Notes/Observations
ECB Economic Bulletin was in line with Draghi’s Jun press conference with current economic recovery is proving to be increasingly robust with inflation likely to remain around recent levels in coming months
Norway Central Bank keeps policy steady but removes easing bias
Japan Govt raised overall economic assessment for the 1st raise since Dec
Overnight
Asia:
New Zealand Central Bank (RBNZ) left its Official Cash Rate (OCR) unchanged at 1.75% (as expected). Noted that its policy to remain accommodative for some time and that a lower currency would help rebalance for New Zealand growth. Recent changes announced in Budget 2017 should support the outlook for growth.
BOJ Dep Gov Iwata: Monetary easing was still necessary in Japan; Inflation was still lacking momentum and remained distant from target
PBoC Adviser Sheng Songcheng reiterated that PBoC woud not unwind balance sheet like the US Fed. Liquidity would not be tighter in China, market rates had kept increasing for some time and don’t have large room to rise further
Europe:
Democratic Unionist Party (DUP) MP Donaldson: Remain confident that a deal with the UK govt will be done; have made progress in talks with Conservatives. Deal centers on infrastructure spending and cuts in air travel tax and VAT
German Finance Ministry Monthly Report reiterated view that domestic economy was in an upswing; exports to rise despite uncertainties
Americas:
Fed’s Harker (hawk, voter) has argued for a pause in rate policy in the months ahead as the Fed implements balance sheet unwind
Energy:
Weekly DOE Crude Oil Inventories: Crude -2.5M v -1.0Me
Economic Data
(CH) Swiss May Trade Balance (CHF): 3.4B v 2.0B prior, Real Exports M/M: +2,9 v -2.4% prior; Real Imports M/M: +2.0 v +3.5% prior
(FR) France Jun Business Confidence: 106 v 105e; Manufacturing Confidence: 108 v 109e, Production Outlook: 17 v 7 prior, Own-Company Production: 13 v 16 prior
(DK) Denmark Jun Consumer Confidence: 7.1 v 6.3e
(TR) Turkey Jun Consumer Confidence: 70.0 v 72.8 prior
(NO) Norway Central Bank (Norges) left its Deposit Rates unchanged at 0.50%; as expected
(PH) Philippines Central Bank (BSP) left its Overnight Borrowing Rate unchanged at 3.00%; as expected
(TW) Taiwan Central Bank (CBC) leaft itsBenchmark Interest Rate unchanged at 1.375% (as expected)
Fixed Income Issuance:
None seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx600 -0.5% at 387, FTSE -0.6% at 7406, DAX -0.4% at 12729, CAC-40 -0.6% at 5241, IBEX-35 -0.8% at 10651, FTSE MIB -1.0% at 20867, SMI +0.3% at 9017, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes European Indices trade lower across the board with the exception of the Swiss SMI gaining on strength in shares of Novartis which account for ~20% of the index. Weakness in Oil continues to be the overriding theme, with futures down over 2%, which continue to weigh on commodity names. On the corporate front Imagination Technologies trades sharply higher after formally announcing a sale process, whilst Healthcare stocks Novartis trades higher after phase III results, and Santhera Pharma is up after positive MHRA opinion. Altran shares declining after holders sold 8.4% of capital.
Equities
Industrials: [Chemring [CHG.UK] +4.3% (Earnings), Solstad Farstad [SOFF.NO] -7% (Names new CFO)]
Technology: [ Imagination Technologies [IMG.UK] +15.0% (Starts formal sale process), Altran [ALT.FR] -4.5% (Placing by holders)]
Healthcare: [Novartis [NOVN.CH] +2.9% (Phase III study shows ACZ885 (canakinumab) reduces cardiovascular risk in people who survived a heart attack), Sannthera Pharma [SANN.CH] +9.3% (Positive MHRA opinion), Shire Pharmaceuticals [SHP.UK] +2.2% (Announces EMA Validation of Veyvondi)]
Speakers
ECB Economic Bulletin noted that the Current economic recovery is proving to be increasingly robust with inflation likely to remain around recent levels in coming months
ECB’s Praet (Belgium): ECB understands German complaint on low interest rates. Inflation to pick-up eventually. ECB needed its own debt-sustainability study on Greece
Norway Central Bank (Norges) Policy Statement noted that the decision to keep policy steady was unanimous. Rate likely to be at current level in period ahead. Reiterated view that forecasts are little changed from March
Norway Central Bank (Norges) Gov Olsen post rate decision press conference noted that it still needed expansionary monetary policy. Interest rates were likely to stay at current level for a significant time
ECB’s Hakkarainen (SSM member): banks should not wait for the public sector to provide an overarching solution to NPL proble
France President Macron reiterated the need for stronger Euro Zone integration, including a shared budget for the zone. Wanted a Euro Zone budget and noted that Germany was willing to accept change
Chancellor Hammond: Confident of reaching an agreement with DUP on working govt. Says he was behind PM May ‘all the way’
Democratic Unionist Party (DUP) MP Donaldson reiterated view that chances of Conservative-DUP agreement was very good
ECB lowered emergency liquidity assistance (ELA) cap for Greece banks from €44.2B to €43.6B
South Africa Chief Justice Mogoeng noted that no-confidence motion was a tool for accountability. Constitution did not specify type of vote but Parliament could determine the type of vote. Speaker could determine whether to use secret ballot in motion of no-confidence against President Zuma
Hungary Central Bank (NBH) Jun Inflation Report saw CPI between 2.0-2.5% in coming months. Forecasted 2017 Core Inflation at 2.3% and 2018 Core Inflation at 2.8%
S&P Global chief ratings officer Kraemer: Brexit negotiations is a lose-lose for both UK and Europe. Believed that UK had more to lose in negotiations; recent election results reduced options. Any UK sovereign downgrade would unlikely be more than one notch
Philippines Central Bank Policy Statement reiterated view that current policy settings remained appropriate as keeping policy steady gave space to monitor developments. It noted that inflation risks were tilted to the upside but its baseline forecast showed lower path for future CPI
Taiwan Central Bank policy statement noted it would maintain appropriately monetary policy and reiterated its view to maintain FX stability
Japan Cabinet Office (Govt) Monthly Economic Report for Jun raised overall economic assessment for the 1st raise since Dec. Economy was experiencing a moderate recovery (**Note: dropped a previous reference to delayed improvement in some areas). Raised its view of private consumption noting that it was picking up gradually
OPEC committee said to focus on rising oil production in Libya and Nigeria
Currencies
The USD was steady against the major European currencies in relatively quiet trading. -The NOK currency was the main focus after the Norway Central Bank removed its easing bias. Norges now saw the Deposit Rate at current level going forward. It had previously leaned towards more rate cuts if needed. EUR/NOK fell from 9.51 to test below 9.47 before consolidating
Fixed Income
Bund futures trade at 165.13 up 17 ticks, recovery after making the 164.79 low. Resistance lies near the 165.52 level, followed by 166.21. A break of the 163.89 support level could see lows target 162.05 followed by 160.30.
Gilt futures trade at 129.22 up 5 ticks with the focus on the DMO’s £2.5B auction in 1.5% 2047 Gilts. Price is pulling back towards the middle of the June trading range. If price becomes bearish and drops below the noted 129.14 level, initial support lies at the 128.27 level, with key support at the 127.96 support level. An acceleration lower could test the 127.43 region. Resistance lies at the 129.80 level followed by 132.65.
Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.6016T a decline of €0.8B from €1.6096T prior. Use of the marginal lending facility fell to €203M from €380M prior.
Corporate issuance saw over $11.45B come to market via 5 issues headlined by Reckitt Benckiser $7.75B 4-part senior unsecured note offering and EDP Finance $1.0B senior unsecured notes
Looking Ahead
(EU) EU Leaders begin 2-day Summit in Brussels
(UR) Ukraine May Industrial Production M/M: No est v -6.9% prior; Y/Y: -3.9%e v -6.1% prior
(PT) Portugal Apr Current Account: No est v €0.2B prior
(CO) Colombia May Industrial Confidence: No est v -8.5 prior; Retail Confidence: No est v 17.8 prior
05:30 (UK) DMO to sell £2.25B in 1.50% 2047 Gilts
05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3 tranches)
05:30 (NO) Norway Central Bank (Norges) Gov Olsen post rate decision press conference
05:30 (IT) Italy Fin Min Padoan at seminar
06:00 (UK) Jun CBI Industrial Trends Total Orders: 7e v 9 prior, Selling Prices: 20e v 23 prior
06:00 (IE) Ireland May PPI M/M: No est v -0.7% prior; Y/Y: No est v 1.8% prior
06:00 (IL) Israel May Unemployment Rate: No est v 4.4% prior
06:00 (CZ) Czech Republic to sell Bills
06:45 (US) Daily Libor Fixing – 07:30 (BR) Brazil Central Bank (BCB) Quarterly Inflation Report
08:00 (PL) Poland Central Bank (NBP) Jun Minutes
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Initial Jobless Claims: 240Ke v 237K prior; Continuing Claims: 1.93Me v 1.935M prior
08:30 (CA) Canada Apr Retail Sales M/M: 0.3%e v 0.7% prior; Retail Sales Ex Auto M/M: +0.7%e v -0.2% prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e Jun 16th: No est v $408.3B prior
09:00 (US) Apr FHFA House Price Index M/M: 0.5%e v 0.6% prior
09:30 (DE) German Fin Min Schaeuble on Stability Council meeting
10:00 (US) Fed’s Powell (moderate, voter) in Senate banking committee
10:00 (EU) Euro Zone Jun Advance Consumer Confidence: -3.0e v -3.3 prior
10:00 (US) May Leading Index: 0.3%e v 0.3% prior
10:30 (US) Weekly EIA Natural Gas Inventories
11:00 (US) Jun Kansas City Fed Manufacturing Activity: 9e v 8 prior
11:00 (US) Treasury announcement on upcoming issuance (2-year, 5-year, 7-year duering week of Jun 26th)
11:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds
11:00 (BR) Brazil to sell 2017, 2019 and 2020 LTN Bills
12:00 (CH) SNB’s Maechler in Zurich
12:00 (UK) BOE’s Forbes (hawk, outgoing) in London
13:00 (US) Treasury to sell $5B in 30-Year TIPS Reopening
14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to raise Overnight Rate by 25bps to 7.00%
15:00 (AR) Argentina May Trade Balance: -$0.1Be v -$0.1B prior
15:00 (CO) Colombia Apr Economic Activity Index (Monthly GDP) Y/Y: -0.3%e v -0.9% prior
