Focus On ECB And Its Plan To Eventually End Its Stimulus

Notes/Observations

• Sweden Central Bank (Riksbank) pushed slightly back its 1st potential rate hike from H2 2018 until towards end of year
• ECB likely to shrugged of recent spat of soft growth and inflation data to keep its normalization path on track
• Germany seek to achieve a long-term delay for US steel tariffs for broader trade talks

Asia:

• Fitch affirmed Japan’s sovereign rating at A; outlook stable; Trade protectionism poses downside risk to outlook
• Japan PM Abe not considering calling snap election or dissolving parliament
• Japan Internal Affairs Min Noda: BoJ should drop 2% inflation target, should not further expand easing program
• South Korea President Moon and North Korea leader Kim to meet at border on Friday, Apr 27th for summit
• China said to consider cutting the levy on imported cars to either 10% or 15% vs 25% currently. An announcement could be made as soon as next month (May)
• China Commerce Min (MOFCOM) reiterated its opposition to all forms of unilateralism and protectionism

Europe:

• UK PM May said to issue ‘wish list’ regarding trade demands for Brexit
• Brexit-backing Conservatives said to have held private talks with PM May on Tuesday, Apr 24th to demand that she sticks to her plan for a clean break with the European Union. Tories said to have received assurances to satisfy the members (Note: could have the power to potentially trigger a leadership challenge and were concerned she was softening her Brexit position)
• German Fin Min Scholz: Still opposed to granting Greece debt relief without strict conditions

Americas:

• Moody’s affirmed the US sovereign rating at Aaa; outlook stable. country’s “exceptional” economic strength would counterbalance lower fiscal strength.
• Bank of Canada (BOC) Gov Poloz stated that the estimate for neutral rate was between 2.5-3.5% but not sure how far or quickly interest rates needed to rise. People needed to prepare for higher rates

Economic Data:

• (DE) Germany May GfK Consumer Confidence: 10.8 v 10.8e
• (FI) Finland Mar Preliminary Retail Sales Volume Y/Y: 3.8% v 2.8% prior
• (NO) Norway Feb AKU Unemployment Rate: 3.9% v 4.0%e
• (SE) Sweden Apr Consumer Confidence: 100.3 v 101.7e; Manufacturing Confidence: 120.3 v 113.3e, Economic Tendency Survey: 110.4 v 107.5e
• (ES) Spain Feb House Mortgage Approvals Y/Y: 13.8% v 9.2% prior; Total Mortgage Lending Y/Y: -2.5% v +18.5% prior
• (ES) Spain Q1 Unemployment Rate: 16.7% v 16.5%e
• (SE) Sweden Central Bank (Riksbank) left its Repo Rate unchanged -0.50% but pushed back slightly its 1st plan rate hike towards the end of 2018 (from H2)
• (SE) Sweden Mar PPI M/M: +1.2% v -0.5% prior; Y/Y: 4.0% v 2.8% prior
• (SE) Sweden Mar Trade Balance (SEK): +2.6B v -2.0B prior
• (AT) Austria Apr Manufacturing PMI: 58.0 v 58.0 prior (27th month of expansion)
• (UK) Mar BBA Loans for House Purchases: 37.6K v 37.2Ke
• (HK) Hong Kong Mar Trade Balance (HKD): -55.5B v -50.0Be; Exports Y/Y: +8.0% v +3.1%e; Imports Y/Y: +10.7% v +5.2%e

Fixed Income Issuance:

• (DK) Denmark sold total DKK300M in 1-month and 3-month Bills
• (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.426% v -0.430% prior; Bid-to-cover: 1.65x v 1.63x prior
• (SE) Sweden sold SEK500M in I/L 2027 bonds; Avg Yield: -1.2300% v -1.127% prior; Bid-to-cover: 2.51x v 3.99x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.2% at 380.8, FTSE flat at 7378, DAX -0.1% at 12406, CAC-40 +0.3% at 5428, IBEX-35 +0.3% at 9891, FTSE MIB +0.3% at 23884, SMI +0.4% at 8776, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes:

• European Indices trade mostly higher following weakness yesterday on another heavy day for corporate earnings. The Dax trades little changed, with Deutsche Bank recovering from earlier losses after missing estimates and announcing actions to reshape its CIB division whilst Kion Group, Lufthansa trade lower after missing estimates, VW trades higher after Q1 results. In France Total, Orange and Valeo reported results; In the UK Barclays reported a rise in adjusted profits, Rev did miss forecasts, with Royal Dutch Shell a faller after results.
  Other notable earners included Philips Lighting which trades over 10% lower after a missing estimates, with Nokia also falling after missing on Revenues.
• Looking ahead notable earners include General Motors, Raytheon and UPS.

Movers

• Consumer Discretionary [Lufthansa [LHA.DE] -6.2% (Earnings), Fielmann [FIE.DE] +2.8% (Earnings) ]
• Materials [Wacker Chemie [WCH.DE] +3.6% (Earnings) ]
• Financials [ Deutsche Bank [DBK.DE] +0.4% (Earnings)]
• Industrials [ Volkswagen [VOW.DE] +2.7% (Earnings), Kion Group [KGX.DE] -6.3% (Earnings), Aixtron [AIXA.DE] +4.9% (Earnings), Philips Lighting [LIGHT.NL] -11% (Earnings) ]
• Telecoms [Nokia [NOKIA.FI] -7% (Earnings) ]
• Healthcare [ Adocia [ADOC.FR] +28% (Announce a strategic Alliance for BioChaperone® Combo and BioChaperone® Lispro in China; To receive upfront payment of $50M)]
• Energy [ Shell [RDSA.NL] -2.6% (Earnings) ]
• Real Estate [Taylor Wimpey [TW.UK] -3.4% (Trading update)]

Speakers

• Sweden Central Bank (Riksbank) Policy Statement pushed back its 1st potential rate hike from H2 2018 until towards end of year (prior was in H2 of 2018). Dep Gov Ohlsson again dissented and called for a 25bps hike and entered a reservation against the lower Repo Rate Path. Recent SEK currency (Krona) weakness was seen as partly temporary and would strengthen going forward
• Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference stated that inflation still needed support from policy. If all wnt well than interest rates would be raised at the end of 2018. SEK currency (Krona) had weakened more than forecasted; weakness was seen as temporary
• Domestic growth to cool to a more normal pace
• EU chief Brexit negotiator Barnier: Many topics where both sides disagree; wanted to find a solution for the Irish border. UK govt red lines did close the door to options
• Greece PM Tsipras: Country to return to normality; close to achieving a clean bailout exit (aka no precautionary credit line needed)
• German govt said to consider stricter M&A rules for foreign companies
• German Chancellor Merkel said to propose to President Trump to renegotiate industry tariffs and sought a achieve a long-term delay for US steel tariffs
• Czech Central Bank Holub (chief economist): Inflation to stay below the 2% target for most of 2018

Currencies

• Focus was on ECB rate decision. Dealers noted that despite recent slowdown in EU growth and inflation it was difficult to see a dovish Draghi on Thursday. Markets will look for signs that ECB was preparing the ground for an announcement in June that stimulus was to come to an end by the end of the year. However, the EUR/USD found it hard to hold onto gains in the session. The pair was trading at 1.2175 just ahead of the NY morning and in the lower end of its 2018 trading range.
• EUR/SEK moved higher after the Riksbank pushed slightly back its 1st potential rate hike from H2 2018 until towards end of year. Cross moved above 10.4820 for fresh 9-year highs.

Fixed Income

• Bund Futures trade 23 ticks higher at 158.00 as European markets eye Thursday’s ECB meeting. Upside targets 159.75, while a return lower targets the157.25 level.
• Gilt futures trade at 121.26 higher by 22 ticks, tentatively breaking back above the 121 handle. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.
• Thursday’s liquidity report showed Wednesday’s excess liquidity rose to €1.863T from €1.850T prior. Use of the marginal lending facility fell from €40M to €30M.
• Corporate issuance saw 1 issuer raise $1.5B in the primary market

Looking Ahead

• (CA) Canada Apr CFIB Business Barometer: No est v 60.7 prior
• (AR) Argentina Apr Consumer Confidence: No est v 43.8 prior
• (IN) India to sell combined INR120B in 2023, 2031, 2035 and 2051 bonds
• (UK) House of Common debate on EU Withdrawal Bill
• 05:30 (ZA) South Africa Mar PPI M/M: No est v -0.3% prior; Y/Y: No est v 4.2% prior
• 05:30 (ID) Indonesia Central bank to hold press conference on IDR currency (Rupiah)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
• 06:00 (CZ) Czech Republic to sell Bills
• 06:00 (UK) Apr CBI Retailing Reported Sales: -3 v -8 prior, Total Distribution: No est v 5 prior
• 06:00 (IL) Israel Feb Manufacturing Production M/M: No est v 3.9% prior
• 06:30 (IS) Iceland to sell 3-month Bills
• 06:45 (US) Daily Libor Fixing
• 07:00 (RO) Romania to sell Bonds
• 07:00 (ES) Spain Mar YTD Budget Balance: No est v -€10.1B prior
• 07:45 (EU) European Central Bank (ECB) Interest Rate Decision: Expected to leave Main Refinancing Rate unchanged at 0.00%
• 08:00 (BR) Brazil Mar PPI Manufacturing M/M: No est v 0.3% prior; Y/Y: No est v 4.7% prior
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (US) Initial Jobless Claims: 230Ke v 232K prior; Continuing Claims: 1.85Me v 1.863M prior
• 08:30 (US) Mar Advance Goods Trade Balance: -$75.0Be v -$75.9B prior (revised from -$75.4B)
• 08:30 (US) Mar Preliminary Durable Goods Orders: 1.6%e v 3.0% prior; Durables Ex-Transportation: 0.5%e v 1.0% prior, Capital Goods Orders (Non-defense/ex-aircraft): 0.6%e v 1.4% prior, Capital Goods Shipment (Non-defense/ex-aircraft): 0.4%e v 1.4% prior
• 08:30 (US) Mar Preliminary Wholesale Inventories M/M: 0.7%e v 1.0% prior; Retail Inventories M/M: No est v 0.4% prior
• 08:30 (US) Weekly USDA Net Export Sales
• 08:30 (EU) ECB’s Draghi post rate decision press conference
• 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 20th: No est v $462.4B prior
• 09:00 (MX) Mexico Mar Unemployment Rate (seasonally adj): 3.3%e v 3.3% prior; Unemployment Rate: 3.1%e v 3.2% prior
• 09:30 (BR) Brazil Mar Total Outstanding Loans (BRL): No est v 3.062T prior; M/M: No est v -0.2% prior; Personal Loan Default rate: No est v 5.1% prior
• 10:00 (MX) Mexico Central Bank (Banxico) Apr Minutes
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) Apr Kansas City Fed Manufacturing Activity: 17e v 17 prior
• 13:00 (US) Treasury to sell $29B in 7-Year Notes