Optimism On Loosen Coronavirus Lockdown Restrictions

Notes/Observations

• Optimism that coronavirus outbreak will move into easing lockdown measures; easing plans point to a gradual improvement in economic activity
• Extraordinary policy intervention continues as BOJ opts for unlimited JGB buying

Asia:

• BOJ left the Interest Rate on Excess Reserves (IOER) unchanged at -0.10% (as expected) but raised the annual pace of JGB bond purchase from ¥80T to ‘unlimited. BOJ also removed price momentum from its forward guidance. Now expected short and long-term policy rates to remain at their present or lower levels [Note: prior forward guidance stated that interest rates would remain at current or lower levels for as long as needed to guard against risk momentum towards the price target]
• Japanese media report claimed North Korea leader Kim Jong Un was in a “vegetative state” after undergoing heart surgery earlier this month
• South Korea top foreign policy adviser Moon Chung-in stated that North Korea leader Kim was alive and well

Coronavirus:

• Total Global Cases 2,971,669 (+9.7% vs. Friday); Total deaths: 206.5k (+8.2% from Friday)

Europe:

• S&P affirmed Italy Sovereign rating at BBB; outlook negative
• S&P affirmed United Kingdom sovereign rating at AA; outlook Negative
• S&P revised Portugal sovereign rating outlook to Stable from Positive; affirms BBB rating
• S&P affirmed Greece sovereign rating at BB-; outlook revised to Stable from Positive
• France PM Philippe office: PM to present plan to unwind lockdown to Parliament on Tuesday, Apr 28th
• PM Johnson expected to announce plans on how to end lockdown as early as this week

Mid-East/Energy:

• Saudi ARAMCO said to have started cutting production early to meet new production target set by OPEC+. To meet 8.5Mbpd target a little ahead of schedule [in line with speculation from April 21st]

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +1.63% at 334.96, FTSE +1.66% at 5,847.80, DAX +2.04% at 10,547.15, CAC-40 +1.67% at 4,466.58, IBEX-35 +1.85% at 6,736.00, FTSE MIB +2.25% at 17,240.50, SMI +1.15% at 9,736.23, S&P 500 Futures +0.80%]
• Market Focal Points/Key Themes: European indices open broadly higher and remained upbeat during the session; financial sector among better performers; consumer discretionary underperforming; risk sentiment supported by expectations of economic reopening as total covid-19 new deaths lessen; earnings expected in upcoming US session include Boeing, CNX Resources and NXP Semiconductors

Equities

• Consumer discretionary:Adidas [ADS.DE] +5% (earnings), Lufthansa [LHA.DE] +7% (EU clears rescue package), InterContinental Hotel Group [IHG.UK] +5% (trading update), Swedish Match [SWMA.SE] -3% (earnings)
• Financials: Deutsche Bank [DBK.DE] +11% (earnings and outlook)
• Healthcare: Bayer [BAYN.DE] +3% (earnings), Santhera Pharmaceuticals [SANN.CH] +28% (COVID-19 trial)
• Industrials: Kvaerner [KVAERR.NO] -5% (earnings)

Speakers

• UK PM Johnson returned to work and noted that the country was making progress on the virus outbreak with real sign that were past the peak and turning the tide. At the moment of maximum risk and easing lockdown measures was difficult in judgement. Must avoid second spike of infections and would not risk it. Relying on science to inform us and must meet tests before entering the 2nd phase
• BOJ Gov Kuroda post rate decision press conference noted that BOJ would purchase bonds more actively. Severity of domestic economy is increasing and will continue for some time. Economic and price risks were both skewed to the downside. He did expect the impact of the virus outbreak to weaken in H2. BOJ to maintain its price target of 2.0%. BOJ made its stance on bond buying clearer by removing the prior ¥80T ceiling. There would not be a situation where BOJ could not buy JGB bonds. Did not believe the risks were high for a strong JPY currency (Yen) and saw the current currency rate not posing a problem
• BOJ provided the details for its JGB bond buying in the month of May and raised the ranges in 3 maturities
• India PM Modi: Danger of coronavirus was far from over; constant vigilance was needed. Impact from outbreak to remain visible in coming months

Currencies/Fixed Income

• USD was softer on some unwinding of safe-haven flows as market participants saw signs of progress in tackling coronavirus worldwide. Optimism that coronavirus outbreak would soon move into easing the lockdown measures and provide a gradual improvement in economic activity
• USD/JPY was lower by 0.2% to trade at 107.20 area in the session. BOJ’s policy measures of unlimited JGB buying was baked into sentiment and did not surprise the market.
• GBP/USD was higher by 0.4% with Cable getting some support from PM Johnson’s return to day-to-day operations at 10 Downing Street.
• EUR/USD higher by 0.2% but holding under the 1.0850 area.
• The peripheral yields were lower after S&P Global Ratings on Friday affirmed Italy’s BBB rating and negative outlook. S&P also affirmed Greece’s BB- rating and Portugal’s BBB rating.

Economic Data

• (FI) Finland Apr Consumer Confidence: -13.9) v -7.1 prior (lowest since 1995); Business Confidence: -23 v -6 prior
• (DK) Denmark Mar Retail Sales M/M: M/M: -2.0% v +0.2% prior; Y/Y: -3.7% v +5.5% prior
• (CH) Swiss Weekly Total Sight Deposits (CHF): 650.7B v 637.2B prior; Domestic Sight Deposits: 573.9B v 560.0B prior (**Note: largest weekly increase since 2015)
• (HK) Hong Kong Mar Trade Balance (HKD): -34.7B v -38.5Be; Exports Y/Y: -5.8% v -10.0%e; Imports Y/Y: -11.1% v -15.0%e

Fixed Income Issuance

• None seen

Looking Ahead

• 05:30 (DE) Germany to sell combined €8.0B in 6-month and 12-month Bubills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (FR) France Q1 Total Jobseekers: No est v 3.309M prior
• 06:00 (IL) Israel to sell bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:00 (BR) Brazil Apr FGV Consumer Confidence: No est v 80.2 prior
• 07:00 (BR) Brazil Apr FGV Construction Costs M/M: 0.3%e v 0.4% prior
• 07:00 (MX) Mexico Mar Unemployment Rate (Seasonally Adj): 4.1%e v 3.7% prior; Unemployment Rate NSA (unadj): 3.9%e v 3.6% prior
• 07:00 (TR) Turkey to sell 2022 Bonds
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:50 (FR) France Debt Agency (AFT) to sell €B in 3-month, 4-month, 6-month and 12-month bills
• 09:00 (RU) Russia Mar Real Retail Sales Y/Y: 1.8%e v 4.7% prior
• 09:45 (EU) ECB weekly QE bond buying update
• 10:30 (US) Apr Dallas Fed Manufacturing Activity Index: -75.0e v -70.0 prior
• 11:30 (US) Treasury to sell 13-Week and 26-Week Bills
• 13:00 (US) Treasury to sell 2-year and 5-year notes
• 16:00 (US) Weekly Crop Progress Report
• 17:00 (KR) South Korea Apr Consumer Confidence: No est v 78.4 prior
• 19:01 (UK) Apr Lloyds Business Barometer: No est v 6 prior
• 19:30 (JP) Japan Mar Jobless Rate: 2.5%e v 2.4% prior; Job-To-Applicant Ratio: 1.40e v 1.45 prior
• 22:00 (KR) South Korea Mar Department Store Sales Y/Y: No est v -21.4% prior
• 23:30 (HK) Hong Kong to sell 3-month and 6-month bills