Sample Category Title

German ZEW economic sentiment dropped to -2.1 in May, down from 3.1 and missed expectation of 5.0. It's also well below long term average of 22.1. Current situation index, though, rose to 8.2, up from 5.5 and beat expectation of 6.0. Eurozone ZEW economic sentiment dropped to -1.6, down from 4.5 and missed expectation of 5.0. Current situation gauge rose 6.2 pts to 7.0.

ZEW noted that "The development of production and exports in Germany as well as Eurostat's most recent flash estimate of GDP growth in the euro area in the first quarter of 2019 give rise to the hope that the German economy, too, has grown more strongly than expected in the first quarter. "

ZEW President Achim Wambach said: "The decline in the ZEW Indicator of Economic Sentiment shows that the financial market experts continue to expect restrained economic growth in Germany for the next six months. The most recent escalation in the trade dispute between the USA and China again increases the uncertainty regarding German exports – a key factor for the growth of the gross domestic product".

Full release here.

Notes/Observations

• US-China trade tensions still in focus but session saw risk aversion shake off some of its grip on the markets; Trump offered some reprieve believing that trade talks would be successful (Note: comments came in the aftermath where China escalated the conflict by announcing retaliatory tariff hikes on US products)
• UK PM May meets with her bitterly divided cabinet to decide whether to axe cross-party Brexit talks
• German May ZEW survey mixed; focus on upcoming GDP on Tuesday

Asia:

• BOJ Gov Kuroda reiterated that needed to continue easing for a while; Japanese banks were making 'reasonable' management of Collateralized Loan Obligations (CLOs)
• South Korea Defense Ministry: South Korea to continue to strengthen its missile defense capabilities to better counter all kinds of threats, including North Korea's short-range missiles

Europe/Mideast:

• UK PM May said to be considering 'definitive votes' on a selection of Brexit options if talks with the Labour Party faltered. Under the plan, PM May would ask MPs to rank different Brexit outcomes in order of preference
• Cross-party Brexit talks between Tory and labour parties ended Monday's session without any significant progress. UK govt spokesperson noted that the talks with took stock of a range of issues and Govt continue to seek to agree to a way forward in order to secure an orderly Brexit
• UK Chief Brexit negotiator Olly Robbins said to be going to Brussels to discuss changes to the political declaration on the UK's future relationship with the EU (Note: issue is a key Labour demand to break the Brexit deadlock)

Americas:

• President Trump reiterated we'll know in 3-4 weeks if talks with China are successful, feels they will be. To meet with China President Xi at G20 (June 28-29), believed US-China meeting at G20 could be fruitful
• Treasury Sec Mnuchin confirmed that US was still in negotiations with China but added that no further rounds were planned and confirmed at this point
• US defense official presented an updated military plan to Trump administration that shows deploying 120K troops to Middle East if Iran attacks American forces

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.40% at 374.06, FTSE +0.67% at 7,212.00, DAX +0.30% at 11,912.30, CAC-40 +0.70% at 5,299.33, IBEX-35 +0.16% at 9,063.00, FTSE MIB +0.59% at 20,715.50, SMI +0.28% at 9,389.50, S&P 500 Futures +0.51%]
• Market Focal Points/Key Themes: European Indices rebound this morning following sharp losses seen yesterday following a lower session Asia and a rebound in US Index futures. On a busy morning for corporate earnings, shares of Vodafone trade higher reversing earlier losses after reporting results which fell short of forecasts and confirmed dividend cut, Vodafone also announced the sale of its New Zealand division for NZ$3.4B. Shares of Allianz gains following a earnings beat and affirmed outlook, while EDF also outperforms after Revenue rose for the first quarter, and raised full year EBITDA outlook. Other movers include OHL, Greggs, K+S and Dufry among others. Meanwhile Shares of DIA in Spain declines sharply on earnings, with Merck KGaa and ThyssenKrupp also declining slightly on earnings. In other news Scout24 declines over 5% as the takeover bid did not meet the minimum acceptance threshold; Bayer declines as the company was ordered to pay $2B in punitive damages in the 'Round up' case. Elsewhere Hellofresh declines after Rocket Internet placed its entire holdings of the company. Looking ahead notable earners include Ralph Lauren, GDS holding and AZZ Inc among others.

Equities

• Consumer discretionary: HelloFresh [HFG.DE] -2.5% (Rocket Internet placement), Greggs [GRG.UK] +12% (positive profit alert), Dufry [DUFN.CH] -2.5% (earnings)
• Energy: Nordex [NDX1.DE] -1% (earnings)
• Financials: Allianz [ALV.DE] +0.5% (earnings), Hoist Finance [HOFI.SE] -16% (earnings)
• Healthcare: Bayer [BAYN.DE] -2.5% (California State Glyphosate Trial), Evotec [EVT.DE] +5% (earnings), Merck [MRK.DE] -2% (earnings)
• Industrials: Thyssenkrupp [TKA.DE] -1.5% (earnings), Volkswagen [VOW3.DE] +1% (Trucks unit IPO), BMW [BMW.DE] +0.5% (car sales), Renault [RNO.FR] -1% (Nissan said to issue profit warning), DCC [DCC.UK] +2.5% (earnings), K+S [SDF.DE] +2.5% (earnings)
• Technology: STMicroelectronics [STM.FR] +1.5% (capital markets day)
• Telecom: Vodafone [VOD.UK] +2% (earnings; confirms dividend cut)

Speakers

• ECB's Villeroy (France): Monetary policy as noted back in March remained appropriate; reiterated that recent economic slowdown seen as temporary. Recent data did not refute economic forecasts
• Italy Dep PM Di Maio (5-Star): No scenario where League party would hold the PM position (**Note: Italy current PM Conti is an independent party member)
• Sweden Central Bank (Riksbank) Gov Ingves: Still needed expansionary monetary policy to support inflation. He did label the recent April CPI data as ‘good'
• Norway revised its 2019 budget forecasts which raised the budget impulse of trend Mainland GDP from 0.0% to 0.5%
• Fed's Williams (moderate, voter): Lower neutral rates meant that global economic recoveries would be slow with inflation below target; scenario would require new policy approaches
• China Foreign Ministry spokesperson Geng Shuang reiterated that raising tariffs would not resolve problems; stated both US-China to continue talks. Had no comment on US Treasury holdings

Currencies/Fixed Income

• As the markets calm from yesterday's volatility, risk aversion is still on everyone's mind as China's foreign Ministry re-affirms China's stance on trade talks and Trump remains confident that China wants a trade deal and that the US is in a good position.
• EUR/USD tried to break out above 1.1260 but failed to do so for a 3rd time in the last 3 weeks. EUR/USD was slightly higher by 0.1% and holding near the mid-12 area just ahead of the NY morning. Europe will see some key economic data in coming sessions (Germany Q1 GDP on Tuesday) but dealers believe the pair would unlikely break above the 1.13 level because of fears the US might impose tariffs on European cars
• GBP/USD continues to sell off as it retreats from the 1.30 handle as cross party talks continue to go nowhere leaving less time for the UK to sort their departure from the EU before EU elections take place May 23rd
• USD/JPY The Yen is trading higher today after it broke the 109.5 level and tested the 109 handle as PM Abe trys to avoid a deal after Japan's upper house elections this summer

Economic Data

• (SE) Sweden Apr PES Unemployment Rate: 3.5% v 3.6% prior
• (NL) Netherlands Mar Retail Sales Y/Y: 1.1% v 4.4% prior
• (FI) Finland Apr CPI M/M: 0.6% v 0.1% prior; Y/Y: 1.5% v 1.1% prior
• (FI) Finland Mar Final Retail Sales Volume Y/Y: 1.7% v 1.0% prelim
• (DE) Germany Apr Final CPI M/M: 1.0% v 1.0%e; Y/Y: 2.0% v 2.0%e
• (DE) Germany Apr Final CPI EU Harmonized M/M: 1.0% v 1.0%e; Y/Y: 2.1% v 2.1%e
• (DE) Germany Apr Wholesale Price Index M/M: 0.6% v 0.3% prior; Y/Y: 2.1% v 1.8% prior
• (CH) Swiss Apr Producer & Import Prices M/M: 0.0% v 0.2%e; Y/Y: -0.6% v -0.4%e
• (IN) India Apr Wholesale Prices (WPI) Y/Y: 3.1% v 3.0%e
• (ES) Spain Apr Final CPI M/M: 1.0% v 1.0%e; Y/Y: 1.5% v 1.5%e
• (ES) Spain Apr Final CPI EU Harmonized M/M: 1.1% v 1.1%e; Y/Y: 1.6% v 1.6%e
• (ES) Spain Apr CPI Core M/M: 1.1% v 0.5% prior; Y/Y: 0.9% v 0.7%e
• (ES) Spain Mar House transactions Y/Y: 6.8% v 5.3% prior
• (TR) Turkey Mar Industrial Production M/M: 2.1% v 0.9%e; Y/Y: -2.2% v -4.4%e
• (NL) Netherlands Q1 Preliminary GDP Q/Q: 0.5% v 0.4%e; Y/Y: 1.7% v 1.7%e
• (SE) Sweden Apr CPI M/M: 07% v 0.7%e; Y/Y: 2.1% v 2.1%e; CPI Level: 334.11 v 333.89e
• (SE) Sweden Apr CPIF M/M: 0.6% v 0.6%e; Y/Y: 2.0% v 2.0%e
• (SE) Sweden Apr CPIF CPIF(ex-energy) M/M: 0.6% v 0.6%e; Y/Y: 1.6% v 1.6%e
• (CZ) Czech Mar Current Account Balance (CZK): 0.2B v 19.5Be
• (UK) Apr Jobless Claims Change: +24.7K v +22.6K prior; Claimant Count Rate: 3.0% v 3.0% prior
• (UK) Mar Average Weekly Earnings 3M/Y: 3.3% v 3.4%e; Weekly Earnings (ex-bonus): 3M/Y: 3.3% v 3.3%e
• (UK) Mar ILO Unemployment Rate: 3.8% v 3.9%e (lowest level since 1975); Employment Change 3M/3M: +99K v +140Ke
• (DE) Germany May ZEW Current Situation Survey: 8.2 v 6.3e; Expectations Survey: -2.1 v +5.0e
• (EU) Euro Zone May ZEW Expectations Survey: -1.6 v +4.5 prior
• (EU) Euro Zone Mar Industrial Production M/M: -0.3% v -0.3%e; Y/Y: -0.6% v -0.8%e
• (US) Apr NFIB Small Business Optimism Index: 103.5 v 102.0e

Fixed Income Issuance

• (UK) DMO opened its book to sell Oct 2054 Gilt via syndicate; guidance seen -0.25 to 0 (nil) bps to Gilts
• (DK) Denmark sold total DKK2.6B in 3-month Bills; Avg Yield: -0.650% v -0.650% prior; bid-to-cover: 1.15x v 1.09x prior
• (ES) Spain Debt Agency (Tesoro) sold total €1.59B vs. €1.0-2.0B indicated range in 3-month and 9-month bills
• (IT) Italy Debt Agency (Tesoro) sold total €6.75B vs. €5.25-6.75B indicated range in 2022, 2026 and 2049 BTP bonds
• Sold €2.75B vs. €2.25-2.75B indicated range in 1.00% July 2022 BTP; Avg Yield: 1.24% v 1.08% prior; Bid-to-cover: 1.58x v 1.62x prior
• Sold €2.5B vs. €2.0-2.5B indicated range in 2.10% July 2026 BTP bonds; Avg Yield: 2.23% v 2.05% prior; Bid-to-cover: 1.40x v 1.36x prior
• Sold €1.5B vs. €1.0-1.5B indicated range in 3.85% Sept 2049 BTP bonds; Avg Yield: 3.65%; Bid-to-cover: 1.34x (syndicated on Feb 6th 2019)

Looking Ahead

• (ID) Indonesia to sell 6-month Islamic Bills; 2-year, 4-year, 15-year and 30-year Bonds
• (SI) Slovenia Debt Agency to sell 3-month, 6-month and 12-month bills
• (ZA) South Africa to sell combined ZAR3.3B in 2023, 2030 and 2037 bonds
• 05:30 (ZA) South Africa Q1 Unemployment Rate: 27.5%e v 27.1% prior
• 05:30 (UK) Weekly John Lewis LFL Sales data
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (BE) Belgium Debt Agency to sell €2.4-2.8B in 3-month and 12-month Bills
• 06:00 (PT) Portugal Q1 Labour Costs Y/Y: No est v 10.3% prior
• 06:00 (TR) Turkey to sell Bonds - 06:45 (US) Daily Libor Fixing
• 07:00 (BR) Brazil COPOM Meeting Minutes
• 07:45 (US) Weekly Chain Store Sales data
• 08:00 (PL) Poland Mar Current Account Balance: -€1.2Be v -€1.4B prior; Trade Balance: -€1.0Be v -€1.3B prior; Exports: €19.8Bev €18.3B prior; Imports: €20.9Be v €19.7B prior
• 08:00 (IS) Iceland Apr Unemployment Rate: No est v 3.2% prior
• 08:00 (UK) Baltic Dry Bulk Index
• 08:00 (BR) Brazil Mar IBGE Service Sector Volume Y/Y: -0.55e v +3.8% prior
• 08:30 (US) Apr Import Price Index M/M: 0.7%e v 0.6% prior; Y/Y: 0.5%e v 0.0% prior; Import Price Index (ex-Petroleum) M/M: 0.1%e v 0.2% prior
• 08:30 (US) Apr Export Price Index M/M: 0.6%e v 0.7% prior; Y/Y: No est v 0.6% prior
• 08:30 (CA) Canada Apr Teranet House Price Index M/M: No est v -0.3% prior; Y/Y: No est v 1.5% prior; HPI: No est v 222.3 prior
• 08:55 (US) Weekly Redbook SSS data
• 09:00 (RU) Russia Apr Official Reserve Assets: $493.0Be v $487.8B prior
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (RU) Russia announces upcoming OFZ Bond issuance
• 10:00 (MX) Mexico Weekly International Reserve data
• 11:00 (CO) Colombia Mar Industrial Production Y/Y: 3.5%e v 2.8% prior
• 11:00 (CO) Colombia Mar Retail Sales Y/Y: 5.5%e v 5.7% prior
• 12:45 (US) Fed's George (hawk, voter) in Mn
• 16:30 (US) Weekly API Oil Inventories

Eurozone industrial production dropped -0.3% mom in March, matched expectations. Over the year, industrial production dropped -0.6% yoy, above expectation of -0.8% yoy. EU28 industrial production dropped -0.1% mom, rose 0.4% yoy.

Over the month, among Member States for which data are available, the largest decreases in industrial production were registered in Malta (-3.7%), Greece (-2.7%) and Sweden (-2.3%). The highest increases were observed in Lithuania (3.5%), Denmark (1.8%) and Slovakia (1.2%).

Full release here.

The DAX has moved higher on Tuesday, after starting the week with sharp losses. Currently, the DAX is at 11,937, up 0.51%. In economic news, German ZEW Economic Sentiment declined by 2.1, missing the estimate of 5.1. The eurozone release followed the same trend, dropping by 1.6 points. This was well short of the estimate of 5.0 points. There was better news from German Final CPI jumped to 1.0%, matching the estimate. On Wednesday, Germany and the eurozone release GDP reports.

ZEW economic sentiments for Germany and the eurozone disappointed in May. The German release ended a long streak of declines in April, with a gain of 3.1. The indicator slipped to 2.1 in May, pointing to pessimism. Eurozone ZEW economic sentiment posted a decline of 1.6 in May, after a score of 4.5 in April. The economic outlooks for the eurozone and Germany are not promising, as the trade war between China and the U.S. has escalated with another round of tariffs between the sides.

The volatility continues on the stock markets, as trade tensions between the U.S. and China have soared in the past few days. On Friday, the U.S. raised tariffs on some $200 billion in Chinese goods, from 10% to 25%. A response followed quickly, as China announced tariffs on $60 billion in U.S. goods. As well, China has allowed the yuan to fall to its lowest level in four months. A lower yuan makes Chinese exports more competitive and will cushion the effect of the new U.S. tariffs, which makes Chinese goods more expensive for U.S. consumers. Despite the rise in tensions between China and the U.S., the new tariffs do not take effect immediately. The U.S. tariffs do not apply to Chinese goods that are in transit, and the shipping of goods across the Pacific can take up to three weeks. The Chinese tariffs do not kick in until June. This hiatus gives negotiators some breathing room before the tariffs take effect.

Despite the rise in tensions between China and the U.S., the new tariffs do not take effect immediately. The U.S. tariffs do not apply to Chinese goods that are in transit, and the shipping of goods across the Pacific can take up to three weeks. The Chinese tariffs do not kick in until June. This hiatus gives negotiators some breathing room before the tariffs take effect.

EUR/USD is slightly higher on Tuesday, erasing the gains seen on Monday. Currently, the pair is trading at 1.1235, up 0.11% on the day. On the release front, German ZEW Economic Sentiment declined by 2.1, missing the estimate of 5.1. The eurozone release followed the same trend, dropping by 1.6. This was well short of the estimate of 5.0. There was better news from German Final CPI jumped to 1.0%, matching the estimate. There are no major U.S. events on the schedule. On Wednesday, Germany and the eurozone release GDP reports. The U.S. will post retail sales and the Empire State manufacturing index.

The well-respected ZEW economic sentiments disappointed in May. The German release ended a long streak of declines in April, with a gain of 3.1. The indicator slipped to 2.1 in May, pointing to pessimism. Eurozone ZEW economic sentiment posted a decline of 1.6 in May, after a score of 4.5 in April. The economic outlooks for the eurozone and Germany are not promising, as the trade war between China and the U.S. has escalated with another round of tariffs between the sides. The U.S. raised tariffs on some $200 billion in Chinese goods, from 10% to 25%. A response followed quickly, as China announced tariffs on $60 billion in U.S. goods. As well, China has allowed the yuan to fall to its lowest level in four months. A lower yuan makes Chinese exports more competitive and will cushion the effect of the new U.S. tariffs, which makes Chinese goods more expensive for U.S. consumers. Despite the rise in tensions between China and the U.S., the new tariffs do not take effect immediately. The U.S. tariffs do not apply to Chinese goods that are in transit, and the shipping of goods across the Pacific can take up to three weeks. The Chinese tariffs do not kick in until June. This hiatus gives negotiators some breathing room before the tariffs take effect.

GBPJPY came under strong pressure after closing below the 143.75 key support level last week, with the price falling towards a three-month low of 141.19 on Monday. The sell-off however could be overstretched as both the RSI and the Stochastics are fluctuating near oversold levels, a signal justified by the current positive price movement.

A rally above 143.75 and more importantly above the January high of 144.82 could prove helpful for the bulls to reach resistance between 146.49 and 147.

Otherwise, should the market weaken below the 50% Fibonacci of 140.68 of the upleg from 132.48 to 148.85, support could next run towards the 61.8% Fibonacci of 138.73 and the 137.50 restrictive level. In this case the medium-term outlook would turn from neutral to bearish.

UK unemployment rate dropped to 3.8% in March, down from 3.9% and beat expectations. That's a 44-year low since 1974. Overall employment rate was 76.1%, joint highest on record since 1971.

However, wage growth slowed with average weekly earnings including bonus rose 3.2% 3moy, down from 3.5% 3moy and missed expectation of 3.4% 3moy. Weekly earnings excluding bonus also slowed to 3.3% 3moy, down from 3.4% 3moy, matched expectations.

Full release here.

Yesterday, the EUR/USD currency pair re-tested the upper boundary of the short-term ascending channel at 1.1258.

During Tuesday's morning, the pair was testing the support of the 55-hour SMA at 1.1235. If the given moving average holds, it is likely, that the exchange rate could reverse north and target the psychological level at the 1.1260 mark.

However, from a theoretical point of view, it is expected, that the rate could target the lower channel line located circa 1.1215. A breakout south is unlikely to happen due to the support level formed by the 100-hour SMA, as well the weekly and monthly PPs at 1.1217.

On Monday, the GBP/USD exchange rate dropped to the lower boundary of the medium-term ascending channel at 1.2940. During today's morning, the rate was testing the lower channel line.

From a theoretical perspective, a reversal north should occur in the nearest future, and the currency pair could rise to the psychological level at the 1.2980 mark.

If the given channel does not hold, it is likely, that a breakout south could occur in the short run. However, the pair has to surpass the Fibonacci 23.90% retracement at 1.2938 and the weekly S1 1.2923.

Meanwhile, take into account that to properly see the larger pattern, one needs to zoom out the chart and load previous price information that in turn would set properly the ascending pattern's drawing reference points.

During the previous trading session, the USD/JPY currency pair tumbled to the monthly S3 at the 109.12 mark. During Tuesday's morning, the pair reversed north to the 55– and 100-hour SMAs located circa 109.68.

If the given moving averages hold, it is expected, that the exchange rate reverses south and trades down. Important support levels to look out for is the weekly S1 and the monthly S3 located at 109.32 and 109.12 respectively.

However, note, that the rate is also supported by the Fibonacci 50.00% retracement at 109.58. Thus, the pair could breach the given SMAs and rise to the monthly S2 at 109.97.