HomeContributorsFundamental AnalysisECB Member Hints As Possible Taper Of PEPP Program

ECB Member Hints As Possible Taper Of PEPP Program

Notes/Observations

  • Expectations for very strong US nonfarm payroll report but unlikely to cause the Fed to switch course away from highly accommodative monetary policy.
  • ECB member noted that it could decide to scale back its emergency bond-buying program next month if the euro-area economy did not deteriorate.

Asia

  • (CN) China Apr Trade Balance: $42.9B v $27.7Be; Exports Y/Y: 32.3% v 24.1%e; Imports Y/Y: 43.1% v 44.0%e.
  • China Apr Caixin PMI Services registered its 12th consecutive expansion (56.3 v 54.2e).
  • Japan Apr Final PMI Services reading confirmed its 15th month of contraction (49.5 v 48.3 prelim).
  • RBA Statement on Monetary Policy (SOMP) noted that the risk to economic outlook had become more balanced. Reiterated its forward guidance that would not raise cash rate until inflation sustainably within 2-3% target range and that conditions for rate hike was unlikely until 2024 at the earliest.

Coronavirus

  • German Chancellor Merkel said to oppose Biden plan to waive COVID vaccine patent.
  • Australia’s Trade Min Tehan: Borders might not be open until the second half 2022 but timing could change.

Europe

  • UK PM Johnson and France President Macron to hold talks on fishing dispute in Jersey.
  • Tories said to take Hartlepool in UK local elections (Note: Hartlepool swings to Conservatives from Labour for first time; Analysts note that result likely to intensify pressure on Labour leader Starmer).
  • France Stats Agency (INSEE) saw Q2 GDP growth around 0.25% and added that the domestic economy would gradually approach its pre-crisis level.

Americas

  • Biden Administration said to likely proceed with the Trump-era China investment ban.
  • Fed Semi-Annual Financial Stability Report: asserted that prices might be vulnerable to significant declines should investor risk appetite fall, progress on containing the virus disappointed, or recovery stalled.
  • Fed’s Bostic (FOMC voter): would not be surprised to see over 1M jobs added in April employment report but US economy was still down 7-8M jobs. Also noted that it was hard to feel confident about inflation forecasts. Hard to get a clear read on inflation for the next couple of months due to base effects and uncertainty over the duration of supply shocks.
  • Fed’s Mester (FOMC voter): economic outlook was bright though some risk remained including the virus. Policy would have to remain very accommodative for some time to make the recovery broaden.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

  • Indices [Stoxx600 +0.45% at 443.02, FTSE +0.57% at 7,116.79, DAX +1.03% at 15,352.90, CAC-40 +0.11% at 6,363.88, IBEX-35 +0.44% at 9,022.00, FTSE MIB -0.02% at 24,490.50, SMI +0.30% at 11,144.53, S&P 500 Futures +0.11%].
  • Market Focal Points/Key Themes: European indices open higher across the board and stayed in the green as the session advanced (notable exception the FTSE MIB slipping into negative); sectors leading to the upside include industrials and consumer discretionary; while laggards include utilities and real estate; DAX supported by better results from BMW and Addidas; Blackstone makes offer for St Modwen; focus on upcoming NFP figures from US, and Scottish parliamentary elections results expected over the weekend; earnings expected later in the US session include Cigna, Cenovus, Spectrum Brands and Telus.

Equities

  • Consumer discretionary: Adidas [ADS.DE] +8% (earnings), International Consolidated Airlines [IAG.UK] -1% (earnings).
  • Financials: St. Modwen Properties [SMP.UK] +19% (deal speculation), Credit Agricole [ACA.FR] -1% (earnings).
  • Industrials: BMW [BMW.DE] +1% (earnings), Siemens [SIE.DE] +3% (earnings).

Speakers

  • ECB’s Kazaks (Latvia) stated that might not spend the entire PEPP envelope and a decision to slow bond-buying was possible in June if financing conditions were favorable.
  • Germany Health Min Spahn stated that the 3rd wave of virus outbreak appeared to be broken.
  • Poland Labor Ministry stated that Apr Unemployment Rate was seen at 6.3% **Note: March reading was 6.4%.
  • Japan PM Suga confirmed to extend the State of Emergency until May 31st as the number of infections remain high in many cities (as speculated). Added prefectures of Aichi and Fukuoka to the emergency.
  • China Vice Foreign Min Qin Gang: Both China and Europe faced opportunities and challenges.

Currencies/ Fixed income

  • USD was softer during the session as recent Fed speak reiterated it stance that now was not the time to talk tapering. Expectations for very strong US nonfarm payroll report but unlikely to cause the Fed to switch course away from highly accommodative monetary policy.
  • EUR/USD approached the 1.21 area after ECB member Kazaks mentioned possible scaling back of bond buying as soon as June.
  • GBP/USD holding above the 1.39 level. Dealer looking towards the next phase of the UK reopening, around May 17th. Analysts noted that the planned reopening could provide a further catalyst for long-end bond yields to rise faster than short-end yields..

Economic data

  • (SE) Sweden Mar Maklarstatistik Housing Prices Y/Y: 19% v 17% prior; Apartment Prices Y/Y: 10% v v 8% prior.
  • (CH) Swiss Apr Unemployment Rate: 3.3% v 3.3%e; Unemployment Rate (seasonally adj): 3.1% v 3.3%e.
  • (DE) Germany Mar Industrial Production M/M: 2.5% v 2.2%e; Y.Y: 5.1% v 5.7%e.
  • (DE) Germany Mar Current Account Balance: €30.2B v €24.0Be; Trade Balance: €20.5B v €21.1Be; Exports M/M: 1.2% v 0.5%e; Imports M/M: 6.5% v 0.8%e.
  • (FI) Finland Mar Preliminary Trade Balance: -€0.3B v -€0.4B prior.
  • (DK) Denmark Mar Industrial Production M/M: +5.0% v -2.1% prior.
  • (ZA) South Africa Apr Gross Reserves: $53.7B v $53.0B prior; Net Reserves: $51.5B v $51.3Be.
  • (AU) Australia Apr Foreign Reserves: A$61.5 v A$63.2B prior.
  • (FR) France Mar Trade Balance: -€6.1B v -€5.5Be; Current Account Balance: -€2.9B v -€2.2B prior.
  • (FR) France Mar Industrial Production M/M: 0.8% v 2.0%e; Y.Y: 13.7% v 15.2%e.
  • (FR) France Mar Manufacturing Production M/M: 0.4% v 1.3%e; Y.Y: 15.7% v 16.9%e.
  • (FR) France Q1 Preliminary Private Sector Payrolls Q/Q: +0.3% v -0.2%e; Wages Q/Q: 0.5% v 0.3% prior.
  • (ES) Spain Mar Industrial Production M/M: 0.4% v 0.5%e; Y.Y: 12.6% v 12.6%e; Industrial Output NSA (unadj) Y/Y: +15.1% v -3.7% prior.
  • (CH) Swiss Apr Foreign Currency Reserves (CHF): 914.1B v 930.3B prior.
  • (CZ) Czech Mar National Trade Balance (CZK): 18.5B v 18.0Be.
  • (CZ) Czech Mar Industrial Output Y/Y: 18.2% v 12.1%e; Construction Output Y/Y: -3.1% v -11.0% prior.
  • (HU) Hungary Mar Preliminary Trade Balance: €1.0B v €0.9B prior.
  • (MY) Malaysia End-Apr Foreign Reserves: $110.8B v $109.3B prior mid-month reading.
  • (SE) Sweden Apr Budget Balance (SEK): -16.9B v +9.2B prior.
  • (TH) Thailand End-Apr Foreign Reserves: $250.4B v $247.0B prior.
  • (CN) Weekly Shanghai copper inventories (SHFE): 208.5K v 199.9K tons prior.
  • (IT) Italy Mar Retail Sales M/M: -0.1% v -0.6%e; Y.Y: +22.9% v -5.7% prior.
  • (CZ) Czech Apr International Reserves: $166.8B v $163.6B prior.
  • (RU) Russia Narrow Money Supply w/e Apr 30th (RUB): 14.14T v 13.99T prior.
  • (TW) Taiwan Apr Trade Balance: $6.2B v $3.2Be; Exports Y/Y: 38.7% v 27.6%e; Imports Y/Y: 26.4% v 27.2%e.
  • (UK) Apr Construction PMI: 61.6 v 62.1e (3rd month of expansion).
  • (IT) Bank of Italy Mar Balance-Sheet Aggregates: Target2 Liabilities at €480.7B v €515.6B prior.

Fixed income issuance

  • (IN) India sold total INR360B vs. INR360B indicated in 2026, 2033, 2035 and 2050 bonds.

Looking Ahead

  • (EU) EU leaders Summit in Porto, Portugal (evening hours).
  • (RU) Russia Apr Light Vehicle Car Sales Y/Y: No est v -5.7% prior.
  • 05:20 (EU) Daily ECB Liquidity Stats.
  • 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2029, 2038 and 2046 Bonds.
  • 06:00 (IE) Ireland Mar Industrial Production M/M: No est v 4.3% prior; Y/Y: No est v 40.3% prior.
  • 06:00 (EU) ECB chief Lagarde on State of the Union.
  • 06:00 (UK) DMO to sell ÂŁB in 1-month, 3-month and 6-month bills (ÂŁB, ÂŁB and ÂŁB respectively).
  • 06:45 (US) Daily Libor Fixing.
  • 07:00 (MX) Mexico Apr CPI M/M: 0.3%e v 0.8% prior; Y/Y: 6.0%e v 4.7% prior; CPI Core M/M: 0.3%e v 0.5% prior.
  • 07:00 (MX) Mexico Apr Vehicle Production: No est v 303.6K prior; Vehicle Exports: No est v 256.1K prior.
  • 07:00 (MX) Mexico Apr Consumer Confidence: 41.0e v 40.4 prior.
  • 07:00 (BR) Brazil Apr FGV Inflation IGP-DI M/M: 1.7%e v 2.2% prior; Y/Y: 32.8%e v 30.6% prior.
  • 07:30 (IN) India Weekly Forex Reserve w/e Apr 30th: No est v $584.1B prior.
  • 07:30 (IS) Iceland to sell Apr 2024 RIKB Bonds.
  • 08:00 (PL) Poland Central Bank (NBP) Apr Minutes.
  • 08:00 (PL) Poland Apr Official Reserves: No est v $158.4B prior.
  • 08:00 (UR) Ukraine Apr CPI M/M: 0.9%e v 1.7% prior; Y/Y: 8.6%e v 8.5% prior.
  • 08:00 (BR) Brazil Mar Retail Sales M/M: -5.1%e v +0.6% prior; Y/Y: -1.6%e v -3.8% prior.
  • 08:00 (BR) Brazil Mar Broad Retail Sales M/M: -11.6%e v 4.1% prior; Y/Y: +5.7%e v -1.9% prior.
  • 08:00 (CL) Chile Apr CPI M/M: 0.3%e v 0.4% prior; Y/Y: 3.2%e v 2.9% prior.
  • 08:00 (UK) Daily Baltic Dry Bulk Index.
  • 08:00 (IN) India announces upcoming bill issuance (held on Wed).
  • 08:30 (US) Apr Change in Nonfarm Payrolls: +1.00Me v +916K prior; Change in Private Payrolls: +938Ke v +780K prior; Change in Manufacturing Payrolls: +57Ke v +53K prior.
  • 08:30 (US) Apr Unemployment Rate: 5.8%e v 6.0% prior; Underemployment Rate: No est v 10.7% prior; Labor Force Participation Rate: 61.6%e v 61.5% prior.
  • 08:30 (US) Apr Average Hourly Earnings M/M: 0.0%e v -0.1% prior; Y/Y: -0.4%e v 4.2% prior; Average Weekly Hours: 34.9e v 34.9 prior.
  • 08:30 (CA) Canada Apr Net Change in Employment: -162.5Ke v +303.1K prior; Unemployment Rate: 7.9%e v 7.5% prior; Full Time Employment Change: No est v +175.4K prior; Part Time Employment Change: No est v +127.8K prior; Participation Rate: 65.2%e v 65.2% prior; Hourly Wage Rate Y/Y: -1.1%e v +2.0% prior.
  • 08:30 (CL) Chile Apr Trade Balance: $1.5Be v $0.5B prior; Total Exports: No est v $7.4B prior; Total Imports: No est v $6.9B prior; Copper Exports: No est v $4.2B prior.
  • 08:30 (CL) Chile Apr International Reserves: No est v $40.2B prior.
  • 09:00 (BR) Brazil Apr Vehicle Production: No est v 200.3K prior; Vehicle Sales: No est v 189.3K prior; Vehicle Exports: No est v 36.8K prior.
  • 10:00 (US) Mar Final Wholesale Inventories M/M: 1.4%e v 1.4% prelim; Wholesale Trade Sales M/M: +1.0%e v -0.8% prior.
  • 10:00 (CA) Canada Apr Ivey Purchasing Managers Index (seasonally Adj): No est v 72.9 prior; PMI (unadj): No est v 67.3 prior.
  • 10:30 (TR) Turkey Apr Cash Budget Balance (TRY): No est v 41.0B prior.
  • 11:00 (EU) Potential sovereign ratings after European close (Fitch on France and Austria sovereign rating; Moody’s on Italy, Denmark and South Africa sovereign rating; S&P on Egypt sovereign rating.
  • 12:00 (RU) Russia Apr CPI M/M: 0.6%e v 0.7% prior; Y/Y: 5.6%e v 5.8% prior.
  • 12:00 (RU) Russia Apr CPI Core M/M: 0.6%e v 0.8% prior; Y/Y: 5.6%e v 5.4% prior.
  • 13:00 (US) Weekly Baker Hughes Rig Count.
  • 15:00 (US) Mar Consumer Credit: $20.0Be v $27.6B prior.

 

 

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