Notes/Observations
UK house prices fell for the 3rd month in a row (first time since 2009)
European Manufacturing PMI data mixed (Beats: Germany, UK, Spain, Russia, Hungary, Turkey; Misses: France, Italy, Sweden, Norway, Poland)
Swiss Q1 GDP misses expectations (QoQ: 0.3% v 0.5%
Overnight
Asia:
China May Caixin PMI Manufacturing registered its 1st contraction in 11 months (49.6 v 50.1e)
BoJ Harada: Current stimulus policy would be sufficient to achieve 2% inflation target; will withdraw stimulus when program succeeds
Europe:
ECB’s Weidmann (Germany): Current outlook suggested ECB should start to discuss whether and when to change forward guidance. Believed that inflation would be higher even with reduced stimulus
ECB’s Nowotny (Austria): possible that inflation rates will remain low in the long term; one could question whether current 2% ECB inflation target as still realistic. Before any rate changes, purchase of govt bonds will probable be cut as first step
Times/YouGov general election weekly poll: Conservatives 42% (-1pts), Labour 39% (+3pts)
(UK) Sun/SurveyMonkey general election poll: Conservative Party 44% (unch), Labour Party 38% (+2ppts)
Americas:
President Trump: I will be announcing my decision on Paris Accord, Thursday at 3:00 P.M E
Fed’s Williams (moderate, non-voter): 3 rate increases for this year is base line view; 4 hikes possible if US economy strengthens Energy:
Weekly API Oil Inventories: Crude: -8.7M v -1.5M prior (biggest draw since Sept 2016)
Economic Data
(IE) Ireland May Manufacturing PMI: 55.9 v 55.0 prior (48 straight month of expansion)
(IN) India May Manufacturing PMI: 51.6 v 52.5 prior
(CH) Swiss Q1 GDP (miss) Q/Q: 0.3% v 0.5%e; Y/Y: 1.1% v 1.3%e
(UK) Nationwide House Price Index (miss)M/M: -0.2% v +0.2%e (3rd straight decline); Y/Y: 2.1% v 2.4%e
(RU) Russia May PMI Manufacturing PMI: 52.4 v 50.8e (10th month of expansion)
(FI) Finland Q1 GDP Q/Q: 1.2% v 1.0%e; Y/Y: 2.7% v 1.7%e
(SE) Sweden May Manufacturing PMI (miss): 58.8 v 62.4e
(NL) Netherlands May Manufacturing PMI: 57.6 v 57.8 prior
(NO) Norway May Manufacturing PMI: 54.3 v 55.0e
(HU) Hungary May Manufacturing PMI: 62.1 v 56.6e
(PL) Poland May Manufacturing PMI: 52.7 v 54.5e (30th month of expansion)
(TR) Turkey May Manufacturing PMI: 53.5 v 51.4e (3rd month of expansion)|
(ES) Spain May Manufacturing PMI (beat): 55.4 v 54.7e (43rd month of expansion)
(CZ) Czech May PMI Manufacturing: 56.4 v 57.9e (9th month of expansion)
(CH) Swiss May PMI Manufacturing: 55.6 v 57.8e
(IT) Italy May Manufacturing PMI (miss): 55.1 v 56.0e (9th month of expansion)
(FR) France May Final Manufacturing PMI (miss): 53.8 v 54.0e (confirmed 8th month of expansion)
(DE) Germany May Final Manufacturing PMI (beat): 59.5 v 59.4e (confirmed 30th month of expansion and highest since Apr 2011)
(EU) Euro Zone May Final Manufacturing PMI: 57.0e v 57.0 prelim (confirmed 46th straight month of growth and highest since April 2011
(GR) Greece May Manufacturing PMI: 49.6 v 48.2 prior(9th month of contraction)
(IT) Italy Q1 Final GDP (beat) Q/Q: 0.4% v 0.2%e; Y/Y: 1.4% v 0.8%e
(UK) May Manufacturing PMI (miss): 56.7 v 56.5e (10th month of expansion)
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) sold total €4.14B vs. €3.5-4.5B indicated range in 2021 and 2066 bonds
Sold €2.7B in new 0.05% 2021 SPGB; Avg yield: +0.021% v -0.142% prior, Bid-to-cover: 1.96x v 1.44x prior (under 1.15% July 2020 SPGB on May 18th 2017)
Sold €1.44B in 3.45% July 2066 SPGB; Yield: 3.249% v 2.688% prior; Bid-to-cover: 1.3x v 1.56x prior (Oct 20th 2016
(ES) Spain Debt Agency (Tesoro) sold €500M vs. €250-750M indicated range in 1.0% Nov 2030 I/L bond; Real Yield: 0.832% v 0.679% prior; Bid-to-cover: 3.26x v 1.76x prior
(FR) France Debt Agency (AFT) sold total €8.273B vs. €7.5-8.5B indicated range in 2027, 2032 and 2039 Oats
Sold €5.08B in 1.00% May 2027 Oat; Avg Yield: 0.72% v 0.81% prior; Bid-to-cover: 1.76x v 2.02x prior
Sold €1.72B in 5.75% Oct 2032 Oat; Avg Yield: 1.10% v 0.52% prior; Bid-to-cover: 1.86x v 1.49x prior
Sold €1.473B in1.75% 2039 green Oat; Avg Yield: 1.51% v 1.48% prior; Bid-to-cover: 1.87x v 1.92x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 +0.5% at 3573, FTSE +0.3% at 7545, DAX %+0.4 at 12670, CAC-40 +0.8% at 5325, IBEX-35 +0.1% at 10893, FTSE MIB +1.3% at 20993, SMI +0.6% at 9068, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes
European Indices trade higher across the board with notable outperformance in Italy, and France. In a busy morning for Macro news Germany, UK and Spain saw Manufactring PMI beat forecasts whilst Italy, Switzerland and France saw slight misses. On the corporate front UK traded First Group trades down over 5% following their FY results and recommendation not to pay a dividend, whilst shares of Inmarsat one of the leading risers following reports that Softbank is looking into the company, Johnson Matthey trades lower after missing on Rev. Looking head, earnings expected from Tech Data, Express and Dollar General out of the US.
Equities
Consumer discretionary[FirstGroup [FGP.UK] -6% (Earnings, Recommends no div), 888 [888.UK] -3.6% (O Shaked shares trust sell 40M shrs at 270p/shr), Watkins Jones [WJG.UK] -1.2% (Earnings)]
Materials: [Johnson Matthey [JMAT.UK] -0.9% (Earnings), Voestalpine [VOE.AT] +0.2% (Earnings)]
Financials: [Barclays [BARC.UK] -0.4% (Places 286M shares of BAGL)]
Telecom: [Inmarsat [ISAT.UK] +5.8% (Reports Softbank is interested)]
Healthcare: [Genfit [GNFT.FR +6% (Positive Outcome from the 1-year Pre-Planned Safety Review by the DSMB, in RESOLVE-IT Phase 3 Clinical Trial with Elafibranor)]
Speakers
German Chancellor Merkel: Germany and China jointly stand for free trade; cited concerns over global uncertainty. Both leaders supported WTO rules (**Note: comments alongside China Premier Li in Berlin)
Netherlands Fin Min Dijsselbloem: 2017 budget surplus revised lower from 0.5% to 0.2% citing need to spend €200M extra a year for education and more expenses for health care
Russia Econ Min Oreshkin: May CPI YoY reading seen around 3.9-4.0%. Inflation may slow below the year-end forecast of 3.8%. To see lower inflation and a smaller budget deficit if OPEC and non-OPEC oil producers agree to extend a production cut deal
Poland Dep Fin Min Skiba: Q2 GDP growth to be close Q1 levels (**Note: Q1 data beat expectations with YoY at 4.0%)
China Premier Li: Germany was China most important partner within the EU. China would stand by pledges tied to Paris accord on climate
Currencies
USD tried to find some steady legs as the month of June began as the greenback tried to solidify expectations of a rise in interest rates this month. The next few session will see various job-related data out of the US (ADP today, jobless claims on Thursday and Non-Farm payrolls on Friday).
EUR/USD probed its recent 7-month highs as the month began aided by German central bank speak that current outlook suggested ECB should start to discuss whether and when to change forward guidance. The Euro drifted off its best levels and was around 1.1230 area just ahead of the NY morning.
GBP/USD was holding just under the 1.29 area but faced headwinds ahead of next week’s Parliamentary election. More polls showing Conservative in front but its lead dwindling a bit in most polls.
Fixed Income
Bund futures trade at 162.18 up 1 ticks, near the mid-point of this week’s trading range as investors appear reluctant to swing bunds either direction. Resistance remains near the 162.81 level followed by 163.54. A break of the 161.65 support level could see lows target 159.96 followed by 157.50
Gilt futures trade at 128.71 lower by 10 ticks, following better than expected UK Manufacturing PMI data. Last week’s rally took out both the 129.00 handle and the 129.14 April 18th high, but yesterday’s decline was unable to hold that key region. Price finds key support at the 128.68 support level. An acceleration lower could test the 127.43 region. Resistance remains the noted 129.00/129.14 region, then 129.75 followed by 130.28.
Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.623T a rise of €10.3B from €1.6127T prior. Use of the marginal lending facility rose to €177M from €148M prior.
Corporate issuance saw over $6.9B come to market via 3 issues headlined by Goldman Sachs $5B in an 3-part senior unsecured note offerings and William Partners $1.45B of senior notes due 2027
Looking Ahead
(RO) Romania May International Reserves: No est v $39.8B prior
(RU) Russia May Sovereign Wealth Fund Balances: Reserve Fund: No est v $16.3B prior; Wellbeing Fund: No est v $73.6B prior
(ZA) South Africa May Naamsa Vehicle Sales Y/Y: -0.4%e v -13.4% prior
(IT) Italy May Budget Balance: No est v -€5.2B prior
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 £2.5B in 1 25% 2027 Gilts;
06:00 (IE) Ireland May Live Registry Monthly Change: No est v -4.6K prior; Live Registry Level: No est v 266.6K prior
06:30 (ZA) South Africa Q1 Unemployment Rate: 27.0%e v 26.5% prior
06:45 (US) Daily Libor Fixing – 07:00 (CA) Canada Apr MLI Leading Indicator M/M: No est v 0.5% prior
07:00 (ZA) South Africa Apr Electricity Production Y/Y: No est v 2.7% prior; Electricity Consumption Y/Y: No est v 2.7% prior
07:30 (US) May Challenger Job Cuts: No est v 36.6K prior; Y/Y: No est v -42.9% prior
08:00 (BR) Brazil Q1 GDP Q/Q: +1.0%e v -0.9% prior; Y/Y: -0.5%e v -2.5% prior; GDP 4-quarters accumulated: -2.3%e v -3.6% prior
08:00 (BR) Brazil May Manufacturing: No est v 50.1 prior
08:00 (PL) Poland Central Bank (NBP) May Minutes
08:00 (CZ) Czech May Budget Balance (CZK): No est v 6.3B prior
08:00 (EU) EU’s Moscovici speaks at Brussels Economic Forum
08:00 (IT) Italy Fin Min Padoan on panel at Brussels Economic Forum in Brussels
08:15 (US) May ADP Employment Change: +180Ke v +177K prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 238Ke v 234K prior;Continuing Claims: 1.92Me v 1.923M prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e May 26th: No est v $405.0B prior
09:30 (CA) Canada May Manufacturing PMI: No est v 55.9 prior
09:45 (US) May Final Markit Manufacturing PMI: 52.5e v 52.5 prelim
10:00 (US) May ISM Manufacturing: 54.6e v 54.8 prior; Prices Paid: 67.0e v 68.5 prior
10:00 (US) Apr Construction Spending M/M: +0.5%e v -0.2% prior
10:00 (BR) Brazil Apr CNI Capacity Utilization: No est v 77.1% prior
10:00 (MX) Mexico Apr Total Remittances: $2.3Be v $2.5B prior
10:00 (MX) Mexico Central Bank (Banxico) May Minutes
10:00 (MX) Mexico Central Bank Economist Survey
10:30 (US) Weekly EIA Natural Gas Inventories
10:30 (MX) Mexico May PMI Manufacturing: No est v 50.7 prior
11:00 (US) Weekly DOE Crude Oil Inventories
11:00 (BR) Brazil to sell LTN 2018, 2019 and 2020 Bills
11:00 (BR) Brazil to sell 2023 LFT
12:00 (IT) Italy May New Car Registrations Y/Y: No est v -4.6% prior
13:00 (MX) Mexico May IMEF Manufacturing Index: 46.0e v 45.0 prior; Non-Manufacturing Index: 48.0e v 47.2 prior
14:00 (BR) Brazil May Trade Balance: $7.5Be v $7.0B prior; Total Exports: $20.5Be v $17.7B prior; Total Imports: $12.9Be v $10.7B prior
15:00 (US) President Trump decision on Paris Climate agreement
