Quiet start to trading week
Notes/Observations
Florida meeting between China President Xi and US President Trump viewed as a success. China has reportedly offered improved market access for US financial sector investments and beef exports in a move to avert a trade war
Geopolitical risks help USD maintain firm tone
Weekend/Overnight:
Asia:
China Premier Li Keqiang calling on cabinet to remain vigilant for risks related to bad assets, bond defaults, shadow banking and online finance
PBoC skipped its open market operations for 11th straight session as liquidity remained at relatively high leve
China said to be willing offer Trump administration better market access for financial sector and US beef/agriculture exports to help avert a trade
BOJ Gov Kuroda reiterated view that Japan CPI to rise toward 2% target and it would maintain QQE until achieving core CPI stably exceeded 2%
US has ordered an aircraft carrier group to move closer to the Korean Peninsula in response to recent provocations from North Korea. State Sec Tillerson noted that US was not planning a regime change in North Korea
Europe:
Bank of England (BOE) said to be implicated in secret recording on Libor that it repeatedly pressured commercial banks to lower their Libor rates during financial crisis
Americas:
President Trump said to executive order to launch a trade investigation that could lead to supplemental duties in certain product categories
Energy:
Weekly Baker Hughes US Rig Count: 839 v 824 w/w (+1.8%) (12th straight weekly rise)
Sen Murkowski (R-AK) introduces measure to repeal Obama-era Arctic offshore oil drilling restrictions
Economic Data
(NO) Norway Mar CPI M/M: 0.3% v 0.4%e; Y/Y: 2.4% v 2.4%e
(NO) Norway Mar CPI Underlying M/M: 0.4% v 0.4%e; Y/Y: 1.7% v 1.7%e
(SE) Sweden Mar PES Unemployment Rate: 3.9% v 3.9%e
(FR) Bank of France Mar Business Sentiment: 103 v 104e
(CZ) Czech Mar CPI M/M: 0.0% v 0.0%e; Y/Y: 2.6% v 2.6%e
(CZ) Czech Mar Unemployment Rate: 4.8% v 4.9%e
(DK) Denmark Mar CPI M/M: 0.1% v 0.1%e; Y/Y: 1.0% v 1.0%e
(TW) Taiwan Mar Trade Balance: $3.7B v $3.7Be, Exports Y/Y: 13.2% v 15.5%e, Imports Y/Y: 19.8% v 25.0%e
(EU) Euro Zone Apr Sentix Investor Confidence: 23.9 v 21.0e
Fixed Income Issuance:
(DK) Denmark sold total DKK1.0B in 3-month and 6-month Bills
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 -0.3% at 3,483, FTSE flat at 7,351, DAX -0.1% at 12,210, CAC-40 -0.5% at 5,110, IBEX-35 -0.4% at 10,486, FTSE MIB -0.2% at 20,252, SMI -0.5% at 8,599, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes:European equity indices are trading generally lower after China’s indices ended lower overnight; Banking stocks trading mixed as shares of SocGen, BNP and Santander trade lower in the Eurostoxx despite shares of Deutsche Bank trading higher; commodity and mining stocks trading mixed in the FTSE 100 as copper prices trading lower intraday; FTSE 100 marginally outperforming led by shares of BHP Billiton after Elliott reportedly sent a letter to holders proposing single Australian HQ and tax residence, with a demerger of BHP’s US petroleum ops, unlocking value.
No upcoming scheduled US earnings pre-market.
Equities (as of 09:50 GMT)
Consumer Discretionary: [Air France AF.FR +3.7% (March metrics), Sanoma SAA1V.FI +3.5% (Divests Dutch TV Business SBS stake to Talpa for €237M – Adjusts FY17 outlook)]
Financials: [Barclays BARC.UK +0.5% (Confirms investigation by the FCA and PRA into CEO Jes Staley relating to Barclays whistleblowing programme)]
Healthcare: [Stada Arzneimittel SAZ.DE +11.0% (Supports the voluntary public tender offer by Bain Capital and Cinven worth €66.00/shr)]
Materials: [BHP Billiton BLT.UK +5.0% (Reportedly Elliott send letter to holders to unlock value; proposing single Australian HQ and Tax residence; Proposes demerging BHP’s US petroleum ops), Centamin CEY.UK -3.8% (Q1 production)]
Bund futures trade at 162.94 up 9 ticks continuing momentum higher after weaker US Mar NFP numbers. Futures traded near session highs with 163.12 the upside target to print new contract highs, followed by 163.34. A reversal looks to 162.02 initially followed by 161.63.
Gilt futures trade at 128.01 up 12 ticks trading higher on risk aversion flows. Support remains at 127.75 then 127.34 followed by 127.05. A move above 128.63 high sees resistance at 128.96 followed by 129.24. Short Sterling futures trade flat with Jun17Jun18 flattening 12/12.5bp
Monday’s liquidity report showed Friday’s excess liquidity rose to a record €1.600T a rise of €9B from €1.591T prior. Use of the marginal lending facility rose to €131M from €90M prior.
Corporate issuance saw $21.15B issued last week via 30 tranches slightly below the $25B polled by analysts. Issuance for the year stands just above $420B for the week ahead analyst eye issuance to come in around $10B ahead of the Easter weekend. In Euro denominated issuance €22.7B came to market, which was in line with analyst expectations. SSA issuance accounted for the bulk of the issuance with just shy of €10B being priced via 12 tranches. Tuesday saw issuance peak with €7.11B priced.
Speakers
Ukraine Central Bank Gov Gontareva said to hand in resignation to President (as expected)
BOJ Quarterly Regional Report (Sakura) maintained assessment in 8 of 9 regions noting that the regions continued to recover or expand moderately.
BOJ Osaka Branch Manager: Recent FX moves were not too concerning for companies in the Kansai region
China Banking Regulatory Commission (CBRC) to strengthen risk control on liquidity and debt default
Currencies
USD was at 3-week highs aided by geopolitical risks
EUR/USD fractionally lower despite continued improvement in the regions confidence data. Sentix climbed to 23.9 but had little impact on price action. Dealers noted that political concerns weighed on the Euro ahead of the French elections.
USD/JPY was higher by 0.3% at 111.35 aided by Fed’s Dudley affirmation that the Fed was getting closer to shrinking its balance sheet
Looking Ahead
(IT) G7 Foreign Ministers begin 2-day meeting in Italy
(MX) Mexico Mar Nominal Wages Y/Y: No est v 4.6% prior
05:30 (DE) Germany to sell €2.0B 6-month BuBills
06:00 (PT) Portugal Feb Trade Balance: No est v -€0.9B prior – 06:45 (US) Daily Libor Fixing
07:00 (BR) Brazil Apr IGP-M Inflation (1st Preview): -0.4%e v 0.3% prior
07:00 (CZ) Czech Central Bank comments on monthly CPI data
07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
07:25 (BR) Brazil Central Bank Weekly Economists Survey
08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming auctions
08:15 (CA) Canada Mar Annualized Housing Starts: 215.5Ke v 210.2K prior
08:15 (UK) Baltic Dry Bulk Index
08:50 (FR) France Debt Agency (AFT) to sell combined €4.8-6.0B in 3-month, 6-month and 12-month BTF Bills
09:00 IMF updates World Economic Outlook (WEO)
09:30 (EU) ECB announces Covered-Bond Purchases
09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
10:00 (US) Mar Labor Market Conditions Index Change: 1.0e v 1.3 prior
11:00 (PT) ECB’s Constancio (Portugal)
11:30 (US) Treasury to sell 3-Month and 6-month Bills
13:00 (US) Treasury to sell 3-Year Notes
16:00 (US) Weekly Crop Progress Report
16:00 (US) Fed Chair Yellen
