Thu, Dec 01, 2022 @ 13:04 GMT
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Market Update – European Session: Markets Try To Shrug Off Risk Aversion Sentiment

Notes/Observations

Simmering tensions on the Korean Peninsula and Syria fan demand for safer assets; gold at 5-month highs

UK average wages slightly exceeds expectations with back month revised higher

Overnight:

Asia:

China Mar CPI registered its 2nd straight decline (M/M: -0.3% v -0.2% prior Y/Y: 0.9% v 1.0%e

Trump administration said to be unlikely to label China as a currency manipulator in Treasury Dept foreign currency report out Saturday, Apr 15th

Europe:

Germany Fin Min Schaeuble: German 2017 GDP seen growing by ~1.5%; European authorities would turn to WTO over any trade violations (urges US to scrap plans for border-adjustment tax)

France govt to revise 2017 budget deficit target to 2.8% from 2.7% prior

Italy govt raised its 2017 GDP forecast to +1.1% y/y (up from +1.0% prior forecast)

Americas:

Fitch affirms United States sovereign rating at AAA; outlook Stable

Fed’s Williams (moderate, non-voter): reiterates three to four rate increases are appropriate this year; Fed should start to shrink balance sheet by end of 2017

Economic Data

(DE) Germany Mar Wholesale Price Index M/M: 0.0% v 0.5% prior; Y/Y: 4.7% v 5.0% prior

(ES) Spain Mar Final CPI M/M: 0.0% v 0.0%e; Y/Y: 2.3% v 2.3%e

(ES) Bank of Spain (BOS): Mar Spanish Banks ECB borrowings at €149.4B v €145.0B prior

(UK) Mar Jobless Claims Change: +25.5K v -6.1K prior; Claimant Count Rate: 2.2% v 2.1% prior

(UK) Feb Average Weekly Earnings 3M/Y: 2.3% v 2.2%e; Weekly Earnings (Ex Bonus) 3M/Y: 2.2% v 2.1%e

(UK) Feb ILO Unemployment Rate 3M/3M: 4.7% v 4.7%e; Employment Change 3M/3M: K v +70Ke

Fixed Income Issuance:

(IN) India sold total INR140B in 3-month and 12-month Bills (INR80B and INR60B respectively)

(EU) ECB allotted $35M in 7-day USD Liquidity Tender at fixed 1.41% vs $45M prior

(SE) Sweden sold SEK10B vs. SEK10B indicated in 3-month bills; Avg Yield: -0.6714% v -0.6735% prior; bid-to-cover: 2.36x v 1.25x prior

(GR) Greece Debt Agency (PDMA) sold €812.5M vs. €625M indicated in 13-Week Bills; Avg Yield: 2.70% v 2.70% prior; Bid-to-cover: 1.3x v 1.3x prior

(IE) Ireland Debt Agency (NTMA) sold total €1.25B vs. €1.0-1.25B indicated range in IGB 2023 and 2026 bonds

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.4% at 3,482, FTSE +0.4% at 7,396, DAX +0.4% at 12,183, CAC-40 +0.5% at 5,126, IBEX-35 +0.2% at 10,440, FTSE MIB +0.3% at 20,172, SMI +0.4% at 8,672, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European equity indices are trading higher as market participants digest ongoing concerns over geopolitical tensions, ahead of the French Presidential elections; Banking stocks trading generally higher across the board with shares of Deutsche Bank higher on large volume; shares of Daimler also notably higher in the Eurostoxx after they released prelim Q1 results overnight; commodity and mining stocks trading lower in the FTSE 100 as copper prices trade sharply lower intraday; shares of Tesco the notable laggard in the index after releasing their FY results, with shares of other large supermarket chains Morrison and Sainsbury lower in sympathy.

Upcoming scheduled US earnings (pre-market) include Delta Air Lines, Fastenal, ClubCorp Holdings, and Shaw Communications.

Equities (as of 09:50 GMT)

Consumer Discretionary: [Barry Callebaut BARN.CH -0.2% (H1 results), Dunelm DNLM.UK -2.2% (Q3 sales), Norcros NXR.UK +13.2% (trading update), PageGroup PAGE.UK +6.4% (Q1 gross profit), Puma PUM.DE +4.9% (prelim Q1 results), Telegraaf Media Groep TMG.NL +0.8% (Talpa confirms bid of €6.50/shr), Tesco TSCO.UK -3.4% (FY16/17 results)]

Consumer Staples: [Clas Ohlson CLASB.SE +1.7% (Mar sales)] – Energy: [Hunting HTG.UK +1.9% (trading update)]

Financials: [Countryside Properties CSP.UK +1.5% (trading update)]

Industrials: [Daimler DAI.DE +1.0% (prelim Q1 results), Kuehne & Nagel KNIN.CH +0.7% (MoU with BABA)]

Materials: [BHP Billiton BLT.UK -0.4% (Response to Elliott proposal)]

Speakers

German Economic Ministry Monthly Report: Domestic demand remained very robust; saw vigorous expansion in Q1. Euro area growth outlook was brighter

German Leading Economic Institutes (Advisors) spring economic forecasts raises 2017 GDP growth forecast from 1.4% to 1.5%and 2018 from 1.6% to 1.8%(as speculated). Saw German 1Q GDP growth of 0.6% and at 0.5% in Q2. ECB monetary policy could stimulate German economy more than assumed

Eurogroup chief Dijsselbloem: ECB’s broad monetary policy could be phased out and did disadvantages to low interest rates

South Africa’s Fin Min Gigaba: Treasury committed to fiscal consolidation; top priority is inclusive growth. Fully aware of impact of govt ability to borrow affordably. To undertake an international roadshow soon and meet with foreign investors

Turkey Dep PM Simsek: GDP growth would rise to 6% path following a ‘yes’ vote in upcoming Constitutional referendum. Easing of fiscal policy was temporary and expected rapid improvement in budget balances in H2

US Sec of State Tillerson stated from Moscow that lines of communication were always open; talks with Russian counterpart come at important moment in relationship

Russia Dep Foreign Min: Upcoming Lavrov/Tillerson meeting to discuss no-fly zone in Syria. US position on Syria remained a mystery to Moscow

China Foreign Ministry commented on potential US actions on Korea said to urge actions should be in accordance with International law. Escalating situation on Korean peninsula would be dangerous

S&P affirmed Singapore sovereign rating at AAA; outlook stable

OPEC secondary output production for March to be 31.928M bpd

Bund futures trade at 163.14 ticks down 7 ticks trading at the lower end of today’s range in a relatively quiet morning ahead of the Easter break. Futures traded a high of 163.37, with a break back above targeting 163.57 then 163.99. A reversal continues to target 162.84 followed by 162.25.

Gilt futures trade at 128.44 down 5 ticks trading little changed after a mixed UK jobs report. Support moves to 127.94 then 127.34 followed by 127.05. A move above 128.67 targets 128.96. Short Sterling futures trade flat to up 1bp with Jun17Jun18 remaining at 10.5/11bp

Wednesday’s liquidity report showed Tuesday’s excess liquidity fell to €1.593T a fall of €27B from €1.620T prior. Use of the marginal lending facility rose to €265M from €185M prior.

Corporate issuance saw $5.4B come to market via 3 issuers comprised Yankee issues. Toyota 3 part $2.25B and JSC NC KazMunayGas $2.75B 3 part deal accounted for the bulk of the issuance as weekly issuance stands just shy of the $10B estimate.

Currencies

Safehaven flows remained the prevalent theme as geopolitical risks related to conflicts in Syria and saber-rattling by North Korea were not abating. Price action saw the JPY currency (Yen) climb to its strongest level since mid-November. USD/JPY tested 109.35 before consolidating. Spot gold hit a 5-month high just under the $1,280 level.

GBP/USD (Sterling) touched a 1-week high ahead of UK labour market data. The GBP was able to hold onto its gains as average wages (key focus of the BOE) did beat expectations and saw higher back-month revisions).

Looking Ahead

(IT) Italy Debt Agency (Tesoro) to sell €8.0-10B in 2020, 2024, 2030 and 2036 BTP Bonds

05:30 (DE) Germany to sell €3.0B in 0.25% Feb 2027 Bunds

05:30 (UK) DMO to sell £1.5B in 2.5% 2065 Gilts

05:30 (PT) Portugal Debt Agency (IGCP) to sell €1.0-1.25B in 2022 and 2025 OT bonds

06:00 (PT) Portugal Mar CPI M/M: No est v -0.2% prior; Y/Y: No est v 1.6% prior

06:00 (PT) Portugal Mar CPI EU Harmonized M/M: No est v -0.2% prior; Y/Y: 1.2%e v 1.6% prior

06:45 (US) Daily Libor Fixing

06:50 OPEC Monthly Report

07:00 (RU) Russia to sell OFZ bonds

07:00 (US) MBA Mortgage Applications w/e Apr 7th: No est v -1.6% prior

07:00 (ZA) South Africa Feb Retail Sales M/M: +0.2%e v -1.2% prior; Y/Y: -1.8%e v -2.3% prior

07:30 (CL) Chile Central Bank’s Traders Survey

08:00 (IN) India Mar CPI Y/Y: 4.0%e v 3.7% prior

08:00 (IN) India Feb Industrial Production Y/Y: 1.3%e v 2.7% prior

08:00 (BR) Brazil Feb Retail Sales M/M: +0.3%e v -0.7% prior; Y/Y: -6.9%e v -7.0% prior

08:00 (BR) Brazil Feb Broad Retail Sales M/M: +1.7%e v -0.2% prior; Y/Y: -7.4%e v -4.8% prior

08:00 (PL) Poland Mar CPI Core M/M: 0.2%e v 0.1% prior; Y/Y: 0.5%e v 0.3% prior

08:00 (RO) Romania Central Bank (NBR) Apr Minutes – 08:00 (HU) Hungary Central Bank (NBH) Mar Minutes

08:15 (UK) Baltic Dry Bulk Index

08:30 (US) Mar Import Price Index M/M: -0.2%e v +0.2% prior; Y/Y: 4.0%e v 4.6% prior

08:30 (CA) Canada Mar Teranet/National Bank HPI M/M: No est v 1.0% prior; Y/Y: No est v 13.4% prior; House Price Index: No est v 202.25 prior

09:00 (EU) EU’s Juncker speaks in Brussels

10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.50%

10:00 (CA) Bank of Canada (BOC) April Monetary Policy Report

10:00 (MX) Mexico Central Bank (Banxico) Mar Minutes

10:00 (US) Fed’s Kaplan (moderate, voter) speaks in Texas

10:30 (US) Weekly DOE Crude Oil Inventories

11:00 (IS) Iceland Mar International Reserves (ISK): No est v 811B prior

11:15 (CA) Bank of Canada (BoC) Gov Poloz holds post rate decision press conference

13:15 (DE) German Fin Min Schaeuble attends panel discussion in Berlin

13:00 (US) Treasury to sell 30-Year Bonds Reopening

14:00 (US) Mar Monthly Budget Statement: -$169.0Be v -$108.0B prior

(BR) Brazil Central Bank (BCB) Interest Rate Decision: Expected to cut Selic Target Rate by 100bps to 11.25%

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