Notes/Observations
Eurogroup meets and again tries to finalize the 2nd Greek bailout review
Recent polls predicting a narrower-than-expected win for PM May in June election (items in recent party manifesto cited)
Socialist Party re-elects Sanchez as its leader(opposition), seen as a thorn in PM Rajoy’s policies
Bi-annual OPEC meeting on Thursday with production cut agreement likely to be extended
Overnight/weekend:
Asia:
North Korea leader Kim Jong Un said to have supervised a test firing of a ballistic missile
Japan chief cabinet Seg Suga: Strongly protest North Korea missile launch as intolerable and a clear violation of UN Resolution
US Sec of State Tillerson: Will continue to apply both economic and diplomatic pressure to North Korea after ballistic missile launch
Europe:
ECB’s Weidmann (Germany): ECB will need to show backbone and not back off when inflationary pressures rise in Euro Zone. Reiterated Council view that expansionary policy remains justified for now
German Finance Ministry Monthly Report: Domestic economic upswing to continue after ‘strong’ Q1, but with less momentum. Maintained 2017 GDP growth forecast of 1.5% and 1.6% for 2018.
Germany’s Foreign Minister Gabriel said to favor debt relief for Greece. Country has been promised debt relief over and over again if reforms are carried out; we must stand by this promise and not fail due to resistance from Germany
EU’s Moscovici: Very close to an overall agreement for Greece
UK Brexit Min Davis: "No deal" with EU threat is genuine, Britain is prepared to see it through; still thinks an agreement is most likely outcome
UK May Rightmove House Prices M/M: 1.2% v 1.1% prior; Y/Y: 3.0% v 2.0%e
Recent polls on upcoming UK electiosn (to be held Jun 8th); Labour making up some ground following release of Conservative Party election manifesto
Americas:
President Trump’s budget said to cut entitlements by $1.7T. Report notes the budget proposal won’t reform Social Security or Medicare (in line with his campaign promise) but it will make large cuts to other entitlement programs.
US to sign $110B of military contracts as part of memorandum of intent to support Saudi defense
Council of Brazil’s Order of Lawyers (OAB) voted favor of an impeachment hearing for President Temer
Energy:
Saudi Oil Min Al-Falih indicated OPEC and non-OPEC producers are on course to back an agreement extending the oil supply deal by a further nine months
Iran President Hassan Rouhani wins second term with 57% of the vote. (Note: Hard-liner Ebrahim Raisi, won 38% of the vote)
Economic Data
(TW) Taiwan Apr Export Orders Y/Y: 7.4% v 13.0%e
Fixed Income Issuance:
(NO) Norway sold NOK4.0B vs. NOK4.0B indicated in 6-month Bills; Avg Yield: 0.40% v 0.47% prior; Bid-to-cover: 3.01x v 3.55x prior
(SE) Sweden sold SEK5B in 2028 Bonds; Avg Yield: 0.7412% v 0.7511% prior; Bid-to-cover: 2.69x v 3.41x prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [EuroStoxx50 flat at 3586, FTSE +0.4% at 7502, DAX +0.2% at 12657, CAC-40 +0.3% at 5338, IBEX-35 -0.3% at 10806, FTSE MIB -0.9% at 21381, SMI +0.4% at 10807, S&P 500 Futures +0.1%] Market Focal Points/Key Themes European indices trade mixed this morning with out performance in the UK FTSE, and weakness in the Italian FTSE MIB. The announced all stock merger of Clariant and Hunstman was the main headline this morning with shares of Clariant up over 9%. Else where the naming of Jan Jenisch as new CEO for LarfargeHolcim helped the stock rise over 6%. Shares of UCB are under pressure as the expected action date for EVENITY was delayed beyond M2017. Looking ahead to the US morning notable earnings include Booz Hamilton, Cheetah Mobile and Navios Maritime. Also on the look out for the formal confirmation of a CEO change at Ford.
Equities
Materials: [Clariant [CLN.CH] +9% (All stock merger with Huntsman), LafargeHolcim [LHN.CH] +6.2% (New CEO),
Financials: [Julius Baer [BAER.CH] +0.5% (AUM), Aegon [AGN] +7.4% (Divestment of some US businesses)
Technology: [Tele Columbus [TC1.DE] +2.2% (Earnings)]
Healthcare: [ Evotec [EVT.DE] +2.3% (Milestone payment from collaboration with Bayer), UCB [UCB.BE] -14% (Sees Osteoporosis Drug Delay on Heart Safety Concern)
Energy: [RWE [RWE.DE] +2.1% (Analyst upgrade), Petro Welt Tech [O2C.DE] -3.5% (Earnings)]
Speakers
Italy Stats Agency (ISTAT) 2017 Economic Forecasts: Raises 2017 GDP growth from 0.9% to 1.0% (as speculated)
Germany Finance Ministry: No completion of second Greece review and no clearance for next loan installment expected at this Eurogroup meeting in Brussels. Have three debt-relief scenarios on the table based upon Greek primary surplus and would be discussed by Eurogroup
France Fin Min Le Maire: France will respect deficit reduction commitments. Working group to present concrete ideas for developing Euro Zone; will look at investment projects
Austria Fin Min Schelling: Meeting on EU Financial Transaction tax (FTT) postponed until Jun 15th Eurogroup meeting. Cited that France’s new finance minister asked for more time to review the issue because he just took office
Russia Econ Min Oreshkin: Could adjust macro economic forecasts in June if oil producing countries reach agreement on production cuts
Romania Central Bank Gov Isarescu stated that monetary and fiscal policies needed to be accommodative but urged prudence on policies. Fiscal stimulus would gradually decline
Iraq State Organization for Marketing of Oil (SOMO) chief Al-Amri: Iraq has made its OPEC production cut commitment and has announced its readiness to the OPEC cut agreement
Currencies
USD began the week inching higher following recent spat of softer economic data and political woes that sent it testing 6-month lows. Dealers noted that FOMC minutes would likely be the main event this week since they are expected to contain an extensive discussion of the Fed’s balance sheet strategy
EUR/USD lower by 0.3% in quiet trading. Dealers noted that encouraging Euro Zone economic activity, the prospect of the ECB announcing a path to more tapering of its asset purchase program at the June ECB meeting, and improving capital inflows would continue to underpin the EUR currency
GBP/USD was lower after a spat of recent polls predicted a narrower-than-expected win for PM May in June election. Some of the items in the recent Tory platform manifesto cited for the narrowing of the gap. GBP/USD lower by almost 0.5% arounf 1.2975 area
Fixed Income
Bund futurestrade at 161.12 down 23 ticks, in the middle of last week’s trading range. Resistance lies near the April 27th high of 162.01 level followed by 163.68. A break of 160.01 support level could see lows target 159.01 followed by 157.50.
Gilt futurestrade at 128.33 higher by 14 ticks, as strong demand for gilts suggest the UK can borrow more. Last week’s rally respected both the 129.00 handle and the 129.14 April 18th high. Price still finds key support at the 127.52 support level. An acceleration lower could test the 126.74 region. Resistance stands at 128.51 then 129.14 followed by 132.80.
Monday’s liquidity report showed Friday’s excess liquidity dropped lower to €1.6380T a decline of €8B from €1.6460T prior. Use of the marginal lending facility rose to €216M from €137M prior.
Corporate issuancesaw $37.05B issued last week, ahead of last week’s forecast of $30B. For the week ahead, analysts eye issuance to come in around $35B. – In Euro denominated issuance €53.7B came to market last week via 41 issuers and 53 tranches.
Looking Ahead
(PT) Portugal Mar Current Account: No est v €0.0B prior – 06:00 (IL) Israel to sell 2019, 2020, 2021, 2027 and 2047 bonds
06:00 (RO) Romania to sell1.35% 2019 Bonds
06:00 (IL) Israel Apr Unemployment Rate: No est v 4.2% prior
06:00 (IE) Ireland Apr PPI M/M: No est v 0.0% prior; Y/Y: No est v 2.1% prior
06:45 (US) Daily Libor Fixing – 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:25 (BR) Brazil Central Bank Weekly Economists Survey – 08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Apr Chicago Fed National Activity Index: 0.10e v 0.08 prior
08:50 (FR) France Debt Agency (AFT) to sell combined €5.4-6.6B in 3-month, 6-month and 12-month BTF Bills
09:00 (MX) Mexico Q1 Final GDP Q/Q: 0.6%e v 0.6% prelim; Y/Y: 2.7%e v 2.7% prelim, Nominal GDP Y/Y: 8.8%e v 8.7% prior
09:00 (MX) Mexico Mar IGAE Economic Activity Index (Monthly GDP) Y/Y: 4.2%e v 1.0% prior
09:00 (RU) Russia Apr Unemployment Rate: 5.5%e v 5.4% prior
09:00 (RU) Russia Apr Real Retail Sales M/M: -0.9%e v +7.9% prior; Y/Y: -0.3%e v -0.4% prior
09:00 (CN) China Apr Conference Board Leading Economic Index: No est v 0.9 prior
09:00 (EU) EU/Euro-Area Finance Ministers (Eurogroup) meet in Brussels
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
11:30 (US) Treasury to sell 3-Month and 6-month Bills
13:30 (AU) RBA’s Debelle speech in Basel
15:00 (MX) Mexico Citibanamex Survey of Economists
16:00 (US) Weekly Crop Progress Report
