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Market Update – European Session: UK Industrial Production And Trade Data Miss Expectations, Focus Turns To Trump/Xi Meeting And US Jobs Report

UK Industrial Production and Trade data miss expectations; Focus turns to Trump/Xi meeting and US jobs report

Notes/Observations

Geopolitical jitters keeps risk appetite sidelined; US launched missile strike on Syrian airbase deemed responsible for recent chemical attack on civilians

Trump/Xi meet on trade and other issues in Florida

China FX Reserves registers its 1st back-to-back monthly increases since in Apr 2016

UK house price growth stagnates in March as Halifax prices registers its slowest annual pace since May 2013

Focus turns to US non-farm payrolls

Syria and various reactions:

US launched cruise missile attacks against airfield targets in Syria. 59 Tomahawk launched from 2 ships in the Eastern Mediterranean, targeting airfield near Homs from which Syria launched recent chemical attack on civilians

US State Sec Tillerson: US has high degree of confidence sarin gas was used in chemical weapons attack; strike shows US prepared to take decisive action to respond to heinous attacks. Russia was either complicit or incompetent as they failed to carry out 2013 agreement to secure Syrian chemical weapons; Did not seek approval from Moscow

Pentagon: US informed Russian forces ahead of cruise missile strikes on Syrian Shayrat airfield; did not target areas where Russian forces were believed to be present

Syria State TV: US aggression targets Syrian military targets with a number of missiles. Attack caused significant damage to Shayrat airbase with multiple casualties

Overnight:

Asia:

BOJ Quarterly Public Opinion of Household Sentiment saw inflation at 2.0% in both 1-year and 5-year outlook

Japan Feb Overtime Pay regiusters its first rise since May 2016 of +0.6%

Europe:

ECB’s Constancio (Portugal): there is wide agreement in Governing Council on ECB policy; differences on council are about nuances, not about direction of the overall policy

Americas:

Senate Republicans pass "nuclear option" rule change that will allow for approval of Gorsuch Supreme Court nomination on a majority vote basis

Economic Data

(NL) Netherlands Feb Manufacturing Production M/M: +2.1% v -2.3% prior; Y/Y: 5.0% v 1.8% prior

(CH) Swiss Mar Unemployment Rate: 3.4% v 3.4%e; Unemployment Rate (Seasonally adj): % v 3.3%e

(DE) Germany Feb Industrial Production M/M: +2.2% v -0.2%e; Y/Y: 2.5% v 0.5%e

(DE) Germany Feb Current Account: €20.4B v €19.1Be; Trade Balance: €19.9B v €17.7Be; Exports M/M: +0.8% v -0.5%e; Imports M/M: -1.6% v +0.2%e

(NO) Norway Feb Industrial Production M/M: -0.5% v 3.4% prior; Y/Y: 1.2% v 1.3% prior

Manufacturing Production M/M: 0.0% v 0.0%e; Y/Y: -1.4% v -0.9% prior

(FR) France Feb Trade Balance: -€6.6B v -€4.9Be

(FR) France Feb Industrial Production M/M: -1.6% v +0.5%e; Y/Y: -0.7% v +1.4%e

(FR) France Feb Manufacturing Production M/M: -0.6% v +0.9%e; Y/Y: -0.5% v +0.9%e

(CH) Swiss Mar Foreign Currency Reserves (CHF): 683.2B v 674.0Be

(UK) Mar Halifax House Prices M/M: 0.0% v 0.2%e; 3M/Y: 3.8% v 4.0%e (slowest annual pace since May 2013)

(CN) China Mar Foreign Reserves: $3.009T v $3.011Te (2nd month of increase)

(UK) Feb Industrial Production M/M: -0.7% v +0.2%e; Y/Y: 2.8% v 3.7%e

(UK) Feb Manufacturing Production M/M: -0.1% v +0.3%e; Y/Y: 3.3% v 3.9%e

(UK) Feb Visible Trade Balance: -£12.5B v -£10.9Be; Total Trade Balance: -£3.7B v -£2.2Be prior; Trade Balance Non-EU: -£3.8B v -£2.5Be

Fixed Income Issuance:

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.5% at 3,474, FTSE -0.1% at 7,294, DAX -0.6% at 12,161, CAC-40 -0.4% at 5,102, IBEX-35 -0.7% at 10,442, FTSE MIB -0.3% at 20,238, SMI -0.5% at 8,598, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European equity indices are trading lower amid geopolitical tensions following a US missile strike on a Syrian airfield from which a deadly chemical weapons attack was launched; Banking stocks generally lower across the board; Spanish IBEX index notably underperforming weighed by shares of Gamesa, down double digits in the session; FTSE 100 slightly outperforming as oil stocks trade higher in line with Brent and WTI contracts; The index currently weighed by commodity and mining stocks as copper prices trade lower intraday.

No upcoming scheduled US earnings pre-market.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Bang & Olufsen BO.DK +1.6% (Q3 results), Hornby HRN.UK +4.9% (trading update)]

Industrials: [Obrascon Huarte Lain OHL.ES +0.3% (awarded €462M contract)]

Utilities: [Public Power Corp PU8.DE +1.2% (FY16 results)]

Speakers

Greece and creditors said to have reach a preliminary agreement on bailout talks in which the institutions would return to Athens

Various EU officials and Finance Ministers commented ahead of Eurogroup meeting

Eurogroup Chief Dijsselbloem noted that it had achieve results on Greece but would not have any political agreement at today’s meeting

EU’s Dombrovskis stated athat Greece and its international lenders had made good progress in talks on reforms necessary. Greek review to be finalized within a few weeks – Germany Fin Min Schaeuble added that he was not sure if an agreement would come out of Eurogroup today on Greece; still differences between creditors

BOE Gov Carney: Both UK and EU needed to agree to recognize each others’ bank rules after Brexit, to avoid a damaging hit to financial services across Europe. BoE and banks needed to be ready for a hard Brexit with no deal reached. Set a July 14th deadline for all cross-border financial firms operating in Britain to tell the BoE how they would cope.

Sweden Central Bank (Riksbank) Dep Gov Ohlsson: Without expansionary policy growth and employment would have been lower

Japan PM Abe’s adviser Hamada noted that Japan should push back against any US suggestion that it was suppressing the JPY currency (yen)s value for trade advantage

Russia Foreign Ministry: US missile strike on Syria only deepens existing problems; reiterated call for emergency meeting of UN Security Council. US airstrikes were planned well in advance

Thailand Central Bank stated that it saw downside risks to both growth and inflation outlook. Policy should remain accommodative

China Banking Regulatory Commission (CBRC) said to issue guidelines on preventing financial risks

China FX regulator SAFE: Current account surplus to remain within a reasonable range. FX reserves to stabilize further. Domestic economy to continue stable and relatively fast growth

RussiaForeign Min Lavrov: No Russians killed in Syria from US missile attack

Russia Energy Min Novak stated that it was too early to talk about extending OPEC/Non-Opec production cuts; need to keep working on oil inventory level

Currencies

Geopolitical jitters kept risk appetite sidelined and boosted safe haven assets after US launched missile strike on Syrian airbase deemed responsible for recent chemical attack on civilians.

USD/JPY tested the lower end of the 110 level on the initial reports of the US missile attack but stabilized back in the mid-110 area afterwards.

The CHF currency (Swiss Franc) was little changed from its opening level in Asia

The GBP/USD softened after Feb Industrial Production and Trade data came in worse then expectations. The pair was off approx. 0.3% to test 1.2430

Fixed Income

Bund futures trade at 162.58 up 18 ticks higher on risk aversion flows following the US strikes on Syrian targets. Futures have come off earlier highs to close the opening gap with continued momentum lower targeting 162.02 followed by 161.52 then 161.02. A move back higher targets 162.84 day high followed by 162.98 then Feb contract high at 163.12. .

Gilt futures trade at 128.11 up 12 ticks trading higher with general risk aversion trend as well as weaker Industrial and Manufacturing data out of the UK. Support remains at 127.75 then 127.34 followed by 127.05. A move above 128.33 high sees resistance stand at 128.50 then 128.96 followed by 129.24. Short Sterling futures trade flat to up 1bp with Jun17Jun18 remaining steady at 14/14.5bp

Friday’s liquidity report showed Thursday’s excess liquidity rose sharply to €1.591T a rise of €126B from €1.465T prior. Use of the marginal lending facility fell to €90M from €256M prior.

Corporate issuance saw $2.88B come to market via 5 issuers headlined by Autozone $600M 10 year offering and NY life global funding $800M 2 part offering bringing the weeks issuance to above $21B, below the $25B consensus. For the week ending April 5th Lipper US Fund flows reported IG funds net inflows of $2.71B bringing YTD net inflows to $41.8B, High Yield funds net reported inflows of $2.38B bringing YTD outflows to $3.56B.

Looking Ahead

(EU) EU/Euro-Area Finance Ministers begins 2-day meeting in Valletta, Malta

(HK) Hong Kong Mar Foreign Reserves: No est v $390.5B prior

(UR) Ukraine Mar CPI M/M: No est v 1.0% prior; Y/Y: No est v 14.2% prior

06:00 (UK) DMO to sell combined £B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively)

06:30 (IS) Iceland to sell Bonds – 06:45 (US) Daily Libor Fixing

07:00 (CL) Chile Mar CPI M/M: 0.5%e v 0.2% prior; Y/Y: 2.7%e v 2.7% prior

07:30 (CL) Chile Mar Trade Balance: $0.2Be v $0.2B prior; Total Exports: 5.2Be v $4.7B prior; Total Imports: $5.1Be v 4.5B prior

07:30 (CL) Chile Mar International Reserves: No est v $39.7B prior

07:30 (IN) India Weekly Forex Reserves

08:00 (UK) Mar NIESR GDP Estimate: 0.6%e v 0.6% prior

08:00 (BR) Brazil Mar IBGE Inflation IPCA M/M: 0.3%e v 0.3% prior; Y/Y: 4.6%e v 4.8% prior

08:00 (PL) Poland Mar Official Reserves: No est v $110.8B prior

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Mar Change in Nonfarm Payrolls: +180Ke v +235K prior, Change in Private Payrolls: +170Ke v +227K prior, Change in Manufacturing Payrolls: +16Ke v +9K prior

08:30 (US) Mar Unemployment Rate: 4.7%e v 4.7% prior, Underemployment Rate: No est v 9.2% prior, Change in Household Employment (civilian labor force): No est v +160.1K prior, Civilian Labor Force Participation Rate: No est v 63.0 prior

08:30 (US) Feb Average Hourly Earnings M/M: 0.2%e v 0.2% prior; Y/Y: 2.7%e v 2.8% prior; Average Weekly Hours: 34.4e v 34.4 prior

08:30 (CA) Canada Mar Net Change in Employment: +5.7Ke v +15.3K prior; Unemployment Rate: 6.7%e v 6.6% prior

09:00 (RU) Russia Mar Official Reserve Assets: No est v $397.3B prior

09:00 (MX) Mexico Mar CPI M/M: 0.6%e v 0.6% prior; Y/Y: 5.3%e v 4.9% prior; Core CPI M/M: 0.5%e v 0.8% prior

10:00 (US) Feb Wholesale Inventories (Final) M/M: 0.4% v +0.4% prelim; Wholesale Trade Sales M/M: No est -0.1% prior

10:00 (CA) Canada Mar Ivey Purchasing Managers Index (Seasonally Adj): 56.0e v 55.0 prior; PMI unadj: No est v 55.1 prior

10:00 (CA) Bank of Canada (BOC) Gov Poloz

11:00 (EU) Potential sovereign ratings after European close (France and Sweden Sovereign Debt to be rated by S&P; Sweden Sovereign Debt to be rated by Moody’s; Czech Sovereign Debt to be rated by Fitch and Spain Sovereign Debt to be rated by Canadian rating agency DBRS

12:15 (US) Fed’s Dudley (dove, FOMC voter) in NY

13:00 (US) Weekly Baker Hughes Rig Count data

14:00 (CO) Colombia Central Bank Mar Minutes

15:00 (US) Feb Consumer Credit: $15.0Be v $8.8B prior

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