Trade Concerns Key Focus As European Indices Decline

Jun 18 18, 11:29 GMT

Notes/Observations

Asia:

China Commerce Ministry: to impose additional 25% tariff on chemicals, medical equipment, energy products, commodities from U.S. in response to tariffs set by the US, threatens to levy tariffs on US crude oil, nat gas and other energy products
(CN) China PBOC reiterates view that monetary policy to be prudent and neutral; to stabilize market expectations
Market participation limited by holidays in China, Hong Kong and Taiwan
Earthquake rocks Osaka Japan region, more than 200 reported injured, so far no reports of issues with nuclear plants or major damage; several companies closing production plants to assess damages
Google to invest $500M into JD.com for 21.1M class A shares At $20.29/shr or $40.58/ADS in a strategic partnership

Europe:

The CSU party is said to have denied a German press report which suggested that the party would give Merkel 2 weeks (until the EU summit) before making a decision on the immigration plan.
UK PM May outlines plans to increase spending on healthcare, which will rise by £20B by 2023, through money saved from being out the EU and increased contribution from voters.

Energy:

Iran’s OPEC Rep Kazempour Ardebili: Iran will block OPEC output raise (Note Saudi Arabia can bypass veto)
OPEC reportedly considering an output hike of 300-600K bpd

Economic Data:

(IT) Italy Apr Trade Balance: €2.9B v €4.5B prior; Trade Balance EU: €1.1B v €0.7B prior
(CZ) Czech May PPI Industrial M/M: 1.0% v 0.5%e; Y/Y: 1.5% v 1.0%e
(TR) Turkey Mar Unemployment Rate: 10.1% v 10.6% prior
(PL) Poland May Employment M/M: 0.0% v 0.0%e; Y/Y: 3.7% v 3.8%e
(CH) SNB Total Sight Deposits for Week Ended Jun 15th
(CHF): 576.5B v 576.3B prior

Fixed Income Issuance:

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 -0.7% at 3,486, FTSE -0.1% at 7,628, DAX -0.8% at 12,912, CAC-40 -0.6% at 5,470; IBEX-35 -0.4% at 9,810, FTSE MIB -0.3% at 22,142, SMI -0.9% at 8,570, S&P 500 Futures -0.4%]
Market Focal Points/Key Themes: European markets open broadly lower continued in that direction as the session progressed; FTSE 100 only exchange to open higher, but later moved to the downside; trade concerns keep risk appetite muted; German equities impacted by political concerns over immigration disagreement in CDU/CSU alliance; technology stocks and utilities underperformers; financial sector performing marginally positive;Trukey closed for holiday; CYBG confirms takeover of Virgin Money; Nexans cuts outlook impacting telecom sector in Italy

Equities

Consumer discretionary: Koovs KOOV.UK +16.3% (results), Norwegian Air NAS.NO +10.4% (Lufthansa contact)
Energy: Engie ENGI.FR -2.1% (cuts outlook)
Financials: CYBG CYBG.UK -1.0% (confirms deal with Virgin Money), Virgin Money CM.UK -2.7% (takeover deal)
Industrials: Enav ENAV.IT +1.2% (analyst action)
Technology: Nexans NEX.FR -16.2% (outlook)
Telecom: Prysmian PRY.IT -1.8% (sympathy with Nexans)

Speakers

(DE) German CSU’s Soeder (Prime Minister of Bavaria): Want to support provision in immigration masterplan to turn away migrants at border; Will make decision on migration policy today, then the federal interior minister will decide how he implements it
(UK) UK Foreign Sec Johnson: NHS funding boost will come from vibrant economy as well as discontinuing payments to Brussels

Currencies

EUR/USD trades slightly lower hovering below 1.16 as the dollar approaches a 7 month high as continued trade tensions weigh. GBP/USD is also weaker on dollar strength ahead of this week’s Bank of England rate decision.

Fixed Income

Bund Futures trade 22 ticks higher at 161.22 as Merkel’s position as German leader is under threat over immigration split. Upside targets 161.75 followed by 162.50, while a return lower targets the 158.75 level.
Gilt futures trade at 122.66 higher by 6 ticks near the midpoint for the month of June. Support continues stands at 120.75 then 119.25, with upside resistance at 122.85 then 123.35.
Monday’s liquidity report showed Fridays’s excess liquidity fell from €1.887T to €1.862T. Use of the marginal lending facility rose from €65M to €95M.
Corporate issuance as the primary market saw $23.9B issued last week

Looking Ahead