Notes/Observations
Risk-on vibe seen through global markets
Focus on US payroll data with wage numbers being crucial for inflation and the rate outlook
UK Construction PMI hits a 17-month high
Overnight
Asia:
US, China likely to propose today UN security council blacklist more North Korean individuals, entities over missile launches
Europe:
France legislative election Harris poll (first round): Macron’s En Marsche Party 31%, National Front 18%, Republicans 18%
Labour will try to form minority govt and rely on Scottish National Party (SNP) votes to implement its policies in event of hung parliament
Amber Rudd set to replace Phillip Hammond becoming 1st female Chancellor if Conservatives win landslide election
US Treasury announced new sanctions on nine companies and govt institutions. The list included two Russian companies and three Russian citizens over their support they provide for North Korean weapons development programs.
Russia Foreign Ministry preparing retaliatory measures in response to US imposing sanctions on Russia firms and businesses linked with North Korea
Americas:
President Trump: confirmed US to withdraw from Paris climate accord; confirmed would start negotiation for a new deal that is more "fair" to the US
Senate Intelligence Committee: Former FBI Dir Comey will testify before the committee on Thurs, June 8t
Economic Data
(JP) Japan May Consumer Confidence: 43.6 v 43.5e
(CZ) Czech Q1 Preliminary GDP (2nd reading) Q/Q: 1.3% v 1.3%e; Y/Y: 2.9% v 2.9%e
(ES) Spain May Net Unemployment M/M: -111.9K v -110.0Ke
(NO) Norway May Unemployment Rate: 2.6% v 2.6%e
(UK) May Construction PMI: 56.0 v 52.6e (9th month of expansion and highest reading since Dec 2015)
(EU) Euro Apr PPI M/M: 0.0% v 0.2%e; Y/Y: 4.3% v 4.5%e
(GR) Greece Q1 Final GDP Q/Q: +0.4% v -0.1%e; Y/Y: % v -0.3%e; GDP Seasonally adj Y/Y: % v -0.5% advance
Fixed Income Issuance:
(IN) India sold total INR150B vs. INR150B indicated in 2022, 2029, 2033 and 2051 bonds
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 +1.0% at 3604, FTSE +0.4% at 7541, DAX +1.2% at 12813, CAC-40 +0.9% at 5365, IBEX-35 +0.9% at 10979, FTSE MIB +0.9% at 21137, SMI +0.5% at 9068, S&P 500 Futures +0.2%]
Market Focal Points/Key Themes
European Indices trade broadly higher taking cue from another strong showing in the US overnight where indices traded another all time high after strong ADP figures for May.
On the corporate front, CGG outperforms this morning up over 25% after agreeing in principal a financial restructuring program. Plus 500 shares outperform after a positive update and share buyback, with Neopost down 2% after results. Looking ahead all focus will be on May Non Farm Payrolls, with positive expectations after the strong ADP reading.
Equities
Consumer discretionary [B&M [BME.UK] -2.7% (CD&R, SSA Sell 12.5% stake )]
Consumer Staples [Laurent Perrier [LPE.FR] +0.9% (Earnings)
Industrials [WYG [WYG.UK] +10% (Contract wins), NeoPost [NEO.FR]-2.9% (Earnings)]
Financials [Plus 500 [PLUS.UK] +9.4% (Q1 update, buyback)
Healthcare [Ipsen [IPN.FR] +8.5% (Proposes €1.67B buyback)]
Energy: [CGG [CGG.FR] +30.6% (Agreement in principle on financial restructuring)]
Speakers
Scottish First Min Sturgeon (SNP): PM May still on track to win UK election but with less of a majority than expected. Scenario where Scotland becomes center stage and potentially a bigger role to play
Currencies
FX markets saw the major pairs confined to tight ranges ahead of the US May Non-farm payroll data. Stronger than forecast ADP data Thursday has some adjusting up their call on the headline NFP release and possibly cementing a rise in Federal Reserve interest rates later this month
The USD/JPY was higher aided by the overall risk-on vibe exhibited through global markets. Pair near 2-week highs at 111.50 area
EUR/USD holding above the 1.12 level and within striking distance of fresh 7-month highs
GBP/USD softer with just under a week to go before national elections. Dealers noted that Sterling was faring better than one would have expected given that some polls suggest that the Tories could lose their majority in Parliament in next week’s election
Fixed Income
Bund futurestrade at 162.39 up 13 ticks, near highs for the week. Resistance remains near the 162.81 level followed by 163.54. A break of the 161.65 support level could see lows target 159.96 followed by 157.50.
Gilt futurestrade at 128.73 higher by 21 ticks, off the lows for the week. Last week’s rally tentatively took out both the 129.00 handle and the 129.14 April 18th high, but Wednesday’s decline was unable to hold that key region. Price finds key support at the 128.48 support level. An acceleration lower could test the 127.43 region. Resistance remains the noted 129.00/129.14 region, then 129.75 followed by 130.28.
Friday’s liquidity report showed Thursday’s excess liquidity surged to €1.667T a rise of €44B from €1.623T prior. Use of the marginal lending facility rose to €327M from €177M prior.
Corporate issuance saw $17.2B come to market via 9 issues headlined by Cardinal Health $5.2B 7-part senior unsecured note offering and Arrow Electronics $500M 10-year senior unsecured notes. This week’s issuance is at $27.15B, lower than the analysts’ issuance target to come in around $35B. Forecast for June issuance is at $90B. For the week ending May 31st Lipper US fund flows reported IG funds net inflows $980.96M bringing YTD inflows to $57.96B, High yield funds reported outflows of $0.52B bringing YTD outflows to $5.49B.
Looking Ahead
(RO) Romania May International Reserves: No est v $39.8B prior
(RU) Russia May Sovereign Wealth Fund Balances: Reserve Fund: No est v $16.3B prior; Wellbeing Fund: No est v $73.6B prior
06:00 (UK) DMO to sell combined £2.0B in 1-month, 3-month and 6-month bills (£0.5B, £0.5B and £1.0B respectively)
06:45 (US) Daily Libor Fixing
07:30 (CL) Chile Central Bank (BCCh) May Minutes
08:00 (BR) Brazil Apr Industrial Production M/M: +0.1%e v -1.8% prior; Y/Y: -5.5%e v +1.1% prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) May Change in Nonfarm Payrolls: +182Ke v +211K prior, Change in Private Payrolls: +175Ke v +194K prior, Change in Manufacturing Payrolls: +5Ke v +6K prior
08:30 (US) May Unemployment Rate: 4.4%e v 4.4% prior, Underemployment Rate: No est v 8.6% prior, Change in Household Employment (civilian labor force): No est v 160.2K prior, Civilian Labor Participation Rate: 62.9%e v 62.9% prior
08:30 (US) May Average Hourly Earnings M/M: 0.2%e v 0.3% prior; Y/Y: 2.6%e v 2.5% prior; Average Weekly Hours: 34.4e v 34.4 prior
08:30 (US) Apr Trade Balance: -$46.1Be v -$43.7B prior
08:30 (US) Weekly USDA Net Export Sales
08:30 (CA) Canada Q1 Labor Productivity Q/Q: 1.2%e v 0.4% prior
08:30 (CA) Canada Apr Int’l Merchandise Trade: C$0.0Be v –C$0.1B prior
09:00 (SG) Singapore May Purchasing Managers Index: 50.9e v 51.1 prior, Electronics Sector Index: No est v 51.6 prior
09:00 (MX) Mexico Apr Leading Indicators M/M: No est v 0.06 prior
09:00 (CL) Chile Apr Retail Sales Y/Y: 3.0%e v 4.9% prior
10:00 (DK) Denmark May Foreign Reserves (DKK): 464.1Be v 464.1B prior
11:00 (CO) Colombia Apr Exports: $2.9Be v $3.2B prior
11:00 (EU) Potential sovereign rating after European close
(IE) Ireland Sovereign Debt to be rated by S&P
(ZA) South Africa Sovereign Debt to be rated by S&P
(FI) Finland Sovereign Debt to be rated by Moody’s
(UK) United Kingdom Sovereign Debt to be rated by Moody’s
(CY) Cyprus Sovereign Debt to be rated by DBRS
12:00 (IS) Iceland Q1 Current Account (ISK): No est v 45B prior
12:45 (US) Fed’s Harker (non-voter)
13:00 (US) Fed’s Kaplan (voter)
13:00 (US) Weekly Baker Hughes Rig Count Data
