HomeContributorsFundamental AnalysisQ1 Euro Area Growth Decelerates As Projected

Q1 Euro Area Growth Decelerates As Projected

Notes/Observations

Asia:

  • EU Q1 GDP growth decelerated (as expected), the key questions remains was the effect temporary??? (Beats: Norway, Hungary; Poland Misses: Germany, Netherlands, Portugal Romania, Czech Republic; in-line: Euro Zone)
  • UK employment picture improved but dealers noted that strong wage growth remained elusive. Earnings (ex-bonus) at its fastest pace since Aug 2015
  • Germany May ZEW Current Situation beat expectations (87.4 v 85.5e)

Asia:

  • RBA May Minutes: members agreed that it was more likely that the next move in the cash rate would be up, rather than down
  • China Apr Industrial Production Y/Y: 7.0% v 6.4%e
  • China Apr Retail Sales Y/Y: 9.7% v 9.9%e
  • China Stats Bureau: US/China trade frictions yet to have an impact on China economy; economy maintaining steady and improving trend in April; steady economic growth sets a good foundation for achieving FY growth target;

Europe:

  • ECB’s Coeure (France): divergence between our key policy rates and market rates could become more important in the future once policy rates begin to normalize
  • Italy President Mattarella said gave more time to 5-Star, League to reach a deal with no deadline given. No intention of hampering the formation of a Govt that can last a full term of office
  • Northern League plans to hold informal referendum on May 19-20 for members to vote on eventual govt deal with Five Star Party
  • EU Barnier: cannot underestimate the importance of June Leader summit as the key date. Reiterated that could be no transition without a Brexit deal
  • EU Commission is considering invoking a 19th century law to prohibit European companies from submitting to US sanctions, in the event they are imposed as a result of its withdrawal from the Iranian nuclear pact – German press

Americas:

  • US Ambassador to China Branstad: China and US still very far apart on trade; President Trump wants ‘dramatic’ increase in farm exports to China. US wanted to see timetable and have things happen sooner or later. China agreed to do a lot of opening up when they joined the WTO, but a lot of promises were not fulfilled.
  • Fed Vice Chair nominee Richard Clarida releases testimony ahead of May 15 Senate hearing. Seek to preserve financial resilience, will take balanced approach to monetary policy and fully supported the Fed’s dual mandate

Economic Data:

  • (DE) Germany Q1 Preliminary GDP Q/Q: 0.3% v 0.4%e; Y/Y: 2.3% v 2.4%e, GDP NSA Y/Y: 1.6% v 1.7%e v 2.3% prior
  • (FI) Finland Mar GDP Indicator WDA Y/Y: 3.1% v 2.4% prior
  • (FI) Finland Mar Current Account: -€0.1B v +€0.3B prior
  • (DK) Denmark Q1 GDP Indicator Q/Q: 0.3% v 0.9% prior
  • (DK) Denmark Apr PPI M/M: +1.5% v -0.4% prior; Y/Y: 2.8% v 1.7% prior
  • (RO) Romania Q1 Advance GDP Q/Q: 0.0% v 0.8%e; Y/Y: 4.0% v 5.5%e
  • (NO) Norway Q1 GDP Q/Q: +0.6 v -0.3% prior; GDP Mainland Q/Q: 0.6% v 0.5%e
  • (NO) Norway Apr Trade Balance (NOK): 19.4B v 13.8B prior
  • (FR) France Apr Final CPI M/M: 0.2% v 0.1%e; Y/Y: 1.6% v 1.6%e; CPI (ex-tobacco): 102.59 v 102.56e
  • (FR) France Apr Final CPI EU Harmonized M/M: 0.2% v 0.1%e; Y/Y: 1.8% v 1.8%e
  • (FR) France Q1 Preliminary Private Sector Payrolls Q/Q: 0.3% v 0.4%e; Wages Q/Q: 0.7% v 0.2% prior
  • (CZ) Czech Q1 Advance GDP Q/Q: 0.5% v 0.7%e; Y/Y: 4.5% v 4.8%e
  • (HU) Hungary Q1 Preliminary GDP Q/Q: 1.2% v 1.0%e; Y/Y: 4.4% v 4.2%e
  • (TR) Turkey Feb Unemployment Rate: 10.6% v 10.8%e
  • (CH) Swiss Apr Producer & Import Prices M/M: +0.4% v -0.2% prior; Y/Y: 2.7% v 2.0% prior
  • (NL) Netherlands Q1 Preliminary GDP Q/Q: 0.5% v 0.6%e; Y/Y: 2.8% v 3.4%e
  • (NL) Netherlands Mar Trade Balance: €5.3B v €4.4B prior
  • (TR) Turkey Apr Central Gov’t Budget Balance (TRY): -2.8B v -20.2B prior
  • (PL) Poland Apr Final CPI M/M: 0.5% v 0.5% prelim; Y/Y: 1.6% v 1.6% prelim
  • (PL) Poland Q1 Preliminary GDP Q/Q: 1.6% v 1.3%e; Y/Y: 5.1% v 4.8%e
  • (UK) Apr Jobless Claims Change: +31.2K v 15.7K prior; Claimant Count Rate: 2.5% v 2.4% prior
  • (UK) Mar Average Weekly Earnings 3M/Y: 2.6% v 2.6%e; Weekly Earnings (ex-bonus) 3M/Y: 2.9% v 2.9%e
  • (UK) Mar ILO Unemployment Rate: 4.2% v 4.2%e (matched the lowest rate since 1975); Employment Change: +197K v +129Ke
  • (PT) Portugal Q1 Preliminary GDP Q/Q: 0.4% v 0.6%e; Y/Y: 2.1% v 2.4% prior
  • (IT) Italy Mar General Government Debt: €2.302T v €2.286T prior
  • (EU) Euro Zone Q1 Preliminary GDP (2nd reading) Q/Q: 0.4% v 0.4%e; Y/Y: 2.5% v 2.5%e
  • (EU) Euro Zone Mar Industrial Production M/M: 0.5% v 0.7%e; Y/Y: 3.0% v 3.7%e
  • (DE) Germany May ZEW Current Situation Survey: 87.4 v 85.2e; Expectations Survey: -8.2 v -8.2e
  • (EU) Euro Zone May ZEW Expectations Survey: 2.4 v 1.9 prior
  • (CY) Cyprus Q1 Preliminary GDP Q/Q: 0.8% v 1.1% prior; Y/Y: 3.8% v 3.9% prior

Fixed Income Issuance:

  • (EU) ESM opened its book to sell 15-year bonds; guidance seen -15bps to mid-swaps
  • (UK) DMO opened its book to sell Oct 2071 Gilt; guidance seen -0.5 bps to 3.5% 2068 gilts. Order book over ÂŁ33B
  • (ZA) South Africa to sell USD-denominated 2030 and 2048 bonds
  • (ID) Indonesia sold total IDR4.06T vs. IDR4.0T indicated in 6-month Islamic Bills, 2-year, 4-year, 7-year and 15-year Project-based Sukuk (PBS)
  • (CH) Switzerland sold CHF378.7M in 6-month Bills; Yield: -0.821% v -0.880% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 flat at 392.3, FTSE +0.2% at 7725.4, DAX -0.2% at 12955, CAC-40 +0.1% at 5545, IBEX-35 -0.3% at 10229, FTSE MIB +0.3% at 24305, SMI flat at 8999, S&P 500 Futures -0.3%]
  • Market Focal Points/Key Themes: European Indices trade little changed, following a swath of earnings this morning and weaker US futures. In the UK shares of Easyjet trades higher after losses narrowed, with Telecom giant Vodafone trading lower after results and the naming of a new CEO. In Germany Merck, ThyssenKrupp , Metro, Carl Zeiss all trade lower following earnings, with Commerzbank trading higher. Iliad falls the most in almost 12 years on weaker Fixed line business, and Sales which missed consensus, with Credit Agricole trading higher despite a miss in earnings. Pandora falls sharply after a miss on the top and bottom line. Looking ahead notable earners include Home Depot, AZZ and Virtusa.

Movers

  • Consumer Discretionary [ Easyjet [EZJ.UK] +2.8% (Earnings), Pandora [PNDORA.DK] -8.5% (Earnings), Metro Ag [B4B.DE] -3.2% (Earnings), Premier Foods [PFD.UK] +2.0% (Earnings)]
  • Consumer Staples [ Carl Zeiss [AFX.DE] -2.4% (Earnings)
  • Industrials [Bauer [B5A+2.6% (Earnings)]
  • Materials [ThyssenKrupp [TKA.DE] -5.0% (Earnings)
  • Healthcare [Merck [MRK.DE] -5.2% (Earnings)]
  • Financials [ Credit Agricole [ACA.FR] +1.6% (Earnings), Commerzbank [CBK.DE] +3.2% (Earnings)]
  • Telecoms [Vodafone [VOD.UK] -3.9% (Earnings), Iliad [ILD.FR] -17% (Earnings)]
  • Energy [ RWE [RWE.DE] -1.3% (Earnings) ]

Speakers

  • Sweden Central Bank (Riksbank) af Jochnick: Important that inflation expectations stabilized around 2% to begin raising rates. Too early to begin raising interest rates at this time. Underlying inflation was somewhat weak and reiterated that had no target for SEK currency (Krone)
  • German Fin Min Scholz: Budget was the basis for future growth. Saw investment increasing year after year
  • Upcoming EU Leader Summit said to discuss options available to shield its economic interest in Iran in the aftermath of the US withdrawal from the Iranian nuclear accord
  • German ZEW Economists noted that US withdrawal from Iran nuclear agreement, concerns over trade, rising oil prices all hwere aving negative impact on expectations
  • Norway Fin Min Jensen: Q1 GDP data supported its 2018 forecasts
  • Norway Govt revised budget projections which maintained growth outlook for both 2018 and 2019. Maintained 2018 non-oil GDP growth at 2.5% and 2019 non-oil GDP growth at 2.6%
  • Turkey President Erdogan: Would take more responsibility for monetary policy if he won in the upcoming June elections. To tighten grip on economy and rate policy
  • German Economic Ministry reiterated view that the domestic economic upturn remained intact
  • BOJ Gov Kuroda testified in parliament and reiterated view that there were many uncertainties on inflation, CPI remained distant from target. Not considering the removal of the 10-year yield control target at this time; but won’t stick with it at all costs

Currencies

  • USD was steady as market participants focused on yields. The US 10-year yield moved back above the 3% level with the curve steepening thus giving the greenback some support.
  • The EUR/USD hovered near 4-month lows as various European Q1 GDP data confirmed the anticipated deceleration in growth.
  • GBP/USD was basically steady in the wake of mixed economic data. The main focus was on wage data with ex-bonus earnings in-line at 2.9% for its fastest pace since Aug 2015 and registering a small improvement from month ago levels. The GBP currency did manage to trims losses in the aftermath of the data release. Overall the employment picture improved but dealers noted that strong wage growth remained elusive
  • USD/JPY against briefly tested the 110 level for the 2nd time in a week and again failed to muster enough momentum for any sustained break above the key psychological level.
  • The TRY currency (Lira) slumped another 0.4% to record low levels after President Erdogan stated he would take more responsibility for monetary policy if he won the elections next month

Fixed Income

  • Bund Futures trade 20 ticks lower at 158.07 following the move lower with Treasuries. Upside targets 159.75, while a return lower targets the 157.25 level.
  • Gilt futures trade at 121.75 lower by 9 ticks after UK weekly earnings comes in line with expectation. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.
  • Tuesday’s liquidity report showed Monday’s excess liquidity stayed steady at €1.908T. Use of the marginal lending facility decreased from €59M to €44M.
  • Corporate issuance saw 10 issuers raise $17.4B in the primary market

Looking Ahead

  • (RU) Russia PM Medvedev to present new Cabinet
  • (CN) China’s Vice Premier (and top economic adviser to President Xi) Liu in Washington DC
  • (SE) Sweden Central Bank (Riksbank) Dep Gov Skingsley speaks in Malmo
  • (UR) Ukraine Q1 Preliminary GDP Q/Q: No est v 0.5% prior; Y/Y: 2.5%e v 2.2% prior
  • 05:30 (ZA) South South Q1 Unemployment Rate: 27.4%e v 26.7% prior
  • 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
  • 06:00 (TR) Turkey to sell 2019 and 2023 bonds
  • 06:45 (US) Daily Libor Fixing
  • 07:45 (US) Weekly Goldman Economist Chain Store Sales
  • 08:00 (BR) Brazil Mar IBGE Services Sector Volume Y/Y: No est v -2.2% prior
  • 08:00 (IS) Iceland Apr Unemployment Rate: No est v 2.4% prior
  • 08:00 (US) Fed’s Kaplan (dove, non-voter) on outlook
  • 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:30 (US) May Empire Manufacturing: 15.0e v 15.8 prior
  • 08:30 (US) Apr Advance Retail Sales M/M: 0.4%e v 0.6% prior; Retail Sales Ex Auto M/M: 0.5%e v 0.2% prior, Retail Sales Ex Auto/Gas: 0.4%e v 0.3% prior; Retail Sales Control Group (used for GDP calc): 0.4%e v 0.4% prior
  • 08:55 (US) Weekly Redbook Sales
  • 09:00 (EU) Weekly ECB Forex Reserves:
  • 09:00 (CA) Canada Apr Existing Home Sales M/M: No est v 1.3% prior
  • 09:30 (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index
  • 10:00 (US) Mar Business Inventories: 0.2%e v 0.6% prior
  • 10:00 (US) May NAHB Housing Market Index: 70e v 69 prior
  • 10:00 (US) Fed nominees Clarida and Bowman testify before Senate
  • 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
  • 11:30 (IL) Israel Apr CPI M/M: 0.4%e v 0.3% prior; Y/Y: 0.4%e v 0.2% prior
  • 11:30 (US) Treasury to sell 4-Week Bills
  • 12:00 (CO) Colombia Q1 GDP Q/Q: No est v 0.3% prior; Y/Y: 2.2%e v 1.6% prior
  • 13:00 (US) Fed’s Williams (moderate, voter)
  • 15:00 (CO) Colombia Mar Economic Activity Index (Monthly GDP) Y/Y: No est v 2.4% prior
  • 15:00 (AR) Argentina Apr National CPI M/M: No est v 2.3% prior; Y/Y: No est v 25.4% prior
  • 16:00 (US) Mar Total Net TIC Flows: No est v $44.7B prior; Net Long-term TIC Flows: No est v $49.0B prior
  • 16:30 (US) Weekly API Oil Inventories
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