Notes/Observations
ECB’s Darghi dampens any speculation on any imminent change in its policy stance
Market focus remains on upcoming discussions between the leaders of the US and Chin
India RBI narrow its rate corridor (not expected); left Repurchase Rate unchanged at 6.25% but raised the Reverse Repo by 25bps to 6.00%
Overnight:
Asia:
China Mar Caixin PMI Services: 52.2 v 52.6 prior (6-month low and 3rd straight sequential decline)
PBoC skips open market operations for 9th straight session
China FX regulator SAFE: China FX market relatively stable, cross-border capital flow were gradually becoming balanced
Europe:
European Finance Ministers to study bad bank loan reduction program. Germany said to support ideas but opposed any European bad banks
Americas:
White House adviser Steve Bannon removed from National Security Council principals committee role in staff reorganization
House Speaker Ryan: House, Senate and White House are not yet on the same page regarding tax reform. Tax reform could take longer than healthcare haul
FOMC Mar Minutes: Most participants saw move to reduce the balance sheet later this year and stressed that policy change should be communicated "well in advance" of any actual change
Economic Data
(NL) Netherlands Mar CPI M/M: 0.3% v 0.7% prior; Y/Y: 1.1% v 1.8% prior
(IN) India Mar PMI Services: 51.5 v 50.3 prior (2nd consecutive month of expansion)
(JP) Japan Mar Consumer Confidence: 43.9 v 43.4e
(DE) Germany Feb Factory Orders M/M: 3.4% v4.0%e; Y/Y: 4.6% v 3.9%e
(CH) Swiss Mar CPI M/M: 0.2% v 0.2%e; Y/Y: 0.6% v 0.5%e
(CH) Swiss Mar CPI EU Harmonized M/M: 0.1% v 0.2%e; Y/Y: 0.5% v 0.5%e
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) sold total €3.92B vs. €3.5-4.5B indicated range in 2020, 2027 and 2041 Bonds
Sold €1.86B in 1.4% 2020 bono; Avg Yield: -0.126% v +0.641% prior; Bid-to-cover: 1.64x v 1.77x prior
Sold €1.27B in 1.5% Apr 2027 bond; Avg yield: 1.610% v 1.684% prior; Bid-to-cover: 1.65x v 1.42x prior
Sold €792M in 4.70% July 2041 SPGB; Avg Yield: 2.666% v 2.569% prior; Bid-to-cover: 1.47x v 1.46x prior
(ES) Spain Debt Agency (Tesoro) sold €876M vs. €0.5-1.0B indicate range in 1.80% Nov 2024 I/L bonds; Real Yield: 0.133% v 0.159% prior; Bid-to-cover: 1.99x v 1.43x prior
(FR) France Debt Agency (AFT) sold total €7.996B vs. €7.0-8.0B in 2027 and 2031 Oats
Sold €4.908B in May 1.0% 2027 Oat; Avg Yield: 0.97% v 0.91% prior; Bid-to-cover: 2.03x v 2.75x prior
Sold €3.088B in May 1.50% 2031 Oat; Avg Yield 1.31% v 1.48% prior; Bid-to-cover: 1.91x v 1.82x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 -0.3% at 3,460, FTSE -0.6% at 7,288, DAX -0.5% at 12,162, CAC-40 -0.2% at 5,082, IBEX-35 -0.1% at 10,396, FTSE MIB -0.5% at 20,144, SMI -0.5% at 8,600, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes: European equity indices are trading lower as markets are jittery ahead of the ECB minutes of the latest policy meeting; Market uncertainty also heightened with US President Trump’s meeting with China President Xi Jinping today; FOMC minutes were released overnight and Speaker Ryan said the road ahead for tax reform may be longer than healthcare; Banking stocks trading lower across the board with the peripheral lender weighted FTSE MIB underperforming as a result; shares of Pearson the notable laggard in the FTSE 100 after receiving an analyst downgrade; Commodity and mining stocks providing some support in the index as copper prices consolidate near yesterday’s rally highs.
Upcoming scheduled US earnings (pre-market) include Fred’s, Hooker Furniture, Carmax, Lamb Weston, MSC Industrial Direct, RPM International, Schnitzer Steel Industries, and Constellation Brands.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Hella KGaA HLE.DE -0.1% (9M results), Homeserve HSV.UK +8.8% (trading update), Mothercare MTC.UK +2.2% (Q4 results), Pearson PSON.UK -8.9% (analyst downgrade), Unilever UNA.NL -0.1% (to buyback €5B shares)]
Consumer Staples: [CHR Hansen CHR.DK -3.3% (Q2 results)]
Financials: [Saint-Gobain SGO.FR -0.5% (extension of pact with Burkard Family in relation to sale of Schenker -Winkler)]
Healthcare: [BTG BTG.UK +3.8% (revised FY outlook), Hikma Pharmaceuticals HIK.UK -0.6% (settlement agreement with Jazz), PureTech Health PRTC.UK +2.3% (Project EVO pilot study results)]
Industrials: [Gerresheimer GXI.DE -5.3% (Q1 results)]
Technology: [Kontron KBC.DE +3.0% (FY16 results), S&T SANT.AT +5.8% (FY16 results), Wirecard WDI.DE -0.2% (final FY16 results)]
Utilities: [Findel FDL.UK -1.5% (trading statement)]
Speakers
ECB chief Draghi reiterated that monetary policy stance remains appropriate; needed to see more inflation confidence before changing stance
ECB’s Praet (Belgium, chief economist) reiterated ECB stance on forward guidance that interest rates to stay low or lower during the forecast horizon. Cyclical recovery gaining momentum with expansion broadening; risks remained to the downside and inflation dynamics were conditional on substantial degree of policy accommodation
EU Commission imposes 5 year tariffs on Chinese hot-rolled coil steel of up to 35.9% in bid to ease competition for EU producers
RBI Policy statement noted that it was unanimous in its decision to narrow rate corridor (6-0). Narrow corridor to help manage weighted average call rate. Forecasted FY17/18 GDP at 7.4% v 6.7% in prior year. Saw H1 inflation at 4.5% and rising to 5.0% in H2
Currencies
Relatively subdued European session with overall market focus remaining on upcoming discussions between the leaders of the US and China on Friday.
EUR currency was softer in the session after ECB’s Draghi dampened any speculation of any imminent change in its policy stance. Pair hit a 3-week low at 1.0630 following the Draghi commentary on forward guidance
Fixed Income:
Bund futures trade at 162.38 down 2 ticks coming off earlier highs following the Spanish and French auctions. Continued momentum lower targets 162.02 followed by 161.52 then 161.02. A move back higher targets 162.67 day high followed by 162.98 then Feb contract high at 163.12. .
Gilt futures trade at 127.95 down 7 ticks also reversing from earlier highs as European indices rebound off lows. Support remains at 127.75 then 127.34 followed by 127.05. Resistance moves to 128.50 then 128.96 followed by 129.24. Short Sterling futures trade flat with Jun17Jun18 remaining steady at 14/14.5bp
Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.465T a fall of f €110B from €1.575T prior. Use of the marginal lending facility rose to €256M from €114M prior.
Corporate issuance saw $7.2B come to market via 4 issuers headlined by Airbus $1.5B 2 part offering, Sinopec $3.4B 4 part offering and Unicredit $2B 2 part offering. Issuance for the week now stands over $18B compared to analyst estimates at $25B.
Looking Ahead
(UK) EU President Tusk meets PM May in London to discuss Brexit
(MX) Mexico Mar Vehicle Production: No est v 301.5K prior; Vehicle Exports: No est v 240.9K prior
05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills
05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds
05:30 (PL) Poland to sell to sell PLN3.0-5.0B in Bonds
05:40 (DE) ECB’s Weidmann (Germany) in Berlin
06:00 (IE) Ireland Mar Live Registry Monthly Change: No est v -2.8Ke; Live Registry Level: No est v 276.0K prior
06:15 (DE) German Chancellor Merkel with State leaders
07:00 (BR) Brazil May FGV Inflation IGP-DI M/M: 0.0%e v 0.1% prior; Y/Y: 4.8%e v 5.3% prior
07:30 (US) Mar Challenger Job Cuts: No est v 37.0K prior; Y/Y: No est v -40.0% prior
07:30 (EU) ECB account of the monetary policy meeting (Feb Minutes)
07:45 (PT) ECB’s Constancio (Portugal) in Malta
08:00 (CL) Chile Feb Nominal Wage M/M: 0.8%e v 1.1 % prior; Y/Y: 4.3%e v 4.4% prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 250Ke v 258K prior; Continuing Claims: 2.03Me v 2.052M prior
08:30 (CA) Canada Feb Building Permits M/M: 1.3%e v 5.4% prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e Mar 31st: No est v $399.0B prior
09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
09:00 (NO) Norway Central Bank (Noregs) Gov Olsen
09:30 (US) Fed’s William (non-voter)
09:30 IMF Financial Stability Report
10:20 (BR) Brazil Mar Vehicle Production: No est v 200.4K prior; Vehicle Sales: No est v 135.7K prior; Vehicle exports: No est v 66.3K prior
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (US) Treasury announces for upcoming 3-year, 10-year and 30-year autions during week of Apr 10th
11:00 (BR) Brazil to sell 2023 LFT
11:00 (BR) Brazil to sell 2018, 2019 and 2020 LTN Bills
12:40 (BE) ECB’s Praet (Belgium, chief economist)
13:15 (PT) ECB’s Constancio (Portugal)
19:00 (PE) Peru Central Bank (BRCP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 4.25%
