Notes/Observations
- Trade concerns continue to reverberate; safe haven flows dominate
- European Manufacturing PMI data mixed (Beats: Italy; Misses: Spain; Unrevised: France, Germany, Euro Zone )
- Italy PM Conte said to have issued ultimatum to ruling coalition to speed up govt action of face his resignation
Asia:
- Previously announced tariffs by the US and China took effect on June 1st (as expected). China raised tariffs 5-25% on $60B of US goods Saturday, preparing a blacklist of “unreliable” foreign companies. Conversely, US customs agents formally began collecting the higher 25% tariffs on $200B list of Chinese goods arriving at US seaports
- China Trade War White Paper issed which reiterated it stance that China would not concede on issues of principle and that the govt had enough fiscal and monetary policy tools: China’s economic prospects were extremely optimistic and could ensure good momentum for a sustained economic development
- China Vice Commerce Minister stated that the purpose of the trade war White Paper was to lay out the backtracking by the US and make clear China’s position. He did not have info to hand on whether Pres Xi/Trump will meet at G20
- China May Caixin PMI Mamufacturing: 50.2 v 50.0e
- Japan May Final PMI Manufacturing: 49.8 v 49.6 prelim (confirm move back into contraction territory)
Europe/Mideast:
- German SPD leader Nahles resigns – Greece provisional local election results show conservative opposition New Democracy party swept 12 of 13 regions ahead of snap election on July 7
- Italy Fin Min Tria confirmed formal reply letter had been sent to EU about debt. Reiterated stance that budget tightening would be counterproductive now. Reiterated 2019 budget deficit/GDP ratio would be below the govt’s 2.4% forecast. Also reiterated that Italy was not seeking a clash with the EU over budget rules and confident it could avert disciplinary steps
Americas:
- President Trump: Mexico is sending a big delegation to talk about the Border. Problem is, they’ve been “talking” for 25 years. We want action, not talk. Mexico delegation to visit White House Wednesday, June 5th
- Mexico President Lopez Obrador (AMLO): encouraged by US willingness to have dialogue over trade issues; expect good results from meeting on Wed (June 5)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 -0.59% at 366.90, FTSE -0.76% at 7,107.04, DAX -0.51% at 11,666.80, CAC-40 -0.64% at 5,174.51, IBEX-35 -0.62% at 8,948.00, FTSE MIB -0.55% at 19,692.50, SMI -0.44% at 9,481.80, S&P 500 Futures -0.53%]
- Market Focal Points/Key Themes: Equities European Indices trade down across the board amid trade tensions again weigh after weekend comments of various officials in both China and U.S. U.K. FTSE underperforms other indices following weaker than expected PMI release and first contraction in almost 3 years. U.S. futures trade also trade in negative territory with Nasdaq futures declining 0.7%. On the corporate front, tech giant Infineon trades 6% lower after confirming acquistion of U.S.-traded Cypress Semiconductor. Novartis and Roche Holding both trading little lower after presenting study data. Wirecard in Germany trades 1% lower amid CEO tweet that company expects ‘outstanding’ H1 2019. On the earnings front, shares of Kier in London trade 42% lower after issuing profit warning as well as trading update. In other news, shares of Deutsche Bank again renew all-time lows following press story on merger talks with Swiss bank UBS. Scapa Group stock fell almost 50% following material contract termination. Looking ahead, no notable earners expected during U.S. morning session.
- Consumer discretionary: William Hill [WMH.UK] -2% (reports it was in merger talks)
- Materials: Lonza Group [LONN.CH] +0.5% (unit job cuts)
- Financials: Deutsche Bank [DBK.DE] -3% (reports on merger talks)
- Healthcare: Novartis [NOVN.CH] -0.5% (data), Roche Holding [ROG.CH] -1% (data), Targovax [TRVX.NO] +12% (study update)
- Industrials: Kier [KIE.UK] -42% (trading update; profit warning), Deutz [DEZ.DE] -1.5% (JV), Scapa Group [SCPA.UK] -47% (contract termination)
- Technology: Infineon [IFX.DE] -6% (acquisition), Wirecard [WDI.DE] -1% (CEO tweet)
- Telecom: Kcom Group [KCOM.UK] +12.5% (recommends offer)
Speakers
- Finland incoming PM Rinne: Govt planning over €4.0B in new spending. Targets balanced public finances by 2023
- China Global Times Editor-in-chief Hu Xijin tweeted that China to issue a warning on the risk of studying in the US due to recent series of discriminatory measures the US took against Chinese students. Could also be seen as a response to the US-initiated trade war.
- Saudi Energy Min Al-Falih: Effectiveness of OPEC efforts had been well proven over the course of 30 months; looked to continue towards market stability in H2
- Saudi Arabia May oil production said to be at 9.65M bpd v 9.74M bpd prior
Currencies/Fixed Income
- Last week saw the USD index futures sell off as the Trade war remained the focal point. We continue the week with Trump visiting the UK and quite a few market moving events ranging from Non-Farm Payrolls and ISM figures to Powell speaking Tuesday just after the US open. Also on the fixed income front we see yields in the US 10 year reaching 2 year lows as futures trade above the 1.27 handle.
- EUR/USD The Euro trades around the 1.12 handle as the 1.11 handle held twice in the past few weeks. We also saw both the BTP and Bund futures trade higher today as the markets continue their risk of theme started a few weeks back. The Euro should be fairly quiet as this week we will see the ECB rate decision on Thursday with focus on the staff projections and any details on TLTRO-3.
- GBP/USD The Cable trades above the 1.26 handle after briefly trading below last week.
- The UK are hosting Trump during the D-Day 75th memorial and he is expected to meet with Boris Johnson a favorite for the PM position to be voted on sometime this month. We also saw UK PMI manufacturing go into contraction for the 1st time since the Jun 2016 Brexit Referendum with a very muted move. We also see BOE Gov Carney to speak Thursday, which could see some market moving comments.
Economic Data
- (IN) India May PMI Manufacturing: 52.7 v 51.8 prior
- (RU) Russia May PMI Manufacturing: 49.8 v 51.5e
- (SE) Sweden May PMI Manufacturing: 53.1 v 50.4e
- (CH) Switzerland May CPI M/M: 0.3% v 0.3%e; Y/Y: 0.6% v 0.6%e; CPI Core Y/Y: 0.6% v 0.5% prior
- (CH) Switzerland May CPI EU Harmonized M/M: -0.2% v +0.6% prior; Y/Y: 0.5% v 1.1% prior
- (AU) Australia May Commodity Index: 125.9 v 122.8 prior
- (NL) Netherlands May Manufacturing PMI: 52.2 v 52.0 prior (69th month of expansion)
- (NO) Norway May PMI Manufacturing: 54.4 v 54.0e (11th month of expansion)
- (HU) Hungary May Manufacturing PMI: 57.9 v 54.0e (42nd month of expansion)
- (PL) Poland May Manufacturing PMI: 48.8 v 49.0e (7th straight contraction)
- (TR) Turkey May Manufacturing PMI: 45.3 v 46.8 prior (14th straight contraction and lowest since Dec)
- (TR) Turkey May CPI M/M: 1.0% v 1.3%e; Y/Y: 18.7% v 19.3%e; Core Index Y/Y: 15.9% v 16.4%e
- (TR) Turkey Apr M/M: 2.7% v 3.0% prior; Y/Y: 28.7% v 30.1% prior
- (HU) Hungary Apr PPI M/M: 1.0% v 0.0% prior; Y/Y: 4.1% v 2.7% prior
- (ES) Spain May Manufacturing PMI: 50.1 v 51.3e (3rd straight expansion)
- (CH) Swiss May PMI Manufacturing: 48.6 v 48.8e (2nd straight contraction)
- (CZ) Czech Republic May Manufacturing PMI: 46.6 v 46.5e (6th straight contraction)
- (SE) Sweden Apr Retail Sales M/M: 1.9% v 0.6%e; Y/Y: 3.9% v 1.5%e
- (IT) Italy May Manufacturing PMI: 49.7 v 48.5e (8th straight contraction)
- (FR) France May Final Manufacturing PMI: 50.6 v 50.6e (confirms 2nd month of expansion)
- (DE) Germany May Final Manufacturing PMI: 44.3 v 44.3 e (confirms 5th straight contraction)
- (EU) Euro Zone May final Manufacturing PMI: 47.7 v 47.7e (confirms 4th straight contraction)
- (GR) Greece May Manufacturing PMI: 54.2 v 56.6 prior
- (CH) Swiss Weekly Total Sight Deposits (CHF): 578.2B v 578.6B prior; Domestic Sight Deposits: 474.3B v 485.0B prior
- (UK) UK May PMI Manufacturing: 49.4 v 52.2e (1st contraction in 34 months)
- (DK) Denmark May PMI Survey: 47.6 v 58.8 prior
- (ZA) South Africa May Manufacturing PMI: 45.4 v 47.2 prior (5th straight contraction)
- (IS) Iceland Q1 Current Account Balance (ISK): 35B v 0.1B prior
Fixed Income Issuance
- None seen
Looking Ahead
- (NG) Nigeria May Manufacturing PMI
- (RU) Russia May Sovereign Wealth Funds: Wellbeing Fund: No est v $59.0B prior
- (ZA) South Africa May Naamsa Vehicle Sales Y/Y: 1.2% (revised from 0.7%)
- (IT) Italy May Budget Balance: No est v -€2.9B prior
- (RO) Romania May International Reserves: No est v $37.5B prior
- (IL) Israel Central bank May Meeting
- (AR) Argentina May Government Tax Revenue (ARS): No est v 357.4B prior
- (BR) Brazil AprCNI Capacity Utilization: No est v 76.5% prior
- (US) Monthly US auto sales data
- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:45 (US) Daily Libor Fixing
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (CZ) Czech May Budget Balance (CZK): No est v -29.7B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (ES) Spain Debt Agengy (Tesoro) size announcement for Thursday’s bond issuance
- 08:30 (CA) Canada Apr MLI Leading Indicator M/M: No est v 0.2% prior
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.7-4.9B in 3-month, 6-month and 12-month Bills
- 09:00 (BR) Brazil May PMI Manufacturing: No est v 51.5 prior
- 09:00 (SG) Singapore May Purchasing Managers Index (PMI): 50.1e v 50.3 prior; Electronics Sector Index: No est v 49.5 prior
- 09:00 (CL) Chile Apr Retail Sales Y/Y: -0.6%e v +0.7% prior; Commercial Activity Y/Y: No est v 2.6% prior
- 09:10 (US) Fed’s Quarles (hawk, voter)
- 09:30 (CA) Canada May Manufacturing PMI: No est v 49.7 prior
- 09:45 (US) May Final Markit Manufacturing PMI: 50.6e v 50.6 prelim
- 10:00 (US) May ISM Manufacturing: 53.0e v 52.8 prior; Prices Paid: 51.0e v 50.0 prior
- 10:00 (US) Apr Construction Spending M/M: +0.4%e v -0.9% prior
- 10:00 (MX) Mexico Apr Total Remittances: $2.8Be v $2.9B prior
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:30 (MX) Mexico May PMI Manufacturing: No est v 50.1 prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 12:00 (IT) Italy May New Car Registrations Y/Y: No est v 1.5% prior
- 12:15 (IT) Italy PM Conte to hold press conference
- 12:40 (US) Fed’s Barkin (hawk, non-voter) at Charlotte Economics Club
- 13:00 (MX) Mexico May IMEF Manufacturing Index: 51.5e v 52.0 prior; Non-Manufacturing Index: 51.5e v 52.4 prior
- 13:25 (US) Fed’s Bullard (dove, voter) in Chicago
- 14:00 (BR) Brazil May Trade Balance: $6.5Be v $6.1B prior
