Notes/Observations
‘Super Thursday’ events loom (UK elections, ECB, former FBI chief Comey testimony)
China FX Reserves rise for the 4th straight increase for its longest streak since Jun 2014)
Germany Factory Orders decline sharply in Apr; likely impacted by Easter
India’s RBI keeps policy steady (as expected) and maintains its neutral bias
Overnight
Asia:
Australia Q1 GDP YoY reading beats expectations (Y/Y: 1.7% v 1.6%e) but still the slowest annual pace since 2009
Europe:
PM May: ready to change UK human rights laws in order to do more to fight extremism
Opinium UK general election poll: Conservatives 43% (unchanged), Labour 36% (-1)
Ashcroft UK election model: UK conservatives to win total 357 seats in Parliament for a 64 seat majority (**Note: compares with 60 projected on June 2nd)
Americas:
S&P affirmed United States of America sovereign rating at AA+; outlook remains stable
US Treasury Sec Mnuchin: pleased with the direction the US is heading with China; US must increase exports to address imbalance in trade with China. Market access to China is definitely an issue; seeks a reciprocal trade relationship
Energy:
Weekly API Oil Inventories: Crude: -4.6M v -8.7M prior (3rd straight draw)
Russia Energy Min Novak: Russia doesn’t plan to call for extraordinary meeting with OPEC over Qatar dispute; OPEC/non-OPEC deal should continue despite problems between the Gulf states
Economic Data
(DE) Germany Apr Factory Orders (miss) M/M: -2.1% v -0.3%e; Y/Y: 3.5% v 4.7%e
(RO) Romania Q1 Preliminary GDP (2nd reading) Q/Q: 1.7% v 1.7%e; Y/Y: 5.7% v 5.7%e
(CH) Swiss May Foreign Currency Reserves (CHF): 693.7B v 696.6B prior
(UK) May Halifax House Price (beat) M/M: +0.4% v -0.2%e; 3M/Y: 3.3% v 3.0%e
(SE) Sweden Apr Industrial Production M/M: -2.4% v +0.3%e; Y/Y: 0.8% v 4.1%e
(TW) Taiwan May Trade Balance: $3.5B v $3.2Be, Exports Y/Y: 8.4% v 7.0%e, Imports Y/Y: 10.2% v 9.6%e
(CH) China May Foreign Reserves (beat): $3.054T v $3.046Te (4th straight rise and longest streak since Jun 2014)
(IN) India Central Bank (RBI) left its Repurchase Rate unchanged at 6.25%(as expected)
Fixed Income Issuance:
(VN) Vietnam sold total VND4.13T in 5-year, 7-year, 20-year and 30-year bonds
(EU) ESM opened book to sell 1.8% Nov 2046 bond via syndicate; guidance seen 20bps to mid-swaps
(IT) Italy Debt Agency (Tesoro) opened its book to sell new Mar 2048 BTP bond via syndicate; guidance seen +12bps to mid-swaps
(IN) India sold total INR140B vs. INR140B indicated in 3-month and 12-month Bills
(DK) Denmark sold total DKK3.35B in 2020 and 2027 bonds
(SE) Sweden sold SEK10B vs. SEK10B indicated in 6-month Bills; Avg Yield: -0.7361% v -0.6603% prior; bid-to-cover: 3.48x v 1.74x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 flat at 3555, FTSE +0.2% at 7539, DAX -0.1% at 12681, CAC-40 +0.3% at 5287, IBEX-35 -0.4% at 10838, FTSE MIB +0.5% at 20855, SMI -0.1% at 8899, S&P 500 Futures flat]
Market Focal Points/Key Themes European indices trade mixed this morning, with out performance in Italy, and France whilst the Dax and Swiss SMI and IBEX trade slightly lower. Recent speculation over the future of Banco Popular was resolved following its acquisition by Santander, with a €7B capital raise announced to help fund the acquisition. Else where European utilities trade at 1 and half year highs, up 22% since the November lows after the German constitutional court ruled against the Nuclear fuel tax with companies expected to be refunded taxes paid plus interest. Notable risers include RWE, EON and EDF.
Equities
Industrials: [RPC [RPC.UK] -2.5% (FY Earnings) ]
Financials: [ Santander [SAN.ES] -2.4% (To acquire Banco Popular; To raise €7B in capital raise to fund transaction), Workspace Grp [WKP.UK] +2.3% (Earnings)]
Healthcare: [Covestro [1COV.DE] -4.4% (Bayer to sell 17.25M shares, reduces stake to 44.8%), Astrazeneca [AZN.UK] -1.5% (Signs agreement with Grünenthal for rights to Zomig; Grünenthal will pay $200M upon completion)]
Energy: [RWE [RWE.DE] +4.4%, EON [EOAN.DE] +4.4%, EDF [EDF.FR] +1.2% (German Constitutional Court strikes down nuclear fuel tax; companies to receive interest on paid taxes)]
Speakers
OECD updated its Economic Outlook which raised its 2017 Global GDP forecasts from 3.3% to 3.5% while maintaining the 2018 forecast at 3.6%
Norway FSA: Signs that mainland activity was picking up but vulnerability of financial system had risen. Development in consumer loans was a concern
India Central Bank (RBI) Policy Statement noted that its stance was neutral.
India Central Bank (RBI) Gov Patel post rate decision press conference noted that Apr inflation surprised to the downside but awaited for greater clarity on data (refers to maintaining its neutral stance)
China FX regulator SAFE noted that it saw stabilizing capital flows: Forex supply and demand are basically balanced. USD currency depreciation and asset price rise were among reasons for rising forex reserves
China PBOC adviser Huang Yiping urged forex reform in China
Currencies
Overall FX price action remained subdue ahead of ‘super Thursday’ which will UK Parliamentary elections, ECB rate decision and former FBI chief Comey testimony in Congress. Gold held near 7-month high as political worries buoyed safe-haven demand.
EUR/USD was just off its 7-month high and holding around 1.1250 area. Dealers are focused on any tweaking of the ECB’s forward guidance which currently stands that rates to stay low or lower beyond the forecast horizon period.
USD/JPY was slightly softer at 109.20. Dealers noted that the recent yen’s strength was being driven by risk and safe-haven flows. The lower US yields are also a catalyst after reports that China could be ready to buy more Treasuries as yuan currency stabilized.
Fixed Income
Bund futurestrade at 164.92 up 3 ticks, after hitting a new high at 165.03 and appears to well supported at the moment. Resistance lies near the 165.95 level followed by 167.79. A break of the 162.65 support level could see lows target 159.96 followed by 157.50.
Gilt futurestrade at 129.43 down 4 ticks, as investors take cover ahead of Thursday’s election. Last week’s decline fell back below both the 129.00 handle and the 129.14 April 18th high. Price finds key support at the 128.27 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.
Wednesday’s liquidityreport showed Tuesday’s deposits dropped rose to €597.6B from €592.6B prior. Use of the marginal lending facility increased to €285M from €221M prior.
Corporate issuancesaw over $5.65B come to market via 6 issues headlined by Citibank $2.5B in an 2-part 3-year notes offering and Coach $1B in a 2-part unsecured senior note offering
Looking Ahead
(IL) Israel May Foreign Currency Balance: No est v $105.1B prior
(FI) Finland announces upcoming RAGB bond for Jun 14th
(NL) Netherlands Debt Agency (DSTA) announces upcoming DSL auction for Jun 13th
05:30 (ZA) South Africa May Sacci Business Confidence: No est v 94.9 prior
05:30 (DE) Germany to sell €3.0B in 0% Apr 2022 BOBL
06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
06:00 (IE) Ireland Apr Property Prices M/M: No est v 0.1% prior; Y/Y: No est v 9.6% prior
06:00 (RU) Russia to sell combined RUB35B in 2024 and 2033 OFZ bonds
06:45 (US) Daily Libor Fixing
07:00 (UK) Prime Minister’s Question Time in House of Commons
07:00 (US) MBA Mortgage Applications w/e Jun 2nd: No est v -3.4% prior
07:00 (BR) Brazil May FGV Inflation IGP-DI M/M: -0.6%e v -1.2% prior; Y/Y: 1.0%e v 2.7% prior
07:45 (DE) German Chancellor Merkel on EU matters in Berlin
08:00 (PL) Poland May Official Reserves: No est v $109.4B prior
08:00 (HU) Hungary Central Bank (NBH) May Minutes
08:15 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada Apr Building Permits M/M: +3.0%e v -5.8% prior
08:30 (CL) Chile May Trade Balance: $0.5Be v $0.5B prior, Total Exports: $5.4Be v $5.0B prior, Total Imports: $5.0Be v $4.5B prior, Copper Exports: No est v $2.2B prior
08:30 (CL) Chile May International Reserves: No est v $39.0B prior
09:00 (RU) Russia May Official Reserve Assets: $404.8Be v $401B prior
09:00 (CL) Chile Apr Nominal Wage M/M: No est v 0.8% prior; Y/Y: 4.2%e v 4.3% prior
09:30 (SE) Sweden Central bank (Riksbank) Dep Gov Skingsley participates in panel debate
10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
10:30 (US) Weekly DOE Crude Oil Inventories
12:00 (CA) Canada to sell 2-Year Bonds
15:00 (US) Apr Consumer Credit: $15.0Be v $16.4B prior
