Notes/Observations
- US-China trade tensions still in focus but session saw risk aversion shake off some of its grip on the markets; Trump offered some reprieve believing that trade talks would be successful (Note: comments came in the aftermath where China escalated the conflict by announcing retaliatory tariff hikes on US products)
- UK PM May meets with her bitterly divided cabinet to decide whether to axe cross-party Brexit talks
- German May ZEW survey mixed; focus on upcoming GDP on Tuesday
Asia:
- BOJ Gov Kuroda reiterated that needed to continue easing for a while; Japanese banks were making ‘reasonable’ management of Collateralized Loan Obligations (CLOs)
- South Korea Defense Ministry: South Korea to continue to strengthen its missile defense capabilities to better counter all kinds of threats, including North Korea’s short-range missiles
Europe/Mideast:
- UK PM May said to be considering ‘definitive votes’ on a selection of Brexit options if talks with the Labour Party faltered. Under the plan, PM May would ask MPs to rank different Brexit outcomes in order of preference
- Cross-party Brexit talks between Tory and labour parties ended Monday’s session without any significant progress. UK govt spokesperson noted that the talks with took stock of a range of issues and Govt continue to seek to agree to a way forward in order to secure an orderly Brexit
- UK Chief Brexit negotiator Olly Robbins said to be going to Brussels to discuss changes to the political declaration on the UK’s future relationship with the EU (Note: issue is a key Labour demand to break the Brexit deadlock)
Americas:
- President Trump reiterated we’ll know in 3-4 weeks if talks with China are successful, feels they will be. To meet with China President Xi at G20 (June 28-29), believed US-China meeting at G20 could be fruitful
- Treasury Sec Mnuchin confirmed that US was still in negotiations with China but added that no further rounds were planned and confirmed at this point
- US defense official presented an updated military plan to Trump administration that shows deploying 120K troops to Middle East if Iran attacks American forces
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.40% at 374.06, FTSE +0.67% at 7,212.00, DAX +0.30% at 11,912.30, CAC-40 +0.70% at 5,299.33, IBEX-35 +0.16% at 9,063.00, FTSE MIB +0.59% at 20,715.50, SMI +0.28% at 9,389.50, S&P 500 Futures +0.51%]
- Market Focal Points/Key Themes: European Indices rebound this morning following sharp losses seen yesterday following a lower session Asia and a rebound in US Index futures. On a busy morning for corporate earnings, shares of Vodafone trade higher reversing earlier losses after reporting results which fell short of forecasts and confirmed dividend cut, Vodafone also announced the sale of its New Zealand division for NZ$3.4B. Shares of Allianz gains following a earnings beat and affirmed outlook, while EDF also outperforms after Revenue rose for the first quarter, and raised full year EBITDA outlook. Other movers include OHL, Greggs, K+S and Dufry among others. Meanwhile Shares of DIA in Spain declines sharply on earnings, with Merck KGaa and ThyssenKrupp also declining slightly on earnings. In other news Scout24 declines over 5% as the takeover bid did not meet the minimum acceptance threshold; Bayer declines as the company was ordered to pay $2B in punitive damages in the ‘Round up’ case. Elsewhere Hellofresh declines after Rocket Internet placed its entire holdings of the company. Looking ahead notable earners include Ralph Lauren, GDS holding and AZZ Inc among others.
Equities
- Consumer discretionary: HelloFresh [HFG.DE] -2.5% (Rocket Internet placement), Greggs [GRG.UK] +12% (positive profit alert), Dufry [DUFN.CH] -2.5% (earnings)
- Energy: Nordex [NDX1.DE] -1% (earnings)
- Financials: Allianz [ALV.DE] +0.5% (earnings), Hoist Finance [HOFI.SE] -16% (earnings)
- Healthcare: Bayer [BAYN.DE] -2.5% (California State Glyphosate Trial), Evotec [EVT.DE] +5% (earnings), Merck [MRK.DE] -2% (earnings)
- Industrials: Thyssenkrupp [TKA.DE] -1.5% (earnings), Volkswagen [VOW3.DE] +1% (Trucks unit IPO), BMW [BMW.DE] +0.5% (car sales), Renault [RNO.FR] -1% (Nissan said to issue profit warning), DCC [DCC.UK] +2.5% (earnings), K+S [SDF.DE] +2.5% (earnings)
- Technology: STMicroelectronics [STM.FR] +1.5% (capital markets day)
- Telecom: Vodafone [VOD.UK] +2% (earnings; confirms dividend cut)
Speakers
- ECB’s Villeroy (France): Monetary policy as noted back in March remained appropriate; reiterated that recent economic slowdown seen as temporary. Recent data did not refute economic forecasts
- Italy Dep PM Di Maio (5-Star): No scenario where League party would hold the PM position (**Note: Italy current PM Conti is an independent party member)
- Sweden Central Bank (Riksbank) Gov Ingves: Still needed expansionary monetary policy to support inflation. He did label the recent April CPI data as ‘good’
- Norway revised its 2019 budget forecasts which raised the budget impulse of trend Mainland GDP from 0.0% to 0.5%
- Fed’s Williams (moderate, voter): Lower neutral rates meant that global economic recoveries would be slow with inflation below target; scenario would require new policy approaches
- China Foreign Ministry spokesperson Geng Shuang reiterated that raising tariffs would not resolve problems; stated both US-China to continue talks. Had no comment on US Treasury holdings
Currencies/Fixed Income
- As the markets calm from yesterday’s volatility, risk aversion is still on everyone’s mind as China’s foreign Ministry re-affirms China’s stance on trade talks and Trump remains confident that China wants a trade deal and that the US is in a good position.
- EUR/USD tried to break out above 1.1260 but failed to do so for a 3rd time in the last 3 weeks. EUR/USD was slightly higher by 0.1% and holding near the mid-12 area just ahead of the NY morning. Europe will see some key economic data in coming sessions (Germany Q1 GDP on Tuesday) but dealers believe the pair would unlikely break above the 1.13 level because of fears the US might impose tariffs on European cars
- GBP/USD continues to sell off as it retreats from the 1.30 handle as cross party talks continue to go nowhere leaving less time for the UK to sort their departure from the EU before EU elections take place May 23rd
- USD/JPY The Yen is trading higher today after it broke the 109.5 level and tested the 109 handle as PM Abe trys to avoid a deal after Japan’s upper house elections this summer
Economic Data
- (SE) Sweden Apr PES Unemployment Rate: 3.5% v 3.6% prior
- (NL) Netherlands Mar Retail Sales Y/Y: 1.1% v 4.4% prior
- (FI) Finland Apr CPI M/M: 0.6% v 0.1% prior; Y/Y: 1.5% v 1.1% prior
- (FI) Finland Mar Final Retail Sales Volume Y/Y: 1.7% v 1.0% prelim
- (DE) Germany Apr Final CPI M/M: 1.0% v 1.0%e; Y/Y: 2.0% v 2.0%e
- (DE) Germany Apr Final CPI EU Harmonized M/M: 1.0% v 1.0%e; Y/Y: 2.1% v 2.1%e
- (DE) Germany Apr Wholesale Price Index M/M: 0.6% v 0.3% prior; Y/Y: 2.1% v 1.8% prior
- (CH) Swiss Apr Producer & Import Prices M/M: 0.0% v 0.2%e; Y/Y: -0.6% v -0.4%e
- (IN) India Apr Wholesale Prices (WPI) Y/Y: 3.1% v 3.0%e
- (ES) Spain Apr Final CPI M/M: 1.0% v 1.0%e; Y/Y: 1.5% v 1.5%e
- (ES) Spain Apr Final CPI EU Harmonized M/M: 1.1% v 1.1%e; Y/Y: 1.6% v 1.6%e
- (ES) Spain Apr CPI Core M/M: 1.1% v 0.5% prior; Y/Y: 0.9% v 0.7%e
- (ES) Spain Mar House transactions Y/Y: 6.8% v 5.3% prior
- (TR) Turkey Mar Industrial Production M/M: 2.1% v 0.9%e; Y/Y: -2.2% v -4.4%e
- (NL) Netherlands Q1 Preliminary GDP Q/Q: 0.5% v 0.4%e; Y/Y: 1.7% v 1.7%e
- (SE) Sweden Apr CPI M/M: 07% v 0.7%e; Y/Y: 2.1% v 2.1%e; CPI Level: 334.11 v 333.89e
- (SE) Sweden Apr CPIF M/M: 0.6% v 0.6%e; Y/Y: 2.0% v 2.0%e
- (SE) Sweden Apr CPIF CPIF(ex-energy) M/M: 0.6% v 0.6%e; Y/Y: 1.6% v 1.6%e
- (CZ) Czech Mar Current Account Balance (CZK): 0.2B v 19.5Be
- (UK) Apr Jobless Claims Change: +24.7K v +22.6K prior; Claimant Count Rate: 3.0% v 3.0% prior
- (UK) Mar Average Weekly Earnings 3M/Y: 3.3% v 3.4%e; Weekly Earnings (ex-bonus): 3M/Y: 3.3% v 3.3%e
- (UK) Mar ILO Unemployment Rate: 3.8% v 3.9%e (lowest level since 1975); Employment Change 3M/3M: +99K v +140Ke
- (DE) Germany May ZEW Current Situation Survey: 8.2 v 6.3e; Expectations Survey: -2.1 v +5.0e
- (EU) Euro Zone May ZEW Expectations Survey: -1.6 v +4.5 prior
- (EU) Euro Zone Mar Industrial Production M/M: -0.3% v -0.3%e; Y/Y: -0.6% v -0.8%e
- (US) Apr NFIB Small Business Optimism Index: 103.5 v 102.0e
Fixed Income Issuance
- (UK) DMO opened its book to sell Oct 2054 Gilt via syndicate; guidance seen -0.25 to 0 (nil) bps to Gilts
- (DK) Denmark sold total DKK2.6B in 3-month Bills; Avg Yield: -0.650% v -0.650% prior; bid-to-cover: 1.15x v 1.09x prior
- (ES) Spain Debt Agency (Tesoro) sold total €1.59B vs. €1.0-2.0B indicated range in 3-month and 9-month bills
- (IT) Italy Debt Agency (Tesoro) sold total €6.75B vs. €5.25-6.75B indicated range in 2022, 2026 and 2049 BTP bonds
- Sold €2.75B vs. €2.25-2.75B indicated range in 1.00% July 2022 BTP; Avg Yield: 1.24% v 1.08% prior; Bid-to-cover: 1.58x v 1.62x prior
- Sold €2.5B vs. €2.0-2.5B indicated range in 2.10% July 2026 BTP bonds; Avg Yield: 2.23% v 2.05% prior; Bid-to-cover: 1.40x v 1.36x prior
- Sold €1.5B vs. €1.0-1.5B indicated range in 3.85% Sept 2049 BTP bonds; Avg Yield: 3.65%; Bid-to-cover: 1.34x (syndicated on Feb 6th 2019)
Looking Ahead
- (ID) Indonesia to sell 6-month Islamic Bills; 2-year, 4-year, 15-year and 30-year Bonds
- (SI) Slovenia Debt Agency to sell 3-month, 6-month and 12-month bills
- (ZA) South Africa to sell combined ZAR3.3B in 2023, 2030 and 2037 bonds
- 05:30 (ZA) South Africa Q1 Unemployment Rate: 27.5%e v 27.1% prior
- 05:30 (UK) Weekly John Lewis LFL Sales data
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 05:30 (BE) Belgium Debt Agency to sell €2.4-2.8B in 3-month and 12-month Bills
- 06:00 (PT) Portugal Q1 Labour Costs Y/Y: No est v 10.3% prior
- 06:00 (TR) Turkey to sell Bonds – 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil COPOM Meeting Minutes
- 07:45 (US) Weekly Chain Store Sales data
- 08:00 (PL) Poland Mar Current Account Balance: -€1.2Be v -€1.4B prior; Trade Balance: -€1.0Be v -€1.3B prior; Exports: €19.8Bev €18.3B prior; Imports: €20.9Be v €19.7B prior
- 08:00 (IS) Iceland Apr Unemployment Rate: No est v 3.2% prior
- 08:00 (UK) Baltic Dry Bulk Index
- 08:00 (BR) Brazil Mar IBGE Service Sector Volume Y/Y: -0.55e v +3.8% prior
- 08:30 (US) Apr Import Price Index M/M: 0.7%e v 0.6% prior; Y/Y: 0.5%e v 0.0% prior; Import Price Index (ex-Petroleum) M/M: 0.1%e v 0.2% prior
- 08:30 (US) Apr Export Price Index M/M: 0.6%e v 0.7% prior; Y/Y: No est v 0.6% prior
- 08:30 (CA) Canada Apr Teranet House Price Index M/M: No est v -0.3% prior; Y/Y: No est v 1.5% prior; HPI: No est v 222.3 prior
- 08:55 (US) Weekly Redbook SSS data
- 09:00 (RU) Russia Apr Official Reserve Assets: $493.0Be v $487.8B prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (RU) Russia announces upcoming OFZ Bond issuance
- 10:00 (MX) Mexico Weekly International Reserve data
- 11:00 (CO) Colombia Mar Industrial Production Y/Y: 3.5%e v 2.8% prior
- 11:00 (CO) Colombia Mar Retail Sales Y/Y: 5.5%e v 5.7% prior
- 12:45 (US) Fed’s George (hawk, voter) in Mn
- 16:30 (US) Weekly API Oil Inventories
