Notes/Observations
- European Q1 GDP data falls in-line with ECB view that recovery is being more broad-based
- UK Apr CPI beats expectations (Y/Y: 2.7% v 2.6%) and remains above BOE target for the 3rd straight month
Overnight:
Asia:
- Reserve Bank of Australia (RBA) May 2nd Meeting Minutes:Maintaining the current accommodative stance of monetary policy would be consistent with achieving sustainable growth and the inflation target over time. Q1 inflation data had generally increased confidence that underlying inflation would pick up to around 2% by early 2018.
- Bank of Japan (BOJ) Gov Kuroda reiterates its view that was not exiting at this stage but quite sure exiting from its easy monetary policy could be managed quite well; BoJ had tools to manage exit from stimulus. Reiterated view that Japan inflation rate was still quite low and that current YCC policy was appropriate. Reiterated view that would take more stimulus steps if needed
- China Banking Regulator (CBRC) to tighten disclosure rules on lenders’ wealth management products to track risky lending practices in shadow banking sector and launch approx. 4 dozen new rules
Europe:
- France President Macron 1st full day in office noted that he planned to carry out reforms in the next few months. France-German relationship needed to be more pragmatic and wanted to set up roadmap with Germany to reform the Euro zone. Treaty changes would not longer be taboo as France was ready for EU treaty change if necessary
- Germany’s Merkel met the French President. Noted that France and Germany want to develop roadmap to deepen EU integration and make the region more resilient to crises. Was possible to change EU treaties but first needed to decide on what reforms were needed
- UK Labour party said to plans to introduce taxes on companies that pay staff more than £330K/ year if it wins general election
Americas:
- President Trump reportedly revealed highly classified intelligence information to Russian Foreign Min Lavrov last week that intelligence agency partners had not given permission to share
- White House official Powell denied President Trump gave classified information to Russian diplomats, as reported in Washington Post. National Security Advisor McMaster added that at no
- time were any intelligence sources or methods discussed and no military operation were disclosed that were not already known publically
– Mar Total Net Tic Flows -$0.7B v $13.2B prior; Long-term TIC Flows $59.8B v $53.1B prior; both Japan and China increased their Treasury holdings
Energy:
- EIA forecasted June total shale regions oil production at 5.40M bpd, +122K bbd m/m (vs +109K bpd rise in May)
Economic Data
- (NO) Norway Q2 Consumer Confidence: 11.1 v 7.3 prior
- (EU) Apr EU27 New Car Registrations: -6.6% v +11.2% prior (1st negative reading in 41 months)
- (NO) Norway Q1 GDP Q/Q: 0.2% v 0.2%e; GDP Mainland Q/Q: 0.6% v 0.5%e
- (RO) Romania Q1 Advance GDP Q/Q: 1.7% v 1.0%e; Y/Y: 5.7% v 4.4%e
- (FR) France Apr Final CPI M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e
- (FR) France Apr Final CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1.2% v 1.2%e, CPI (Ex-Tobacco) Index: 101.23e
- (CZ) Czech Q1 Advance GDP Q/Q: 1.3% v 0.7%e; Y/Y: 2.9% v 2.3%e
- (HU) Hungary Q1 Preliminary GDP Q/Q: 1.3% v 1.2%e; Y/Y: 4.1% v 3.2%e
- (NL) Netherlands Q1 Preliminary GDP Q/Q: 0.4% v 0.5%e; Y/Y: 3.4% v 2.8%e
- (IT) Italy Q1 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 0.8% v 0.8%e
- (PL) Poland Q1 Preliminary GDP Q/Q: 1.0% v 0.8%e; Y/Y: 4.0% v 3.9%e
- (UK) Apr CPI M/M: 0.5% v 0.4%e; Y/Y: 2.7% v 2.6%e; CPI Core Y/Y: 2.4% v 2.3%e
- (UK) Apr RPI M/M: 0.5% v 0.4%e; Y/Y: 3.5% v 3.4%e; RPI Ex Mortgage Interest Payments (RPIX) Y/Y: 3.8% v 3.7%e
- (UK) Apr PPI Input M/M: 0.1% v 0.0%e; Y/Y: 16.6% v 17.0%e
- (UK) Apr PPI Output M/M: 0.4% v 0.2%e; Y/Y: 3.6% v 3.4%e
- (UK) Apr PPI Output Core M/M: 0.5% v 0.2%e; Y/Y: 2.8% v 2.5%e
- (DE) Germany May ZEW Current Situation Survey: 83.9 v 82.0e; Expectation Survey: 20.6 v 22.0e
- (EU) Euro Zone May ZEW Expectations Survey: 35.1 v 26.3 prior
- (EU) Euro Zone Mar Trade Balance (Seasonally Adj): €23.1B v €18.7Be; Trade Balance NSA (unadj): €30.9B v €25.8Be
- (EU) Euro Zone Q1 Preliminary GDP (2nd reading) Q/Q: 0.5% v 0.5%e; Y/Y: 1.7% v 1.7%e
Fixed Income Issuance:
- (FR) France Debt Agency (AFT) opened its book to sell new May 2048 Oat; Guidance seen mid-teens bps to French Treasuries
- (SI) Slovenia Debt Agency opened its book to sell EUR-denominated 2027 and 2040 bonds
- (ID) Indonesia sold total IDR6.02T in 2-year,4-year,7-year and 15-year Project-based Sukuk (PBS)
- (ES) Spain Debt Agency (Tesoro) sold total €1.605B vs. €1.0-2.0B indicated range in 3-month and 9-month Bills (Apr 18th 2017)
- (UK) DMO opened its books to sell 1.75% July 2057 Gilt; guidance seen +2.5-2.75bps to UK Treasuries
- (ZA) South Africa sold total ZAR2.35B vs. ZAR2.35B indicated in 2026, 2036 and 2048 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.1% at 3268, FTSE +0.4% at 7486, DAX -0.1% at 12799, CAC-40 -0.4% at 5394, IBEX-35 +0.1% at 10972, FTSE MIB +0.1% at 21714, SMI -0.2% at 9094, S&P 500 Futures -0.1%]
Market Focal Points/Key Themes
European Indices trade mixed this morning, with out performance in the FTSE100 led by Vodafone up ~4% following their Full year results, EasyJet on the other hand one of the leading decliners after missing estimates. Earlier the DAX hit a new record high before pulling back, after record highs for US indices yesterday. Telecoms are outperforming with Car makers and Healthcare stocks declining.
Looking ahead to the US morning notable earnings on the calendar include Home Depot, Staples, Dick’s Sporting Goods and TJX.
Equities
- Consumer discretionary: [EasyJet [EZJ.UK] -6.6% (Earnings), DCC [DCC.IL] -3.1% (Earnings), SpeedyHire [SDY.UK] +3% (Earnings)]
- Consumer Staples: [ITE Grp [ITE.UK] -4.3% (Earnings)]
- Financials: [Crest Nicholson [CRST.UK] -1.9% (Earnings)]
- Technology: [Sonova [SOON.CH} +0.8% (Earnings)]
- Telecom: [Vodafone [VOD.UK] +4.0% (Earnings)]
- Healthcare: [AB Science [AB.FR] -29% (Announces that ANSM requested the temporary suspension of clinical studies conducted in France following deviations from Good Clinical Practice (GCP) standards), BTG [BTG.UK] -9.0% (Earnings)]
Speakers
- Italy PM Gentiloni commented from Beijing that China President Xi had expressed confidence in the future of EU –
- German ZEW Economists noted that the latest figure suggested on GDP confirm German economy is in good shape with prospects gradually improving; exports continue to strengthen. Euro Zone prospects were also better
- Sweden Central Bank (Riksbank) publishes Opinion on Inflation Target Variable; Proposes CPIF from CPI. changes are expected to be able to be implemented at the monetary policy meeting in September 2017. Proposal will would not entail any change to policy being conducted
- European Court of Justice (ECJ): Free trade agreement with Singapore needed the approval of national parliaments before it can become legal (**Insight: case widely seen as setting a precedent for the UK and pave the way for the trade negotiations as he country prepares to leave the bloc)
- IEA Monthly Report noted that if saw a sharp stockpile draw if production cuts were extended. Trimmed 2017 global oil demand growth from 1.32M bpd to 1.30M bpd. Raised 2017 Non-Opec oil supply growth forecast from 485K bpd to 600K bpd. Opec production was higher from 31.68M to 31.78M, +65K bpd; compliance of 96% v 99% m/m
- Russia Energy Min Novak: Looking to extend timeframe for production cuts; keep continues in place
Currencies
- USD still hampered by a spat if weaker-than-expected economic data that any upward expectations that Fed 2017
- EUR/USD hit fresh 7-month highs in the session at 1.1050. Dealers cited continued optimism following the election of Macron. German Chancellor Merkel noted that she was open to changing the EU’s treaties to strengthen the bloc, voicing a desire to work closely with France. Both leaders agreed to “develop and renew” their bilateral relationship and that their cabinet ministers would meet shortly after the French parliamentary election in June
- GBP/USD was firmer as UK inflation data remain hot. Apr CPI YoY reading topped estimates and remained above the BOE target for the 3rd straight month. GBP/USD tested above 1.2950 area afterwards but still unable to fiund the momentum to tackle the 1.30 handle. The pair failed at several attempts last week to bust above the key resistance. GBP saw its gains erode just ahead of the NY morning with GBP/USD back below the 1.29 level.
Fixed Income
- Bund futures trade at 160.36 down 18 ticks, continuing to come off Friday’s high of 160.99. Initial resistance comes from the 161.01 level, while medium –term 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 futures trade at 127.55 lower by 6 ticks, but off the lows of 127.45 after UK inflation came in hotter than expected. Last week’s rally saw a pause from the continuation of the pullback from the 129.14 April 18th high. Price still finds key support at the 126.41 support level. An acceleration lower could test the 125.80 region. Resistance remains the 128.51 level then 129.14 followed by 132.80.
- Tuesday’s liquidity report showed Monday’s excess liquidity rose to €1.6536T a rise of €9.6B from €1.6440T prior. Use of the marginal lending facility climbed to €227M from €248M prior.
- Corporate issuance saw over $13.5B come to market via 11 issues headlines by Intl Flavors & Fragrances $2.0B in a 2-part senior unsecured notes & bond offering and Wells Fargo $3.0B in a 2-part senior notes and non-call 10-year offering
Looking Ahead
- (IT) Italy PM Gentiloni meets Russia President Putin
- (CO) Colombia Apr Consumer Confidence Index: No est v -21.1 prior
- 05.30 (UK) Weekly John Lewis LFL sales data
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
- 06:00 (IE) Ireland Mar Trade Balance: No est v €4.7Be
- 06:00 (IL) Israel Q1 Advance GDP Annualized: 3.7%e v 6.3% prior
- 06:00 (TR) Turkey to sell 2019 and 2022 bonds
- 06:30 (SE) Sweden Central Bank (Riksbank) Gov Ingves speech
- 07:00 (BR) Brazil May FGV Inflation IGP-10 M/M: -1.0%e v -0.8% prior
- 07:45 (US) Weekly Goldman Economist Chain Store Sales
- 08:00 (IS) Iceland Apr Unemployment Rate: No est v 2.4% prior
- 08:15 (UK) Baltic Dry Bulk Index
- 08:30 (US) Apr Housing Starts: 1.26Me v 1.22M prior; Building Permits: 1.27Me v 1.267M prior (revised from 1.260M)
- 08:55 (US) Weekly Redbook Sales
- 09:00 (EU) Weekly ECB Forex Reserves:
- 09:00 (NZ) Fonterra Global Dairy Trade Auction
- 09:00 (RU) Russia announces weekly OFZ bond auction
- 09:15 (US) Apr Industrial Production M/M: 0.4%e v 0.5% prior; Capacity Utilization: 76.3%e v 76.1% prior, Manufacturing Production: +0.4%e v -0.4% prior
- 10:00 (US) Q1 MBA Mortgage Foreclosures: No est v 1.53% prior; Mortgage Delinquencies: No est v 4.8% prior
- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills
- 11:00 (BR) Brazil to sell 2022, 2026 2035 and 2055 I/L Bonds – 08/15/2022
- 11:30 (US) Treasury to sell 4-Week Bills
- 11:30 (AT) ECB’s Nowotny (Austria) speaks in Vienna
- 16:30 (US) Weekly API Oil Inventories
