.0Be; Trade Balance Non EU: -£4.7B v -£3.3Be
Fixed Income Issuance:
(SE) Sweden sold SEK750M vs. SEK750M indicated in 0.125% I/L 2027 bond; Avg Yield: -1.0527% v -1.0657% prior; Bid-to-cover: 1.92x v 1.46x prior
(IT) Italy Debt Agency (Tesoro) sold total €2.5B vs.€1.75-2.5B indicated range in 2044 and 2047 BTP Bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Indices [Stoxx50 -0.1% at 3641, FTSE flat at 7386, DAX flat at 12763, CAC-40 +0.1% at 5404, IBEX-35 -0.7% at 10961, FTSE MIB +0.2% at 21603, SMI +0.2% at 9107, S&P 500 Futures -0.1%]
Equities
Consumer discretionary [ SuperGroup [SGP.UK] -7.0% (Earnings)]
Industrials: [ Deutsche Post [DPW.DE] -3.5% (Earnings)]
Financials: [Unicredit [UCG.IT] +3.7% (Earnings), Credit Agricole [ACA.FR] -1% (Earnings), Aegon [AGN.NL] -5.2% (Earnings)]
Telecom: [BT [BT.UK] -3.2% (Earnings), Telefonica [TEF.ES] -2.8% (Earnings),
Healthcare: [Hikma Pharma [HIK.UK] -7.8%, Vectura [VEC.UK] -89.4% (update on the status of its ANDA for generic Advair Diskus, low likelihood of approval this year)]
Energy: [SolarWorld [SWVK.DE] -79% (Files for insolvency)]
Speakers
ECB publishes Economic Bulletin which reiterated the Draghi press conference that it would maintain a very substantial monetary accommodation. If the outlook became less favorable, the Governing Council stood ready to increase the asset purchase program in terms of size and/or duration.
EU Commission Spring Economic Forecast raised its GDP growth forecasts of euro zone for both 2017 and 2018. Raised Euro Zone 2017 GDP growth from 1.6% to 1.9% and 2018 GDP growth from 1.8% to 1.9%. On inflation the EU raised 2017 Euro Area inflation (HICP) from 1.7% to 2.0% and maintained 2018 Euro Area inflation (HICP) at 1.4%
Norway revised its 2017 budget and maintains 2017 Mainland GDP growth forecast at 1.6%. Cut 2017 Core CPI forecast from 2.1% to 1.7%
Philippines Central Bank Policy Statement noted that inflation risks were tilted to the upside and would remain vigilant against CPI risks. It would adjust policy as needed
Iraq Oil Min Al-Luaibi: Iraq raising oil output to 5M bpd will not conflict with OPEC’s cuts; Reiterated OPEC view that OPEC and non-OPEC consensus view was to extend cuts for 6-months
Currencies
The focus was on the BOE rate decision and whether more hawks will show their feathers. With a vacancy on the MPC analyst foresee a 7-1 vote for unchanged rates instead of 8-1 (Dep Gov Hogg resigned a few weeks ago). Updated economic projections contained within the May BoE QIR will likely show modest downside revisions to both growth and inflation. If more hawks appear the GBP/USD could see another attempt on the $1.3000 level. The GBP was weaker following data misses for Mar production data and wider trade deficits and hovering just above its 1-week low of 1.2902
During Asia the NZD currency (Kiwi) saw volatility following the RBNZ rate decision which was viewed more neutral than anticipated. RBNZ was looking past the rising inflation with its neutral stance given the recent cooling in Auckland housing market, and its latest projections only see the next rate hike in late 2019 compared to analyst projections of late 2018. The NZD/USD pair fell to 10month lows below 0.6820 on the decision before recovering slightly
Fixed Income
Bund futures trade at 160.17 down 16 ticks, breaking through trend support at the 160.22 region. A break of 160.01 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 127.18 modestly lower by 3 ticks, after initially trade much lower ahead of the Industrial data, which disappointed across the board. The focus will remain on the BOE rate decision later today. 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.
Thursday’s liquidity report showed Wednesday’s excess liquidity ticked lower to €1.6537T a decline of €0.3B from €1.6540T prior. Use of the marginal lending facility fell to €232M from €342M prior.
Corporate issuance saw over $4.4B come to market via 4 issues headlined by RBS $3.2B in a 2-part senior unsecured note offering
Looking Ahead
(IT) Italy Debt Agency (Tesoro) to sell €3.75-4.75B in 2020 and 2024 BTP Bonds
05:30 (ZA) South Africa Mar Total Mining Production M/M: No est v 2.9% prior ; Y/Y: 4.7%e v 4.6% prior; Gold Production Y/Y: No est v -16.8% prior; Platinum Production Y/Y: No est v 47.2% prior
05:30 (DE) German Chancellor Merkel with NATO Sec Gen Stoltenberg in Berlin
05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)
06:00 (PT) Portugal Apr CPI M/M: No est v % prior; Y/Y: No est v % prior
06:00 (PT) Portugal Apr CPI Harmonized M/M: No est v % prior; Y/Y: No est v % prior
06:00 (IE) Ireland Apr CPI M/M: No est v 0.6% prior; Y/Y: No est v 0.7%prior
06:00 (IE) Ireland Apr CPI EU Harmonized M/M: No est v 0.6% prior; Y/Y: No est v 0.6%prior
06:25 (US) Fed’s Dudley (voter, dove) in India
06:30 (IS) Iceland to sell Bills
06:45 (US) Daily Libor Fixing
07:00 (UK) Bank of England Bank (BOE) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.25%; maintain Asset Purchase Target (AFT) at £435B
07:00 (UK) Bank of England Bank (BOE) May Minutes
07:00 (UK) Bank of England Bank (BOE) Quarterly Inflation Report (QIR)
07:00 (ZA) South Africa Mar Manufacturing Production M/M: +0.5%e v -0.4% prior; Y/Y: -2.4%e v -3.6% prior
07:00 (BR) Brazil May IGP-M Inflation (1st Preview): -0.6%e v -0.7% prior
07:30 (UK) BOE Gov Carney QIR press conference
08:00 (UK) Apr NIESR GDP Estimate: 0.4%e v 0.5% prior
08:00 (BR) Brazil CONAB Report
08:00 (BR) Brazil Mar Retail Sales M/M: -0.6%e v -0.2% prior; Y/Y: -1.8%e v -3.2% prior
08:00 (BR) Brazil Mar Broad Retail Sales M/M: -0.1%e v +1.4% prior; Y/Y: +0.4%e v -4.2% prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 245Ke v 238K prior; Continuing Claims: 1.98Me v 1.964M prior
08:30 (US) Apr PPI Final Demand M/M: +0.2%e v -0.1% prior; Y/Y: 2.2%e v 2.3% prior
08:30 (US) Apr PPI Ex-Food&Energy M/M: 0.2%e v 0.0% prior; Y/Y: 1.6%e v 1.6% prior
08:30 (US) Apr PPI Ex-Food, Energy & Trade M/M: 0.2%e v 0.1% prior; Y/Y: No est v 1.7% prior
08:30 (CA) Canada Mar New Housing Price Index M/M: 0.2%e v 0.4% prior; Y/Y: No est v 3.3% prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e May 5th: No est v $401.1B prior
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (US) Treasury announces issuance for upcoming 10-year Tips auctions for May 18th
11:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds
11:00 (BR) Brazil to sell 2019, 2020, 2027 LTN Bills
12:30 (CH) IMF’s Obstfeld speaks in Geneva
13:00 (US) Treasury to sell 30-Year Bonds
