German ZEW Survey Continues To Decelerate, UK Jobs/Wage Data Mixed

Notes/Observations

• Market looking for more details in Trump/Kim document signing on denuclearization pledge
• UK data mix; Jobs being created while hourly wage data misses expectations; Any BOE Aug rate hike still in doubt
• German ZEW Survey continues to decelerate, weighed down by exports and production components

Asia:

• President Trump met North Korea leader Kim for a first ever meeting between a sitting US President and NK Leader; both leaders sign ‘very important ‘ document following the Singapore Summit
• China PBOC was very likely to follow Fed and raise its open market operation (OMO) rates after next Fed move (Note: Not the key 1-year benchmark rates but operational rates)

Europe:

• UK Parliament will vote on Brexit customs union amendment on Wed, June 13th
• PM May set to avoid Commons defeat on customs union after agreeing compromise deal with Tory rebels
• Leading Tory Grieve: Have tabled compromise amendment on Brexit deal, likely to rebel if amendment is rejected
• Brexit sec Davis to put his name to ‘compromise customs amendment’ on Wednesday when UK lawmakers vote on amendments to the European Union withdrawal bill
• UK Foreign Sec Johnson backs £15B ‘Brexit bridge’ linking Scotland and Northern Ireland. Believes that it was an interesting idea which should be looked at more seriously

Americas:

• President Trump: Letter with N Korea was very comprehensive. North Korea denuclearization process would be starting ‘very quickly’
• White House Economic Adviser Kudlow has had a mild heart attack, being treated at Walter Reed Medical

Economic Data:

• (FR) France Q1 Final Private Sector Payrolls Q/Q: 0.2% v 0.3%e; Total Payrolls: 0.2% v 0.3% prior
• (RO) Romania May CPI M/M: 0.5% v 0.3%e; Y/Y: 5.4% v 5.4%e
• (ES) Spain Apr House transactions Y/Y: +29.7% v -3.1% prior
• (NO) Norway May Region Survey: Output past 3-months: 1.23 v 1.32 prior; Output next 6-months: 1.47 v 1.45e
• (IT) Italy Q1 Unemployment Rate: 1.1% v 11.1%e
• (UK) May Jobless Claims Change: -7.7K v +28.2K prior; Claimant Count Rate: 2.5% v 2.5% prior
• (UK) Apr Average Weekly Earnings 3M/Y: 2.5% v 2.5%e; Weekly Earnings (ex Bonus) 3M/Y: 2.8% v 2.9%e
• (UK) Apr ILO Unemployment Rate: 4.2% v 4.2%e; Employment Change 3M/3M: +146K v +120Ke
• (DE) Germany Jun ZEW Current Situation: 80.6 v 85.0e; Expectations Survey: -16 v -14.0e
• (EU) Euro Zone Jun ZEW Expectations Survey: -12.6 v +2.4 prior
• (CN) China May M2 Money Supply Y/Y: 8.3% v 8.5%e
• (CN) China May New Yuan Loans (CNY): 1.150T v 1.300Te
• (CN) China May Aggregate Financing (CNY): 0.8B v 1.300Te

Fixed Income Issuance:

• (EU) ESM opened its book to sell €1.5B in 0.75% Mar 2027 bonds; guidance seen -10bps to mid-swaps
• (NL) Netherlands Debt Agency (DSTA) sold €2.15B vs. €1.5-2.5B indicated range in 0% 2024 DSL bonds; Avg Yield: 0.090% v 0.087% prior
• (ES) Spain Debt Agency (Tesoro) sold total €5.48B vs. €5.0-6-0B indicated range in 6-month and 12-month Bills
• Sold €930M in 6-month Bills; Avg Yield: -0.348% v -0.488% prior; Bid-to-cover: 2.74x v 6.22x prior
• Sold €4.55B in 12-month Bills; Avg Yield: -0.468% v -0.414% prior; Bid-to-cover: 1.59x v 1.81x prior
• (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 12-month Bills; Avg Yield: 0.550% v 1.213% prior; Bid-to-cover: 1.95x v 1.19x prior
• (CH) Switzerland sold CHF152.2M in 3-month Bills; Yield: -0.861% v -0.861% prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 flat at 388.1, FTSE -0.2% at 7719, DAX +0.1% at 12856, CAC-40 -0.1% at 5462, IBEX-35 +0.2% at 9918, FTSE MIB +0.1% at 22104, SMI flat at 8621, S&P 500 Futures -0.1%]
• Market Focal Points/Key Themes: European Indices trade mixed coming off the earlier highs following a mixed session in Asia overnight and the positive tone from the Trump-Kim meeting in Singapore. On the corporate front, UK internet retailer reverses earlier gains to trade sharply lower following their Q1 trading update, with Crest Nicholson, and Heidelberger Druck other notable fallers after results. Casino trades higher in France following asset disposal plans, while Carrefour also rises after announcing a partnership with google. Looking ahead notable earnings include Lands End, John Wiley and Caseys General Stores.

Movers

• Consumer Discretionary Boohoo [BOO.UK] -3% (earnings), Casino [CO.FR] +4.2% (Asset disposal plan), Carrefour [CA.FR] +2% (partnership with Google), Heidelberger Druck [HDD.UK] -6.6% (Earnings, outlook)
• Healthcare Gensight Biologics [SIGHT.FR] +1.8% (Trial data)
• Real Estate Crest Nicholson [CRST.UK] -5.7% (Earnings), Bellway [BWY.UK] -1.3% (Trading update)

Speakers

• UK Brexit Min Davis: Brexit White Paper will come out after the June 28th EU Summit (in-line with recent speculation)
• Tory Minister Phillip Lee (pro-remain) resigns as UK Minister over Brexit
• EU’s Oettinger stated EU was grateful for Tria interview comments and added it created confidence (**Reminder: On Jun 11th Italy Fin Min Tria stated that the Govt had no intention of leaving the Euro. Determined to prevent market conditions that might push towards a Euro exit)
• German ZEW Economists stated that worse than expected exports, production and industrial in April contributed to more difficult outlook.
• Bank of Italy (BOI) Monthly Report `Money and Banks’: Bad Loans €164.8B v €164.1B m/m
• Trump/Kim Document: U.S. and North Korea committed to working towards complete denuclearization of the Korean peninsula
• President Trump Post-Summit news conference stated that Kim Jon Un wanted to do what was right and write a new chapter. Sanctions on North Korea to remain in effect. US to keep troops in region for now, to stop war games for the time being. To verify denuclearization process. Human rights were discussed ‘relatively briefly’. Kim to return over 6,000 American war dead. To visit Pyongyang at the appropriate time
• Sec of State Pompeo: US to offer unprecedented security deal to North Korea with assurances that would go further than 2005 agreement
• Bank of Korea May Minutes: One Member noted the need to reduce amount of policy accommodation. One member stated that needed to focus on financial stability at this time. One member stated that needed to pick up on hike timing after monitoring CPI
• China Foreign Ministry: Could consider reducing sanctions on North Korea in accord with compliance with UN Security Council resolutions

Currencies

• Market sentiment shifted from the Trump/Kim summit to the upcoming policy meetings this week. The USD Index hit a 1-week high during the Asian session but saw its gains slipped away as the European morning progressed.
• GBP/USD focus turning to politics ahead of the Parliamentary vote on the EU Withdrawal bill. UK jobs data continued to hold up to keep the GBP on firmer footing. Analysts noted that the recent wage data made any possible hike in Aug as unlikely. UK Tory member Lee (pro-remain) resigned as UK Minister over Brexit ahead of the Wed Parliamentary vote on the EU Withdrawal bill. GBP/USD at 1.3400 area just ahead of the NY morning.
• EUR/USD was hovering around the 1.18 area as the attention turned to the upcoming ECB meeting on Thursday.

Fixed Income

• Bund Futures trade 31 ticks lower at 159.53 as Italian bonds advance and Bunds dip, though supply may take focus. Upside targets 161.75 followed by 162.50, while a return lower targets the 158.75 level.
• Gilt futures trade at 121.60 lower by 10 ticks following steady earnings and unemployment data. Support continues stands at 120.75 then 119.25, with upside resistance at 122.85 then 123.35.
• Tuesday’s liquidity report showed Monday’s excess liquidity fell from €1.924T to €1.910T. Use of the marginal lending facility increased from €30M to €261M.
• Corporate issuance saw 7 issuers raise $6.1B in the primary market

Looking Ahead

• (UK) Parliament debates EU withdrawal bills (**Note: vote expected on Wed)
• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month Bills
• 05:30 (ZA) South Africa to sell combined ZAR2.4B in 2030, 2035 and 2044 bonds
• 06:00 (US) May NFIB Small Business Optimism: 105.0e v 104.8 prior
• 06:00 (PT) Portugal May Final CPI M/M: No est v 0.4% prelim; Y/Y: No est v 1.0% prelim
• 06:00 (PT) Portugal May CPI EU Harmonized M/M: No est v 0.8% prelim; Y/Y: 1.4%e v 1.4% prelim
• 06:00 (TR) Turkey to sell 2019 Zero Bonds
• 06:00 (FI) Finland to sell Up to €1.0B in 1.125% 2034 Bonds (no history, syndicated on Feb 6th 2018)
• 06:45 (US) Daily Libor Fixing
• 07:30 (SE) Sweden Financial Stability Council
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (IN) India May CPI Y/Y: 4.8%e v 4.6% prior
• 08:00 (IN) India Apr Industrial Production Y/Y: 5.9%e v 4.4% prior
• 08:00 (BR) Brazil CONAB Crop Report
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (US) May CPI M/M: 0.2%e v 0.2% prior; Y/Y: 2.8%e v 2.5% prior
• 08:30 (US) May CPI Ex Food and Energy M/M: 0.2%e v 0.1% prior; Y/Y: 2.2%e v 2.1% prior
• 08:30 (US) May CPI Index NSA: 251.570e v 250.546 prior; CPI Core Index: 256.884e v 256.450 prior
• 08:30 (US) May Real Avg Weekly Earnings Y/Y: No est v 0.4% prior; Real Avg Hourly Earning Y/Y: No est v 0.2% prior
• 08:30 (CL) Chile Central Bank Economists Survey
• 08:55 (US) Weekly Redbook Sales
• 09:00 (EU) Weekly ECB Forex Reserves
• 09:00 (UK) BOE’s Haldane speech
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills
• 11:30 (US) Treasury to sell 4-Week Bills
• 12:00 (US) DOE Short-Term Crude Outlook
• 12:00 (IS) Iceland May International Reserves (ISK): No est v 660B prior
• 12:00 (US) USDA World Agricultural Supply and Demand Estimate (WASDE) Crop Report
• 12:15 (DE) German Chancellor Merkel with Austria PM Kurz
• 13:00 (US) Treasury to sell $14B in 30-Year Bonds Reopening
• 14:00 (US) May Budget Statement: -$139.5Be v +$214.3B prior
• 15:00 (AR) Argentina Central Bank (BCRA) Interest Rate Decision: Expected to keep Repo Reference Rate unchanged at 40.00%
• 16:30 (US) Weekly API Oil Inventories