Notes/Observations
- Ascension Day holiday in numerous European countries keep participation at a low
- Spain May CPI data missed expectations with its annual pace at 18 month low
- Italy reply to EU said to see that any budget adjustment would jeopardize its recovery
- PBOC Officials downplay concerns on financial risks and CNY currency (Yuan) at a Beijing Forum
- Focus turns to key data releases in coming 24 hours (US 2nd reading of GDP on Thursday; German May CPI on Friday)
Asia:
- BOJ’s Sakurai stated that he believed that no additional easing was necessary at this time. Would continue to carefully watch yield moves (Note: JGB at lowest level since 2016)
- Japan Econ Min Motegi: trade talks with US have got off to good start
- China PBOC adviser Liu Shijin: No problem for China to keep 2019 GDP above 6.2%
Europe/Mideast:
- UK Chancellor of the Exchequer Hammond (Fin Min) said to have warned against Conservative leader candidates pitching tax cuts and deregulation
Americas:
- Pentagon said to have released report on rare earth minerals to Congress amid effort to cut reliance on China
- US Commerce Dept enacted anti-dumping duties on certain China products including beer kegs and mattresses; the margins range from 38.56 to 1,731.75%
- Canada PM Trudeau: draft ratification legislation for USMCA trade pact has been formally presented to Parliament (as expected)
Energy:
- Weekly API Oil Inventories: Crude: -5.3M v +2.4M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.35% at 371.82, FTSE +0.24% at 7,202.60, DAX +0.50% at 11,896.48, CAC-40 +0.47% at 5,246.75, IBEX-35 +0.79% at 9,151.85, FTSE MIB +0.37% at 20,074.50, SMI n/c, S&P 500 Futures +0.31%]
- Market Focal Points/Key Themes: European Indices rebound after sharp losses yesterday, following higher US futures in a quieter day as certain European nations observe ascension day. On the corporate front shares of Axel Springer rises sharply on talks with the Springer family and KKR of a possible going private transaction. On the earnings front, FirstGroup gains following a rise in profits and the commencement of the process to sell Greyhound and Firstbus with Daily Mail Trust rising after beating H1 forecasts. Meanwhile De La Rue declines over 20% following earnings and the stepping down of its CEO, with Johnson Matthey another notable decliner on earnings. Looking ahead notable earners include Tech Data along side retailers including Express, Dollar General, Dollar Tree, J.Jill, Movado and Burlington Stores among others.
Equities
- Consumer discretionary: FirstGroup [FGP.UK] +5% (earnings; strategy update), Daily Mail [DMGT.UK] +9% (earnings), Campari [CPR.IT] -2% (analyst action)
- Energy: Tullow Oil [TLW.UK] +3% (analyst action)
- Technology: Axel Springer [SPR.DE] +20.5% (confirms possible investment), De La Rue [DLAR.UK] -26% (earnings and profit warning; CEO to step down), Aptitude Software Group [APTD.UK] +11% (divestment)
- Materials: Johnson Matthey [JMAT.UK] -1.5% (earnings)
Speakers
- BOE’s Ramsden: Would want to wait and see before changing policy if a no-deal after Brexit was the outcome; such a scenario would have large negative effects. Reiterated MPC view that interest rates could go either way (higher or lower) in the event of a no-deal outcome. He was a bit more pessimistic on growth compared to recent BOE projections but would expect GDP growth to pick up if Brexit did go smoothly and thus would require further monetary tightening to maintain monetary stability,
- Italy response to EU letter on debt clarification will tell EU that any budget tightening would be a mistake
- Italy League leader Salvini said to have discussed economy, EU and grpwth measures with PM Conti and Fin Min Tria
- UK Chancellor of the Exchequer Hammond (Fin Min): Would be a threat to the union if we left EU with no deal. Stressed that any solution must protect businesses. Reiterated that Govt had made preparations for a no-deal outcome. Stated that those candidates for conservative party leadership should be fiscally responsible
- Russia Foreign Ministry said to urge Iran not to leave the nuclear pact
- China Commerce Ministry (MOFCOM) Spokesman Gao Feng reiterated govt stance that tariffs would not solve trade imbalances; US consumers wuld pay the price of such tactics. China would not accept a trade deal that hurts its pride or sovereignty. China is firmly against any US bullying tactics and will retaliate. US must address its concerns in order to reach any agreement
- PBoC Monetary Policy Dept Head Sun Guofeng: China’s monetary policy was appropriate this year; to fine-tune policy with economic conditions. China’s economy stable despite global uncertainties.
Currencies/Fixed Income
- The dollar index futures traded higher yesterday as comments appear to be positive between the US and Japan on a trade agreement over tariffs.
- EUR/USD The Euro continues its grind lower towards 1.11 as tensions between the EU and Italy continued. The Bund futures are now trading back below the 1.68 handle where yields were near record lows. We also saw BTP futures trading higher today with volatility slowing down after the 2 point sell off seen on Monday.
- GBP/USD The cable also trades lower continuing its slow grind lower as it approaches the 1.26 handle. With nothing new being said, just usual comments about Brexit and no figures, the Cable could finish higher today with the 1.26 handle creating support
Economic Data
- (ES) Spain May Preliminary CPI M/M: 0.2% v 0.4%e; Y/Y: 0.8% v 1.1%e (annual pace at a 18-month low)
- (ES) Spain May Preliminary CPI EU Harmonized M/M: 0.2% v 0.3%e; Y/Y: 0.9% v 1.1%e
- (ES) Spain Apr Advance Retail Sales Y/Y: 1.1% v 2.0%e; Retail Sales Y/Y: 2.0% v 0.2% prior
- (HU) Hungary Mar Average Gross Wages Y/Y: 11.6%e v 12.1% prior
Fixed Income Issuance
- Awaiting Italian auction results
Looking Ahead
- (IT) Italy Debt Agency (Tesoro) to sell €4.25-5.25B in 5-year, 7-year and 10-year BTP bonds
- 05:00 (IT) Italy Debt Agency (Tesoro) to sell €500-750M in Jan 2025 CCTeu (Floating rate Note)
- (MX) Mexico Apr YTD Budget Balance (MXN): No est v -24.5B prior
- 05:30 (ZA) South Africa Apr PPI M/M: 0.8%e v 1.3% prior; Y/Y: 5.9%e v 6.2% prior
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills
- 06:00 (PT) Portugal Apr Industrial Production M/M: No est v -1.3% prior; Y/Y: No est v -7.6% prior
- 06:00 (PT) Portugal Apr Retail Sales M/M: No est v 1.2% prior; Y/Y: No est v 4.2% prior
- 06:00 (CA) Canada May CFIB Business Barometer: No est v 56.7 prior
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil May FGV Inflation IGPM M/M: 0.6%e v 0.9% prior; Y/Y: 7.8%e v 8.6% prior
- 08:00 (BR) Brazil Q1 GDP Q/Q: -0.2%e v +0.1% prior; Y/Y: 0.5%e v 1.1% prior; GDP 4 quarters Accumulated: 0.9%e v 1.1% prior
- 08:00 (ZA) South Africa Apr Budget Balance (ZAR): No est v -20.3B prior
- 08:00 (PL) Poland Central Bank (NBP) May Minutes
- 08:00 (UK) Baltic Dry Bulk Index
- 08:30 (US) Q1 Preliminary GDP Annualized Q/Q: 3.0%e v 3.2% advance; Personal Consumption: 1.2%e v 1.2% prior
- 08:30 (US) Q1 Preliminary GDP Price Index: 0.9%e v 0.9% prior; Core PCE Q/Q: 1.3%e v 1.3% prior
- 08:30 (US) Initial Jobless Claims: 214Ke v 211 K prior; Continuing Claims: 1.66Me v 1.676M prior
- 08:30 (US) Apr Advance Goods Trade Balance: -$72.7Be v -$71.4B prior
- 08:30 (US) Apr Preliminary Wholesale Inventories M/M: +0.1%e v -0.1% prior; Retail Inventories M/M: +0.2%e v -0.3% prior
- 08:30 (CA) Canada Q1 Current Account Balance: -$18.1Be v -$15.5B prior
- 08:30 (US) Weekly USDA Net Export Sales
- 09:00 (RU) Russia Gold and Forex Reserve w/e May 24th: No est v $494.1B prior
- 10:00 (US) Apr Pending Home Sales M/M: 0.5%e v 3.8% prior; Y/Y: +0.1%e v -3.2% prior
- 10:00 (MX) Mexico Central Bank (Banxico) May Minutes
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) Weekly DOE Crude Oil Inventories
- 11:00 (IT) Italy Fin Min Tria
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 12:00 (US) Fed’s Clarida (moderate, voter) speaks to the Economic Club of New York
- 14:15 (CA) Bank of Canada (BOC) Senior Dep Gov Wilkins
