EU Parliamentary Elections Were Much Less Anti-EU Than Feared But Pro-European Camp Becoming More Fragmented

May 27 19, 11:00 GMT

Notes/Observations

US and UK markets closed for holiday
Markets assess the results of the EU parliament election; The pro-European camp becoming more fragmented; one question begs will the outcome affect the appointed to top positions regarding the succession of Juncker, Tusk and Draghi

Asia:

Chinese regulators’ takeover of Baoshang Bank to prevent systemic risks; moved said to have dealt a blow to market sentiment’ move triggered an increase in smaller lenders’ interbank funding costs
China Apr Industrial Profits YoY: -3.7% v +13.9% prior
China Banking and Insurance Regulatory Commission (CBIRC) Spokesman Xiao Yuanqi said those who speculate and short the yuan (CNY) will for sure suffer heavy loss EU Parliamentary

Elections:

Mainstream European Union parties held their ground in EU Parliamentary elections seen winning approx. two-thirds of all seats in Parliament with the first increase in turnout in 40 years and the best since 1994. The centre-left and centre-right blocks were the biggest losers and would no longer hold a majority in parliament (total of 329 seats out of 751)
EU elections saw the Far right had modest gains overall, but did very well in Italy and France; Overall populists and nationalists with approx. 25% of seats vs. 20% prior
UK results in EU elections: Labour and Tories suffer heavy losses as Brexit party and Lib Dems surge

Europe/Mideast:

Greece PM Tsipras called general snap elections; cannot ignore EU Parliamentary election results
Former Brexit Sec Dominic Raab confirmed he would run for Conservative Party leadership. To fight to renegotiate a Brexit deal with the EU and if not then would leave on WTO terms (Note: other contenders via for PM position include Environment Sec Gove; Esther McVey; Andrea Leadsom and Health Sec Matt Hancock)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.4% at 3,362, FTSE closed, DAX +0.4% at 12,064, CAC-40 +0.3% at 5,331, IBEX-35 +0.7% at 9,240, FTSE MIB +0.8% at 20,536, SMI +0.7% at 9,730, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

Equities

European bourses were in the green as Autos & Parts sector was outperforming. Overall price action was subdued with both UK and US markets closed for holidays. Market participants assessed the results of the EU parliament election which saw mainstream European Union parties hold their ground in EU Parliamentary elections against the populist tide and winning approx. two-thirds of all seats in Parliament
Consumer discretionary: Galliford Try [GFRD.UK] said to have gotten an approach from Bovis Homes [BVS.UK} about possible merger. Shareholders rejected offer from Bovis for being too low
Financials: Nasdaq [NDAQ] withdrew its offer to acquire Oslo Børs [OSLO.NO]
Industrials: Fiat Chrysler [FCAU) submitted 50-50 merger proposal with Renault [RNO.FR]

Speakers

Turkey Central Bank raised the reserve requirement on FX Deposits by 200bps. The Measures said to withdraw around $4.2B of liquidity from the market
Italy Dep PM Salvini (League) said not to seek a government reshuffle or demand more ministers in ruling coalition with 5-Star party following EU elections. EU vote showed Europe was changing with Le Pen winning in France and Nick Farage winning in the UK. Convinced that new EU Commission would be more friendly to Italy. Must re-discuss old and outdated EU fiscal rules
Austria Chancellor Kurz said to face possible ouster as Nationalists back a no-confidence vote by the opposition Social Democrats
Japan PM Abe joint press conference with President Trump: Trump agreed to accelerate bilateral trade talks; sought to achieve a win-win agreement. Trump expressed support for a Japan-North Korea Summit
President Trump: US-Japan alliance was a cornerstone in the region and sought peace and stability in North Korea. US and Japan might reach a trade deal in August. US not ready to make a trade deal with China; Believed that China probably wish they made the deal that they had on the table before they tried to renegotiate it,
China Foreign Ministry spokesperson Lu Kang reiterated stance that trade disputes should be resolved via dialogue

Currencies/Fixed Income

EUR/USD was steady but holding below the 1.12 level as markets assessed the results of the EU parliament election. European parliamentary elections were much less anti-EU than feared but the pro-European camp was becoming more fragmented. One analyst noted that a looming question was whether the outcome could affect the appointed to top positions regarding the succession of EU’s Juncker, EU’s Tusk and and ECB’s Draghi
GBP/USD was steady with UK markets out for a bank holiday. More contenders threw their cap in for the upcoming Tory leadership challenge. pair at 1.2704 in mid-session.

Economic Data

(FI) Finland May Consumer Confidence Index: -1.8 v -1.7 prior; Business Confidence: +1 v -1 prior
(JP) Japan Mar Final Leading Index CI: 95.9 v 96.3 prelim; Coincident Index: 99.4 v 99.6 prior
(DK) Denmark Apr Retail Sales M/M: -0.3 v +0.9% prior; Y/Y: 3.2% v 1.0% prior
(CH) Swiss Weekly Total Sight Deposits (CHF): 578.6B v 578.3B prior; Domestic Sight Deposits: 485.0B v 487.2B prior
(PL) Poland Apr Unemployment Rate: 5.6% v 5.6%e
(PL) Poland Q1 Unemployment Rate: 3.9% v 3.6%e
(HK) Hong Kong Apr Trade Balance (HKD): -35.1B v -49.4Be; Exports Y/Y: -2.6% v +0.1%e; Imports Y/Y: -5.5% v -0.1%e

Fixed Income Issuance

Looking Ahead

(IT) Italy Debt Agengy (Tesoro) announces details on upcoming BTP and CCTeu issuance for Thursday, May 30th
05:30 (DE) Germany to sell €2.0B in 3-month Bubills
05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
06:00 (IL) Israel Apr Unemployment Rate: No est v 3.9% prior
06:00 (IL) Israel to sell bonds
06:00 (RO) Romania to sell Bonds
06:45 (US) Daily Libor Fixing
07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:00 (BR) Brazil May FGV Construction Costs M/M: 0.2%e v 0.5% prior
07:25 (BR) Brazil Central Bank Weekly Economists Survey
08:00 (UK) Baltic Dry Bulk Index
09:00 (FR) France Debt Agency (AFT) to sell combined €B in 3-month, 6-month and 12-month Bills
09:30 (BR) Brazil Apr Current Account Balance: +0.5Be v -$0.5B prior; Foreign Direct Investment (FDI): $5.9Be v $6.9B prior