Notes/Observations
Focus on Trump administration’s tax reform plan
Overnight:
Asia:
Australia Q1 CPI data was a slight miss but annual inflation has risen to RBA’s 2-3% target range in 2 years (YoY: 2.1% v 2.2%e). **Insight: RBA focuses more closely on core inflation
Japan Fin Min Aso reiterated view that regional economies were experiencing moderate recovery; still heightened sense of caution due to geopolitical risks. Extremely important to ensure continuous wage increases to spur consumption and investment
South Korea Defense Ministry: Confirmed that some elements of THAAD missile defense system had been moved to the planned site
Europe:
UK may face EU budget payments until 2020 following Brexit negotiations to secure favorable Brexit transition deal
Greece PM Tsipras: govt will legislate additional austerity sought by creditors in 2019 and 2020 but will only implement them if there is a debt relief deal
France IFOP daily presidential poll: Second round poll: Macron 61.0%; Le Pen 39%
Americas:
President Trump’s tax plan said to reduce rate for pass-through businesses (category said to include mom-and-pop grocers and also hedge funds) to 15% from 39.6%; proposes 10% tax on some $2.6T in earnings that US companies have booked offshore. Tax plan to include 15% tax rate for corporations but no border-adjustment proposal.
Commerce Sec Ross: Trade national security probes could extend to semiconductors and aluminum. Considering ramping up free-trade talks with EU, Japan and UK. UK bilateral trade pact unlikely to come soon
Energy:
Weekly API Oil Inventories: Crude: +0.9M v -0.8M prior; first buld in 4 weeks
Economic Data
(NL) Netherlands Apr Producer Confidence: 8.3 v 7.8 prior
(FR) France Apr Consumer Confidence: 100 v 100e
(SE) Sweden Apr Consumer Confidence: 103.4 v 103.5e; Manufacturing Confidence: 123.2 v 113.4e, Economic Tendency Survey: 112.8 v 109.5e
(PL) Poland Mar Unemployment Rate: 8.1% v 8.2%e
(CH) Swiss Apr Credit Suisse Expectation Survey: 22.2 v 29.6 prior
Fixed Income Issuance:
(ES) Spain Debt Agency (Tesoro) opened its book to sell Nov 2027 Inflation-linked bonds; guidance seen -94 to -92 bps vs. linker SPGB
(IN) India sold total INR140B vs. INR140B indicated in 3-month and 12-month Bills
(SE) Sweden sold SEK10B in 3-month bills; Avg Yield: -0.6795% v -0.6714% prior; bid-to-cover: 2.75x v 2.36x prior
(NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2027 Bonds; Avg Yield: 1.65% v 1.70% prior; Bid-to-cover: 2.22x v 2.30x prior
(IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated 6-month Bills; Avg Yield: -0.326% v -0.294% prior; Bid-to-cover: 1.86x v 1.59x prio
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 -0.2% at 3,577, FTSE flat at 7,277, DAX flat at 12,465, CAC-40 +0.1% at 5,280, IBEX-35 -0.2% at 10,758, FTSE MIB -0.6% at 20,687, SMI +0.2% at 8,793, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes: European equity indices are trading mixed after a raft of corporate earnings premarket, and as market participants await US President Trump’s tax reform plans; Asian equity indices ending positive across China and Japan; Banking stocks generally lower across the board adding to losses seen in the heavily peripheral lender weighted FTSE MIB and IBEX indices; shares of Deutsche Bank however trading notably higher; shares of GKN the notable laggard in the FTSE 100 after releasing a trading update; shares of LSE trading higher in the index after releasing Q1 results; Commodity and mining stocks trading mixed as copper prices open higher but trade lower intraday.
A plethora of upcoming scheduled US earnings (pre-market) include Alaska Air, Anthem, Amphenol Corp, Avery Dennison, Axalta Coating Systems, Boeing, Baxter International, BCE, Brink’s Company, Bloomin’ Brands, Cullen/Frost Bankers, Cenovus Energy, Dr Pepper Snapple, DTE Energy, Entergy, FLIR Systems, General Dynamics, WR Grace, Hess, Hershey Foods, Huntsman, Ingersoll-Rand, Coca-Cola FEMSA, Lear, Magellan Health Services, M/I Homes, NASDAQ OMX, Northrop Grumman, Norfolk Southern, New York Community Bancorp, Owens Corning, Oshkosh, Penske Auto, Pepsico, Procter & Gamble, Restaurant Brands, Rockwell Automation, Rollins, Sonic Automotive, Santander Consumer USA, Silgan Holdings, State Street, Seagate Technology, TE Connectivity, Timken, Thermo Fisher Scientific, Tri Pointe Homes, Twitter, United Therapeutics, United Technologies, Vantiv, Waste Management, Westrock, and Wyndham Worldwide.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Air Liquide AI.FR +0.8% (Q1 sales), Boohoo.com BOO.UK -3.2% (FY16/17 results), Dufry DUFN.CH +1.5% (HNA Group exceeds 15% holding), XXL XXL.NO -3.0% (Q1 results)]
Financials: [Banco Santander SAN.ES -0.5% (Q1 results), Credit Suisse CSGN.CH +2.5% (Q1 results, job cuts), London Stock Exchange LSE.UK +1.1% (Q1 results), Standard Chartered STAN.UK +4.5% (Q1 results)]
Industrials: [Antofagasta ANTO.UK -0.1% (Q1 production), Assa Abloy ASSAB.SE +0.8% (Q1 results), Daimler DAI.DE -0.5% (Q1 results, raises outlook), GKN GKN.UK -1.4% (trading update), Kloeckner & Co KCO.DE +0.8% (Q1 results), PSA UG.FR -1.9% (Q1 sales), Saab SAABB.SE +5.5% (Q1 results), Wartsila WRT1V.FI -3.1% (Q1 results), Yara YAR.NO -5.5% (Q1 results)]
Materials: [Fresnillo FRES.UK -0.9% (Q1 production)]
Technology: [Cap Gemini CAP.FR +1.3% (Q1 sales), Dassault Systems DSY.FR -5.5% (Q1 results)]
Telecom: [Royal KPN KPN.NL +1.3% (Q1 results)]
Utilities: [Iberdrola IBE.ES -0.7% (Q1 results)]
Speakers
Brexit Sec Davis: Compromise will be needed by both sides in upcoming negotiations. UK will not take "divide and rule" approach
Russia Foreign Min Lavrov: Use of force in North Korea would have catastrophic consequences
China Foreign Ministry continued to oppose deployment of THAAD in South Korea; Urging US and South Korea to withdraw system
Saudi Oil Min Al-Falih reiterated view that Saudi Arabia was interested in continuing talks to stabilize oil prices between OPEC and non-OPEC members
Currencies
The USD was firmer heading into the NY morning with focus turning to details on the Trump administration’s tax reform plan. The greenback was firmer as reports indicated that Trump would provide an incentive to repatriate accumulated foreign profits for US companies
EUR/USD did hit fresh 5-1/2 month at 1.0950 during the Asian session aided by receding concerns about the risks posed by the French presidential election. The pair moved off its best levels ahead of the US open.
USD/JPY continued its winning streak after hitting a 5-month low of 108.13 back on April 17th. The Nikkei225 Index registered its 4th straight 1% gain a feat last done back in Mid-2013. The Trump trade aiding the pair.
Fixed Income
Bund futures trade at 161.01 up 3 tick recovering from earlier losses as Equities reverse earlier gains to trade slightly lower for the day in what has been a busy day for corporate earnings. Continued downside targets yesterday low at 160.65 followed by 160.15. Resistance moves to 161.12 followed by 161.63 with eventual target of 162.52 gap fill.
Gilt futures trade at 128.14 down 7 ticks consolidating above the 128 level. Continuation with the downward trend eyes 127.94 followed by 127.74. Resistance stands at 128.58 then 128.81 followed by 129.14. Short Sterling futures trade flat with Jun17Jun18 remaining at 12.5/13bp.
Wednesday’s liquidity report showed Tuesday’s excess liquidity rose to €1.604T a rise of €28B from €1.576T prior. Use of the marginal lending facility fell to €120M from €207M prior.
Corporate issuance saw $3.33B come to market via 2 issuers in another quiet day. Issuance comprised of Kaiser 2 part 2.08B offering and Nextera Energy $1.25B 10 year. Monthly issuance tops $62B, almost half of the issuance seen in March.
Looking Ahead
(UK) EU’s Juncker to visit UK PM May in London
(IT) Italy PM Gentiloni in Parliament on Brexit – 05:30 (ZA) South Africa Mar PPI M/M: 0.6%e v 0.6% prior; Y/Y: 5.5%e v 5.6% prior
05:30 (UK) DMO to sell £800M in 1.8% 2046 I/L Gilts
06:00 (FI) Finland to sell €1.5B in 2022 and 2047 RFGB bonds
06:00 (CZ) Czech Republic to sell 2020, 2025 and 2030 bonds
06:00 (RU) Russia to sell combined RUB45B in OFZ bonds
06:45 (US) Daily Libor Fixing
07:00 (US) MBA Mortgage Applications w/e Apr 21st: No est v -1.8% prior
07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Benchmark Repurchase Rate unchanged at 8.00% (all key rates unchanged)
07:00 (BR) Brazil Apr FGV Consumer Confidence: No est v 85.3 prior
07:00 (BR) Brazil Apr FGV Construction Costs M/M: 0.0%e v 0.4% prior
07:00 (UK) PM May weekly question Time in House of Commons
07:30 (CL) Chile Central Bank’s Traders Survey
08:15 (UK) Baltic Dry Bulk Index
08:30 (CA) Canada Feb Retail Sales M/M: 0.0%e v 2.2% prior; Retail Sales Ex Auto M/M: -0.3%e v +1.7% prior
09:00 (MX) Mexico Feb Retail Sales M/M: +0.6%e v -1.1% prior; Y/Y: 3.0%e v 4.9% prior
09:30 (BR) Brazil Mar Total Outstanding Loans (BRL): No est v 3.07T prior; M/M: No est v -0.1% prior
10:00 (US) Revisions: Retail Sales
10:00 (TR) EU Parliament debates situation in Turkey
10:30 (US) Weekly DOE Crude Oil Inventories
11:30 (US) Treasury to sell 2-Year Floating Rate Notes
12:00 (FR) France Mar Net Change in Jobseekers; -13.8Ke v -3.5K prior, Total Jobseekers: 3.447Me v 3.46M prior
12:00 (CA) Canada to sell 10-Year Bonds
13:00 (US) Treasury to sell 5-Year Notes
