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Risk Aversion Flows Not Dead Yet

Notes/Observations

  • Issuance bonanza continues (UK, Spain, Ireland, Greece with syndicates; Dutch, Germany with planned auctions; demand deemed quite healthy
  • Risk aversion finds some tailwinds on Far East political strains
  • Rising tensions between North Korea and South Korea aid demand for safe-haven assets;
  • China-Taiwan joust on airspace
  • China-Australia trade tension spilling into other areas – German Apr exports slump by record amount

Asia:

  • US military planes flew over Taiwan; Taiwan Defense Min reported that two 2 China fighter jets entered its airspace and immediately warned to leave
  • North Korea announced it would cut off communication lines with South Korea ‘completely’ at noon today (Tuesday, June 9th). Move in response to anti North Korean regime leaflets being sent from South Korea

Coronavirus:

  • Total global cases 7,118,471 (+1.5% d/d); Total deaths: 406.5K (+0.9% d/d)

Europe:

  • UK diplomats said to fear end of UK-US trade relationships if President Trump is not re-elected

Americas:

  • Fed loosened its loan terms for Main Street Lending Program to include more businesses; increases loan term to five years from four years, lowers min loan amount to $250K from $500K; raised maximum loan size for all facilities

Mid-East/Energy:

  • Libya National Oil Corporation stated that armed forces had entered state owned Sharara oilfield; permitted employees to stop working

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -1.38% at 368.96, FTSE -1.75% at 6,359.04, DAX -2.07% at 12,554.40, CAC-40 -1.83% at 5,081.07, IBEX-35 -2.33% at 7,712.00, FTSE MIB -2.43% at 19,740.50, SMI -0.04% at 10,148.66, S&P 500 Futures -0.93%]
  • Market Focal Points/Key Themes: European indices open modestly higher across the board; Bank of France sees GDP contracting 10.3% this year; City of London Investment group to merge with Karpus Management; reportedy Italy regulator questioning Intesa-UBI deal; earnings expected in upcoming US session include Avery Dennison, Brown-Forman and Gamestop

Equities

  • Consumer discretionary: Lufthansa [LHA.DE] +2.5% (deal with Austrian govt)
  • Consumer staples: British American Tobacco [BATS.UK] -3.5% (trading update)
  • Healthcare: BioInvent [BINV.SE] +15% (direct offering)
  • Technology: Aveva Group [AVV.UK] +2.5% (earnings)

Speakers

  • ECB’s Rehn (Finland): To safeguard price stability, support growth and ensure that monetary policy was transmitted to the real economy. Saw no certainty that output and employment would now embark on a substantial growth trajectory in post lockdown period despite substantial measures. Deflation risks were elevated in region and inflationary expectations were weak. Reiterated ECB stood ready to adjust all instruments to meet target
  • ECB SSM chief Enria: European Banking sector in better shape compared to the financial crisis back in 2008
  • EU Leaders could hold a physical summit between July 9-10th regarding the Recovery fund (**Note: EU leaders have a scheduled June 19th video conference on its Recoevry Fund proposal)
  • France Fin Min Le Maire stated that both France, Europe must retain global aerospace positions and saw ~100K jobs in risk in next 6-months
  • Bank of France official stated that 2020 GDP to contract by with 2021 registering 6.9% growth in 2021
  • Norway Financial Supervisory Authority (FSA): Banking sector well positioned to handle losses amid the virus outbreak
  • Hungary Central Bank Dep Gov nominee Virag stated during his Parliamentary hearing that needed a proactive and innovative monetary policy
  • S&P lowered its sovereign outlook to from positive to stable; affirms rating at A+
  • Thailand Dep PM said to call for more measures to boost the economy in H2
  • China Education Ministry said to have told students to ‘assess risks’ of studying in Australia due to reported ‘many’ racial incidents targeting Asians due to coronavirus

Currencies/Fixed Income

  • Risk aversion flows aid the USD, CHF and JPY currencies against all other major pairs with simmering tension in the far East cited as the initial catalyst for the sentiment.
  • EUR/USD remained locked within its 2020 trading zone as the pair fell short of approaching the 1.15 key resistance in recent sessions. USD/JPY unable to break above the 110 level and drifted back to test below 108 in the session. AUD/USD weighed down by simmering trade tension with China with the pair lower by 1.5% to test lower end of 0.69 handle.

Economic Data

  • (SE) Sweden Maklarstatistik May Housing Prices Y/Y 5% v 5% prior; Apartment Prices Y/Y: 3% v 7% prior
  • (NL) Netherlands May CPI M/M: -0.1% v +0.5% prior; Y/Y: 1.2% v 1.2% prior
  • (NL) Netherlands May CPI EU Harmonized M/M: -0.2% v +1.0% prior; Y/Y: 1.1% v 1.0%e
  • (NL) Netherlands Apr Manufacturing Production M/M: -8.1% v -1.0% prior; Y/Y: -11.0% v -1.9% prior; Industrial Sales Y/Y: -19.1% v -6.1% prior
  • (CH) Swiss May Unemployment Rate: 3.4% v 3.5%e; Unemployment Rate (Seasonally Adj): 3.4% v 3.6%e
  • (DE) Germany Apr Current Account Balance: €7.7B v €14.1Be; Trade Balance: €3.5B v €11.6Be; Exports M/M: -24.0% v -15.6%e; Imports M/M: -16.5% v -16.0%e
  • (DE) Germany Q1 Labor Costs Q/Q: 2.4% v 0.0% prior; Y/Y: 4.3% v 3.0% prior
  • (DK) Denmark Apr Current Account Balance (DKK): 18.5B v 16.3B prior; Trade Balance: 9.4B v 9.4B prior
  • (RO) Romania Q1 Preliminary GDP (2nd reading) Q/Q: 0.3% v 0.3%e; Y/Y: 2.4% v 2.4%e
  • (JP) Japan May Preliminary Machine Tool Orders Y/Y: -52.8% v -48.3% prior
  • (FR) Bank of France May Industrial (Business) Sentiment: 83 v 50 prior
  • (FR) France Apr Trade Balance: -€5.0B v -€3.0Be
  • (FR) France Apr Current Account Balance: -€5.4B v -€2.8B prior
  • (ES) Spain Q1House Price Index Q/Q: +1.1% v -0.6% prior; Y/Y: 3.2% v 3.6% prior
  • (HU) Hungary May CPI M/M: 0.4% v0.5%e; Y/Y: 2.3% v 2.3%e
  • (HU) Hungary Apr Preliminary Trade Balance: -€0.6B v +€0.1Be
  • (NO Norway May Region Output Survey (past 3-months): -2.63 v +0.89 prior; Output Survey (next 3-months): 0.08 v 0.83 prior
  • (CZ) Czech May International Reserves: $149.8B v $146.9B prior
  • (EU) Euro Zone Q1 Final GDP Q/Q: -3.6% v -3.8%e; Y/Y: -3.1% v -3.2%e
  • (EU) Euro Zone Q1 Household Consumption Q/Q: -4.7% v -4.8%e; Govt Expenditures: -0.4% v -0.4%e; Gross Fixed Capital: -4.3% v -4.8%e
  • (EU) Euro Zone Q1 Final Employment Q/Q: -0.2% v -0.2% prelim; Y/Y: 0.4% v 0.3% prelim

Fixed Income Issuance

  • (ID) Indonesia sold total IDR9.5T vs. IDR7.0T target in Islamic bills and bonds (Sukuk)
  • (IE) Ireland Debt Agency (NTMA) opened its book to sell EUR-denominated 10-year bond via syndicate; guidance seen +32bps to mid-swaps
  • (GR) Greece Debt Agency (PDMA) opened its book to sell EUR-denominated 10-year bond via syndicate; guidance seen +170-175bps to mid-swaps
  • (ES) Spain Debt Agency (Tesoro) opened its book to sell EUR-denominated Oct 2040 SPGB bond via syndicate; guidance seen low 30bps area to benchmark SPGB
  • (UK) DMO opened its book to sell Oct 2050 Gilts; guidance seen +0.5-1.0bps
  • (NL) Netherlands Debt Agency (DSTA) sold €2.805B vs. €1.0-3.0B indicated range in 0.00% July 2030 DSL Bonds; Avg Yield: -0.154% v -0.213% prior
  • (ES) Spain Debt Agency (Tesoro) sold total €6.886B vs. €6.0-8.0B indicated range in 6-month and 12-month bills

Looking Ahead

  • (PT) Bank of Portugal May ECB financing to Portuguese Banks: No est v €21.2B prior
  • (UR) Ukraine May CPI M/M: 0.4%e v 0.8% prior; Y/Y: 1.9%e v 2.1% prior
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
  • 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
  • 05:30 (DE) Germany to sell €3.0B in 0% Nov 2027 Bund
  • 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.8-2.2B in 3-month and 12-month bills
  • 05:30 (ZA) South Africa to sell combined ZAR6.1B in 2026, 2030 and 2035 bonds
  • 05:40 (UK) BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
  • 06:00 (US) May NFIB Small Business Optimism Index: 92.2e v 90.9 prior
  • 06:00 (PT) Portugal Apr Trade Balance: No est v -€1.6B prior
  • 06:00 (FI) Finland to sell €1.0B in 6-month and 12-month bills
  • 06:30 (EU) ESM to sell 12-month bills
  • 06:30 (EU) ECB allotment in weekly fixed-rate 1-month LTRO operation (prior)
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (MX) Mexico May CPI M/M: +0.5%e v -1.0% prior; Y/Y: 3.0%e v 2.2% prior; CPI Core M/M: 0.4%e v 0.4% prior
  • 07:00 (BR) Brazil Jun IGP-M Inflation (1st Preview): +1.0%e v -0.3% prior
  • 07:45 (US) Weekly Chain Store Sales
  • 07:45 (UK) BOE to buy ÂŁ1.5B in APF Gilt purchase operation (3-7 years)
  • 08:00 (BR) CONAB Crop Report
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:30 (CL) Chile Central Bank Economists Survey
  • 08:45 (UK) BOE to buy ÂŁ1.5B in APF Gilt purchase operation (7-20 years)
  • 08:55 (US) Weekly Redbook LFL Sales data
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
  • 09:45 (UK) BOE to buy ÂŁ1.5B in APF Gilt purchase operation (20+ years)
  • 10:00 (US) Apr JOLTS Job Openings: 5.750Me v 6.191K prior
  • 10:00 (US) Apr Final Wholesale Inventories M/M: 0.4%e v 0.4% prelim; Wholesale Trade Sales M/M: No est v -5.2% prior
  • 10:00 (MX) Mexico Weekly International Reserve data
  • 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills
  • 11:30 (US) Treasury to sell 1-month and 3-month Cash Management bills (CMB)
  • 13:00 (US) Treasury to sell 10-Year Notes Reopening
  • 16:30 (US) Weekly API Oil Inventories
  • 18:00 (NZ) New Zealand Government 10-Month Financial Statements
  • 18:45(NZ) New Zealand Q1 Manufacturing Activity SA Q/Q: No est v 2.4% prior
  • 19:00 (KR) South Korea May Unemployment Rate: 4.0%e v 3.8% prior
  • 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 98.3 prior
  • 19:50 (JP) Japan May PPI M/M: -0.3%e v -1.5% prior; Y/Y: -2.4%e v -2.3% prior
  • 19:50 (JP) Japan Apr Core Machine Orders M/M: -7.0%e v -0.4% prior; Y/Y: -13.2%e v -0.7% prior
  • 20:30 (AU) Australia Jun Westpac Consumer Confidence Index: No est v 88.1 prior
  • 21:00 (PH) Philippines Apr Trade Balance: -$2.5Be v -$2.4B prior; Exports Y/Y: -17.0%e v -24.9% prior; Imports Y/Y: -30.0%e v -26.2% prior
  • 21:00 (AU) Australia to sell A$2.0B in 1% 2030 Bonds;
  • 21:10 (JP) BOJ Outright Bond Purchase operation for 3~5 year and 5~10 Year maturities
  • 21:30 (CN) China May CPI Y/Y: 2.7%e v 3.3% prior; PPI Y/Y: -3.2%e v -3.1% prior
  • 21:30 (AU) Australia Apr Home Loan Value M/M: -10.0%e v +0.2% prior
  • 22:35 (CN) China to sell 2-year and 5-year Upsized Bonds
  • 23:00 (KR) South Korea Apr M2 Money Supply M/M: No est v 0.9% prio; “L” Money Supply M/M: No est v 1.0% prior
  • 23:00 (KR) South Korea May Total Bank Lending To Household (KRW): No est v 915.7T prior
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