German IFO Survey Misses Expectations

Notes/Observations

• Continues European economic data shows that regional economy slowing down; gives ECB reasons to hold off on any QE guidance until June
• China stocks react to reports that China had signaled more RRR cuts are possible in the near future to replace maturing MLF (adds to last week’s RRR cut which becomes effective on Apr 25th)

Asia:

• Australia remains below RBA’s 2-3% target (Q1 CPI Q/Q: 0.4% v 0.5%e; Y/Y: 1.9% v 2.0%e; Trimmed Mean Q/Q: 0.5% v 0.5%e; Y/Y: 1.9% v 1.8%e). Core CPI has now remained below the target range for 9 straight quarters (record streak)
• China said to have additional room to cut RRR and repay maturing MLF; govt likely to ease liquidity tension in week

Europe:

• UK House of Lords votes 316-245 to add an EU rights charter to UK law, another defeat for PM May
• EU Chief Brexit negotiator Barnier: seeing good progress on orderly UK withdrawal from EU. UK must present a clear plan for its future relationship with the EU if Brexit talks are to move on

Americas:

• Bank of Canada (BOC) Gov Poloz: protectionist trade policies remained the biggest risk to the economic outlook. BoC will stay cautious on rate policy

Economic Data:

• (CH) Swiss Mar Trade Balance (CHF): 1.8B v 3.1B prior; Real Exports M/M: 0.6 v 2.0% prior; Real Imports M/M: +3.9 v -8.8% prior; Watch Exports: 4.8% v 12.9% prior
• (FI) Finland Mar PPI M/M: 0.7% v 0.7% prior; Y/Y: 3.1% v 2.4% prior
• (FI) Finland Mar Unemployment Rate: 8.8% v 8.6% prior
• (DK) Denmark Mar Retail Sales M/M: +0.4% v -0.1% prior; Y/Y: 1.8% v 3.0% prior
• (FR) France Apr Business Confidence: 108 v 108e; Manufacturing Confidence: 109 v 110e; Production Outlook Indicator: 24 v 25e; Own- Company Production Outlook: 15 v 10e
• (FR) France Apr Business Survey Overall Demand: 17 v 22 prior
• (CZ) Czech Apr Business Confidence: 17.2 v 16.5 prior; Consumer Confidence: 10.0 v 10.3 prior, Composite (Consumer & Business) Confidence: 15.8 v 15.3 prior
• (ZA) South Africa Feb Leading Indicator: 108.3 v 106.8 prior
• (SE) Sweden Mar Unemployment Rate: 6.5% v 6.6%e; Unemployment Rate (Seasonally Adj): 6.2% v 6.1%e
• (DE) Germany Apr IFO Business Climate: 102.1 v 102.8e; Current Assessment: 105.7 v 106.0e, Expectations Survey: 98.7 v 99.5e
• (IT) Italy Apr Consumer Confidence: 117.1 v 116.9e; Manufacturing Confidence: 107.7 v 108.8e, Economic Sentiment: 105.1 v 106.0 prior
• (UK) Mar Public Finances (PSNCR): £0.5B v £19.1B prior, Public Sector Net Borrowing: -£0.3B v +£1.3Be, Central Government NCR: +£19.9B v -£1.9B prior, PSNB ex Banking Groups: £1.3B v £3.0Be

Fixed Income Issuance:

• (EU) EFSF opened its book to sell €1.0B in 1.375% May 2047 bonds; guidance seen +4bps to mid-swaps
• (ID) Indonesia sold total IDR6.15T vs. IDR target in 3-month, 9-month Bills, 5-year, 10-year and 20-year Bonds
• (CH) Switzerland sold CHF315.0M in 3-month Bills; Yield: -0.853% v -0.853% prior
• (ZA) South Africa sold total ZAR2.4B vs. ZAR2.4B indicated in 2023, 2037 and 2044 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.2% at 383.8, FTSE +0.4% at 7427, DAX +0.4% at 12621, CAC-40 flat at 5440, IBEX-35 -0.1% at 9914, FTSE MIB -0.1% at 23954, SMI +0.1% at 8814, S&P 500 Futures +0.4%]
• Market Focal Points/Key Themes: European Indices trade mostly higher across the board following a raft of earnings out of Europe, with strength in the Dax helped by shares of SAP which reported results and raised guidance. In France PSA Group reported a slight beat in Revs, Michelin reported in line results, with shares slightly lower. AMS following a miss of estimates trades over 10% lower in Switzerland. Randstad and Akzo Nobel fall sharply in the Netherlands after missing on earnings, while Volvo is another notable faller despite a beat on the top and bottom line. In Spain Santander did report a small beat however shares trade lower. In the M&A space Shire trades higher after reportedly nearing an agreement to be acquired by Takeda. Looking ahead notable earners include Verizon, Caterpillar, Eli Lilly and 3M.

Movers

• Materials [Anglo American [AAL.UK] -1.3% (Earnings), Akzo Nobel [AKZA.NL] -3.9% (Earnings) ]
• Industrials [ Michelin [ML.FR] -1.3% (Earnings), Volvo [VOVLA.SE] -3.6% (Earnings), PSA Group [UG.FR] -1.6% (Earnings)]
• Financial [Santander [SAN.ES] -1.8% (Earnings), Randstad [RAND.NL] -4.9% (Earnings), St James Place [STJ.UK] -1.3% (Earnings)]
• Healthcare[Sartorius [SRT.DE] -5.7% (Earnings), Shire [SHP.UK] +4% (Reportedly nearing agreement with Takeda) ]
• Telecoms [Telenor [TEL.NO] -2.6% (Earnings)]
• Technology [SAP [SAP.DE] +3.2% (Earnings), AMS [AMS.CH] -11.3% (Earnings) ]

Speakers

• ECB Bank Lending Survey: Loan growth support by easing credit standards and increasing demand
• EU officials said to believe that the preferred solution on the Irish border may not prevent a hard Brexit. Backstop in its current form could potentially pave the way for a future trade deal that could give the UK many benefits of the single market without membership
• EU’s Dombrovskis: Financial companies must continue to prepare for all possible Brexit scenarios
• German IFO Economists noted that id did not view the softer April survey as a change in trend for the economy. Forecasted Q1 GDP at 0.4% vs. 0.6% q/q – UK DMO raised FY18/19 Gilt issuance by £3.1B to £106.0B
• Poland Dep Fin Min Skiba: 2018 GDP growth could exceed 3.8%
• Philippines Central Bank (BSP) Gov Espenilla: Domestic economy is robust and could handle a rate hike if necessary
• Hong Kong Monetary Authority (HKMA): Peg system is stable
• Iran President Rouhani said to warn President Trump to remain in the nuclear deal or face ‘severe consequences’

Currencies

• USD continued to hold onto recent gains aide by the recent steepening of the US yield curve
• EUR/USD holding below the 1.22 level ahead of Thursday’s ECB meeting. Dealers noted that ECB would have to digest recent economic downside surprises in various economic releases. German IFO survey continued to show the recent spat of disappoint numbers continued as the German/regional economic shifted into a lower gear.
• Other USD-related pairs were little change with USD/JPY holding below the 109 level and GBP/USD at 1.3930 just ahead of the NY morning.

Fixed Income

• Bund Futures trade 5 ticks higher at 157.88 as European markets eye Thursday’s ECB meeting. Upside targets 159.75, while a return lower targets the158.25 level.
• Gilt futures trade at 121.30 higher by 14 ticks, tentatively finding support from the 121 handle. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.
• Tuesday’s liquidity report showed Wednesday’s excess liquidity fell to €1.846T from €1.848T prior. Use of the marginal lending facility fell from €92M to €85M.
• Corporate issuance saw 6 issuers raise $8B in the primary market last week

Looking Ahead

• NAFTA talks resume
• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (EU) ECB allotment in 7-day Main Financing Tender
• 05:30 (DE) Germany to sell €4.0B in 0% Mar 2020 Schatz
• 05:30 (UK) DMO to sell £750M of 0.125% Inflation -Linked 2048 Gilts (UKTei)
• 05:30 (ZA) South Africa to sell combined ZAR2.4B in 2023, 2037 and 2044 bonds
• 06:00 (UK) Apr CBI Industrial Trends Total Orders: 4e v 4 prior, Selling Prices: No est v 18 prior, Business Optimism: No est v 13 prior
• 06:00 (FI) Finland to sell €1.0B in 0.5% Sept 2027 RFGB bonds
• 06:45 (US) Daily Libor Fixing – 07:00 (RU) Russia announces upcoming OFZ bond auction (held on Wed)
• 07:00 (BR) Brazil Apr FGV Consumer Confidence: No est v 92 prior
• 07:30 (TR) Turkey Apr Capacity Utilization: No est v 77.8% prior
• 07:30 (TR) Turkey Apr Real Sector Confidence (seasonally adj): No est v 109.5 prior; Real Sector Confidence (unadj): No est v 111.9 prior
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%
• 08:00 (PL) Poland Mar M3 Money Supply M/M: 0.3%e v 0.4% prior; Y/Y: 5.3%e v 4.9% prior
• 08:00 (CL) Chile Mar PPI M/M: No est v -0.8% prior
• 08:15 (UK) Baltic Dry Bulk Index
• 08:55 (US) Weekly Redbook Sales
• 09:00 (US) Feb FHFA House Price Index M/M: 0.6%e v 0.8% prior
• 09:00 (US) Feb S&P/ Case-Shiller 20-City M/M: 0.68%e v 0.75% prior; Y/Y: 6.35%e v 6.40% prior; House Price Index (HPI): No est v 205.10 prior
• 09:00 (US) Feb S&P Case-Shiller (overall) HPI Y/Y: No est v 6.18% prior, Overall HPI Index: No est v 196.31 prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (BE) Belgium Apr Business Confidence: -0.5e v +0.1 prior
• 09:00 (HU) Hungary Central Bank (MNB) Gov Matolcsy policy statement
• 10:00 (US) Apr Consumer Confidence: 126.0e v 127.7 prior
• 10:00 (US) Mar New Home Sales: 630Ke v 618K prior
• 10:00 (US) Apr Richmond Fed Manufacturing Index: 16e v 15 prior
• 11:30 (US) Treasury to sell 4-Week and 52-Week Bills
• 13:00 (US) Treasury to sell $32B in 2-Year Notes
• 15:00 (AR) Argentina Feb Economic Activity Index (Monthly GDP) M/M: No est v 0.6% prior; Y/Y: 4.3%e v 4.1% prior
• 15:00 (AR) Argentina Mar Trade Balance: -$1.1Be v -$0.9B prior
• 16:30 (US) Weekly API Oil Inventories
• (AR) Argentina Central Bank (BCRA) Interest Rate Decision: Expected to leave 7-Day Repo Reference Rate unchanged at 27.25%