PMI Readings Register Record Lows Amid Lockdown, Focus On EU Leaders Call On Recovery Plan

Notes/Observations

• EU’s moment of truth as Leaders hold call on recovery fund
• Major European PMI data registers record lows across the Board as coronavirus lockdown hampers economic activity

Asia:

• South Korea Q1 Preliminary GDP registered its largest contraction since 2008 (Q/Q: -1.4% v -1.0%e; Y/Y: 1.3% v 1.0%e) – Australia Apr Preliminary PMI Manufacturing: 45.6 v 49.7 prior (2nd month of contraction and a record low)
• Japan Apr Preliminary PMI Manufacturing: 43.7 v 44.8 prior (12th month of contraction and lowest since Apr 2009)

Coronavirus:

• Total Global cases: 2,628,527 (+2.5%); Total deaths 183.4k (+3.4%)

Europe:

• ECB widened collateral rules to mitigate impact of downgrades; to accept some junk-rated debt as collateral for loans (as speculated)
• Germany CDU Party Chief Kramp Karrenbauer stated that coalition parties had agreed to additional measures to protect workers and companies form impact of coronavirus. To increase state wage support until end of year

Americas:

• President Trump: Number of new coronavirus cases continues to decline; More US states will soon be in a position to gradually reopen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.01% at 330.10, FTSE -0.18% at 5,760.30, DAX -0.46% at 10,367.59, CAC-40 +0.22% at 4,421.37, IBEX-35 +0.45% at 6,750.00, FTSE MIB +0.70% at 16,882.50, SMI -0.67% at 9,566.38, S&P 500 Futures -0.08%]
• Market Focal Points/Key Themes: European indices open higher across the board but later turned around to perform mixed; focus on EU leaders’ summit; energy sector among better performers ahfter higher crude prices; telecom and consumer discretionary among underperforming sectors; French FinMin wants all retail except restaurants and bars to open by May 11th; overnight ECB allowed accpeing some junk bonds as collateral; upcoming earnings expected in the US session include Vinci, Intel and Capital One.

Equities

• Consumer discretionary: Hermes [RMS.FR] +1.5% (earnings), Unilever [UNA.NL] -5% (trading update; affirms div)
• Energy: Tullow Oil [TLW.UK] +33% (divestment; trading update)
• Financials:Credit Suisse [CSGN.CH] -1.5% (earnings; holds buybacks)
• Industrials: Renault [RNO.FR] +3% (earnings), Volvo [VOLVA.SE] -7% (earnings), Dassault Systemes [DSY.FR] -1% (earnings)
• Technology: Schneider Electric [SU.FR] +1% (earnings)

Speakers

• ECB’s Villeroy (France) reiterated stance that inflation to remain low for years to come
• Germany Chancellor Merkel reiterated stance that joint EU debt would require difficult treaty changes and stressed the need for EU aid being available asap. Not at the end phase of the epidemic and would have to live with the virus for a long time
• German Fin Min Scholz: Additional state wage support to help country get through crisis; must ensure that all member States recover. Financial Transaction Tax (FTT) could finance the EU in the future and income from emissions trading could also finance the EU
• Italy Econ Minister Gualtieri stated that a strong rebound in Q3 GDP was seen with significant growth in 2021
• Italy govt official reiterated view that country’s 2020 budget deficit to GDP could rise to 10.4% due to effects from virus lockdown as GDP could contract by 8%. Govt sought approval of deficit extension of €55B
• UK Debt Management Office (DMO): To issue £180B in May-Jun period (**Note: an increase in issuance) but would not specify planned maturity split for FY20/21 at this time. To provide further details on July 29th
• China said to be importing up to 10M tons of soybeans, 20M tons of corn, 1M ton of cotton
• China Commerce Ministry (MOFCOM) spokesperson Gao Feng reiterated China and US should work in concert; two countries should reduce uncertainties in trade
• Kuwait Oil Min Khaled al-Fadhel stated that it had implemented agreed upon OPEC+ oil production cuts ahead of the planned May 1st start date

Currencies/Fixed Income

• EUR/USD tested 2-week lows below the 1.08 level after the major European PMI data all missed expectations and recorded record low readings for April as lockdown measures hampered the regional economies.
• GBP was initially softer after the UK DMO announced increased borrowing plans to meet spending to counter the coronavirus impact
• The widening of euro zone government bond yield spreads blamed on the large supply coming to market this week. ECB was preparing the way to purchase the region’s junk bonds.

Economic Data

• (FI) Finland Mar Preliminary Retail Sales Volume Y/Y: -2.7% v +3.3% prior
• (FI) Finland Mar Unemployment Rate: 7.3 v 6.9% prior
• (FR) France Apr Business Confidence: 62 v 80e; Manufacturing Confidence: 82 v 83e; Production Outlook Indicator: -78 v -45e; Own-Company Production Outlook: -35 v -7 prior
• (FR) France Apr Overall Demand Business Survey: -17 v -3 prior
• (DE) Germany May GfK Consumer Confidence: -23.4 v -1.8e
• (UK) Mar Public Finances (PSNCR): £7.2B v £1.4B prior; Public Sector Net Borrowing: £2.3B v £1.8Be; Central Government NCR: +£21.3B v -£2.5B prior; PSNB (ex Banking Groups): £3.1B v £2.7Be – (NO) Norway Feb AKU Unemployment Rate: 3.5% v 4.0%e
• (SE) Sweden Apr Consumer Confidence: 73.9 v 89.4 prior; Manufacturing Confidence: 70.5 v 100.8 prior; Economic Tendency Survey: 58.6 v 92.5 prior
• (FR) France Apr Preliminary PMI Manufacturing: 31.5 v 37.0e (3rd straight contraction and record low); PMI Services: 10.4 v 24.5e; PMI Composite: 11.2 v 24.5e
• (DE) Germany Apr Preliminary PMI Manufacturing: 34.4 v 39.0e (16th month of contraction and a record low); PMI Services: 15.9 v 28.0e; PMI Composite: 17.1 v 28.5e
• (EU) Euro Zone Apr Preliminary PMI Manufacturing: 33.6 v 38.0e (15th straight month and record low); PMI Services: 11.7 v 22.8e; PMI Composite: 13.5 v 25.0e
• (PL) Poland Mar Construction Output Y/Y: 3.7% v 1.0%e
• (TW) Taiwan Mar Industrial Production Y/Y: 10.4% v 5.4%e
• (UK) Apr Preliminary PMI Manufacturing: 32.9 v 42.0e (2nd straight contraction and record low); PMI Services: 12.3 v 27.8e; PMI Composite: 12.9 v 29.5e
• (HK) Hong Kong Mar CPI Composite Y/Y: % v 1.8%e

Fixed Income Issuance

• None seen

Looking Ahead

• (AR) Argentina Apr Consumer Confidence Index: No est v 41.2 prior
• (BR) Brazil Apr CNI Industrial Confidence: No est v 60.3 prior
• 05:30 (UK) BOE’s Vieghe
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds
• 05:30 (PL) Poland to sell Bonds
• 06:00 (UK) Apr CBI Industrial Trends Total Orders: -51e v -29 prior; Selling Prices: 4e v 7 prior; Business Optimism: -58e v +23 prior
• 06:00 (IL) Israel Mar Trade Balance: No est v -$1.4B prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to cut Key Interest Rate by 100bps to 9.00%
• 07:00 (MX) Mexico Feb Retail Sales M/M: 0.2%e v 0.5% prior; Y/Y: 3.1%e v 2.7% prior
• 07:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (3-7 years)
• 08:00 (BR) Brazil CONAB Sugar crop report
• 08:00 (PL) Poland Mar M3 Money Supply M/M: 1.0%e v 1.4% prior; Y/Y: 9.6%e v 9,4% prior
• 08:00 (PL) Poland Central Bank Apr Minutes
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Initial Jobless Claims: 4.50Me v 5.245M prior; Continuing Claims: 16.74Me v 11.976M prior
• 08:30 (US) Weekly USDA Net Export Sales
• 08:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (7-20 years)
• 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 17th: No est v $564.9B prior
• 09:00 (RU) Russia Mar PPI M/M: -1.2%e v -0.6% prior (revised from -0.5%); Y/Y: -3.1%e v -1.1% prior (revised from -1.2%)
• 09:00 (EU) EU leaders to discuss coronavirus recovery package via tele-conference
• 09:45 (US) Apr Preliminary Markit PMI Manufacturing: 35.0e v 48.5 prior; PMI Services: 30.0e v 39.8 prior; PMI Composite: No est v 40.9 prior
• 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)
• 10:00 (US) Mar New Home Sales: 644Ke v 765K prior
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:00 (US) Apr Kansas City Fed Manufacturer Activity Index: -37e v -17 prior
• 11:30 (US) Treasury to sell 4-week and 8-week bills
• 13:00 (US) Treasury to sell 5-Year TIPS
• 15:00 (AR) Argentina Feb Supermarket Sales Y/Y: No est v -1.6% prior; Shop Center Sales Y/Y: No est v -1.9% prior
• 19:01 (UK) Apr Preliminary GFK Consumer Confidence: -40e v -34 prior
• 19:30 (JP) Japan Mar National CPI Y/Y: 0.4%e v 0.4% prior; CPI Ex-fresh food(core) Y/Y: 0.4%e v 0.6% prior; CPI (ex-fresh food/energy) Y/Y: 0.6%e v 0.6% prior
• 19:50 (JP) Japan Mar PPI Services Y/Y: 1.7%e v 2.1% prior
• 22:30 (SG) Singapore Q1 Unemployment Rate: 2.6%e v 2.3% prior
• 23:30 (JP) Japan to sell 3-Month Bills