Notes/Observations
- Focus on Wed’s FOMC decision and hints for taper timing’ Market participants wary of any hawkish surprise (other decision in the week include: SNB and BOJ as well as Brazil, Indonesia and Turkey).
- UK planned reopening for Jun 21st set for a one-month delay.
Asia:
- Numerous holidays in region (Australia, China, Hong Kong and Taiwan closed).
Europe:
- G7 Communique agreed on the need to continue support for economies for as long as necessary and that agreed pick-up in inflation was temporary. Shifting focus towards job creation and infrastructure investment, once recovery was firmly established. Needed to work on repairing public finances.
- UK Govt said to approves delay of 4 weeks to COVID lockdown measures (Note: The next phase of easing measures were scheduled for Jun 21st).
- France President Macron said to have told UK PM Johnson that there needed to be a reset of Franco-British relations, but bilateral ties could only improve if the UK kept its word on the Brexit deal.
- UK PM Johnson was said to have insisted that he would do whatever it took to protect Britain’s territorial integrity.
- Turkey Pres Erdogan noted that it had reserves ~$100B; Talks with President Biden to focus on future cooperation. Signed new $3.6B swap deal with China, raised total swap deal with China to $6.0B.
- German Election Poll INSA poll For Bild: Conservative Bloc 27% greens 20%.
Energy:
- Iraq Oil Min Jabbar: Expect oil prices to be $68-75/bbl in second half of 2021 due to commitment to OPEC+ output cut.
Speakers/Fixed income/FX/Commodities/Erratum
Equities
- Indices [Stoxx600 +0.26% at 458.70, FTSE +0.39% at 7,161.65, DAX +0.34% at 15,747.30 , CAC-40 +0.35% at 6,625.08, IBEX-35 +0.59% at 9,259.00, FTSE MIB +0.21% at 25,772.50 , SMI +0.07% at 11,850.00, S&P 500 Futures +0.10%].
- Market Focal Points/Key Themes: European indices open higher across the board but moderated gains as the session progressed; sectors leading to the upside include consumer discretionary and technology; while underperforming sectors include health care and materials; reportedly IAG considering spinning of BA; reportedly Shell looking to sell their assets in the Permian Basin; corporate events expected in the upcoming US session include earnings from Plug Power, and a press conference by Hapag-Lloyd CEO on shipping industry.
Equities
- Consumer discretionary: Atlantia [ATL.IT] +1% (Confirms to divest its entire stake in Autostrade per l’Italia), International Consolidated Airlines [IAG.UK] -2% (potential spin-off of British Airways).
- Financials: Serco Group [SRP.UK] +4% (raises outlook).
- Industrials: Implenia [IMPN.CH] +6% (awarded contract).
Speakers
- ECB chief Lagarde reiterates Council stance that was far too early to debate end of PEPP. Needed to really anchor the recovery. Hoped to present the Strategic review by the end of the summer.
- ECB’s Holzmann (Austria) stated that ECB was not in a dangerous zone as inflation concerns were rising. Reiterated Council stance that it is too early to talk regarding PEPP; program was designed to be temporary.
- ECB’s de Cos (Spain) noted that climate policies could affect inflation volatility.
- ECB’s Simkus (Lithuania) stated that it was too early to discuss the end of the Pandemic Bond Buying Program (PEPP). Would need the Sept Staff Projections to debate the PEPP program.
- Poland Central Bank’s Lon stated that could review policy in November when Staff Projections are updated.
- Poland Central Bank’s Kropiwnicki noted that a better picture of domestic economy was possible in September.
- Hungary Central Bank’s Pleschinger noted that it was likely to raise rates once a quarter and that such hikes should balance CPI and GDP risks.
- Czech Central Bank’s Holub (chief economist) stated that he favored a rate hike at next week’s policy meeting.
- NATO Sec Gen Stoltenberg noted that relations with Russia were at its lowest level since the cold war. China was not our enemy but its military buildup posed challenges. Stressed that was not entering a new cold war with China. Confident that member nations would agree to invest more.
- Iran Foreign Ministry spokesperson noted that JCPOA Nuclear talks were not at an impasse but little time was remaining on key issues. Deal was in place on sectoral sanctions including energy.
Currencies/Fixed Income
- FX markets quiet in Asia with markets in Hong Kong, China and Australia shut for holidays. USD was trying to hold onto its recent gains.
- Focus on Wed’s FOMC decision and hints for taper timing. The US will see some key data before the Fed (Retail Sales and Industrial Production on Tues). Recent data had been pointing to a surge in inflation and raised concerns that price pressures following the post-COVID economic reopening could force policymakers into an earlier tapering of currency-depreciating stimulus. Some deals noted that fiscal policy stimulus was fading and bottlenecks in the system was making business more difficult.
- EUR/USD holding above the 1.21 level in dull trade.
- GBP/USD back below the 1.41 level as the UK was set to delay the end of social distancing measures as the government tried to slow a rapid rise in COVID-19 infections.
Economic data
- (FI) Finland May CPI M/M: 0.2% v 0.4% prior; Y/Y: 2.2% v 2.1% prior.
- (IN) India May Wholesale Prices (WPI) Y/Y: 12.9% v 13.4%e.
- (CH) Swiss May Producer & Import Prices M/M: 0.8% v 0.7% prior; Y/Y: 3.2% v 1.8% prior.
- (TR) Turkey Apr Current Account Balance: -$1.7B v -$2.2Be.
- (CH) Swiss weekly Total Sight Deposits (CHF): 711.0B v 710.8B prior; Domestic Sight Deposits: 630.8B v 632.2B prior.
- (EU) Euro Zone Apr Industrial Production M/M: 0.8% v 0.4%e; Y/Y: 39.3% v 37.4%e.
- (IS) Iceland May International Reserves (ISK): B v 850B prior.
Fixed income Issuance
- European Union to sell EUR-denominated 10-year bond under its NextGeneration EU Funding Strategy (NGEU).
- (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills; Avg Yield: 0.32% v 0.28% prior; Bid-to-cover: 1.64x v 1.93x prior.
Looking Ahead
- (IL) Israel Central Bank (BOI) May Minutes.
- (FR) Bank of France May Industrial (Business) Sentiment: 108e v 107 prior.
- 05:20 (EU) Daily ECB Liquidity Stats.
- 05:30 ((DE) Germany to sell €4.0B in 6-month BuBills;.
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).
- 06:00 (PT) Portugal May Final CPI M/M: No est v 0.2% prelim; Y/Y: No est v 1.2% prelim.
- 06:00 (PT) Portugal May Final CPI EU Harmonized M/M: No est v 0.2% prelim; Y/Y: No est v 0.4% prelim.
- 06:00 (IL) Isreal Q1 Current Account Balance: No est v $5.1B prior.
- 06:00 (IL) Israel to sell bonds.
- 06:45 (US) Daily Libor Fixing.
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.
- 08:00 (PL) Poland Apr Current Account Balance: €1.2Be v €0.9B prior; Trade Balance: €0.5Be v €0.6B prior; Exports: €22.8Be v €24.4B prior; Imports: €22.1Be v €23.8B prior.
- 08:00 (BR) Brazil Apr Economic Activity Index (Monthly GDP) M/M: +1.4%e v -1.6% prior; Y/Y: 18.2%e v 6.3% prior.
- 08:00 (IN) India May CPI Y/Y: 5.4%e v 4.3% prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).
- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming auction.
- 08:30 (CA) Canada Apr Manufacturing Sales M/M: -1.1%e v +3.5% prior.
- 09:00 (FR) France Debt Agency (AFT) to sell €5.3-6.5B in 3-month, 6-month, 9-month and 12-month bills.
- 09:00 (DE) ECB’s Schnabel (Germany).
- 09:00 (UK) BOE Gov Bailey at conference.
- 09:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden.
- 09:45 (EU) ECB weekly QE bond buying update.
- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (3-7 years).
- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.
- 16:00 (US) Weekly Crop Progress Report.
- 18:45 (NZ) New Zealand May Food Prices M/M: No est v 1.1% prior.
- 21:30 (AU) Australia House Price Index Q/Q: 5.5%e v 3.0% prior; Y/Y: 7.8%e v 3.6% prior.
- 21:30 (AU) RBA Jun Minutes.
- 23:00 (KR) South Korea Apr M2 Money Supply M/M: No est v 1.2% prior; “L” Money Supply M/M: No est v 1.5% prior.
- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills.
- 23:30 (JP) Japan to sell 6-Month Bills.
