UK Inflation Boldens The Case For More QE, DMO Issues Bonds With Negative Yield For 1st Time Ever

Notes/Observations

• Risk appetite initially hit some headwinds as some questions had been raised about certain coronavirus treatments
• UK CPI data hits 4-year low and remained well below BOE target (YoY: 0.8% v 0.9%e); embolden the BOE to expand its quantitative easing program
• UK DMO sold bonds with a negative yield in any maturity
• Two Central Banks cut rates in session (Thailand and Iceland)

Asia:

• China PBoC Monthly LPR Fixing left rates for both 1-Year Loan Prime Rate and 5-year unchanged (as expected)
• China Communist Party and State Council to renew their 2013 pledge to undertake market-oriented reforms of its economy and to better regulate local government finances. Only changes seem to be focus on employment and traditional monetary and fiscal policies
• Australia Apr Preliminary Retail Sales data registered its largest decline on record (M/M: -17.9% v +8.5% prior)
• RBNZ Gov Orr reiterated goal was to keep yield curve low or flat; Prepared to go negative on rates but such move off in the distance

Coronavirus:

• Total global cases 4,897,567 (+1.9%); Total deaths: 323.3K (+1.5%)

Europe:

• UK Chancellor of the Exchequer (Fin Min) Sunak: the longer the recession, the greater the likely scarring. Not obvious UK would have an immediate bounce back

Americas:

• White House econ adviser Kudlow: Pres Trump is not saying he will tear up China deal; Pres Trump in a ‘bad place’ over China’s virus mistakes
• US Senate expected to vote on Holding Foreign Companies Accountable act; which could delist China companies from the US stock exchanges, law would require Chinese companies to establish they are not owned or controlled by a foreign govt, submit to audit by US oversight board in order to raise money in the US markets

Mid-East/Energy:

• Weekly API Crude Oil Inventories: -4.8M v +7.6M prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.03% at 339.58, FTSE -0.01% at 6,001.74, DAX -0.10% at 11,064.35, CAC-40 -0.65% at 4,429.25, IBEX-35 -0.17% at 6,598.00, FTSE MIB -0.76% at 16,904.50, SMI -0.06% at 9,758.00, S&P 500 Futures +0.95%]
• Market Focal Points/Key Themes: European indices open generally lower but later returned to trade mixed; consumer discretionary among better performing sectors; financials underperforming sector; reportedly Italy to ask for more funds from EU; earnings expected in the upcoming US session include Target, Altice and Analog Devices

Equities

• Consumer discretionary: Marks & Spencer [MKS.UK] +4% (earnings), Experian [EXPN.UK] +7% (earnings), Vapiano [VAO.DE] +16% (deal), Fresenius [FRE.DE] +4% (analyst action), Parrot [PARRO.FR] -5% (earnings)
• Industrials: Rolls Royce [RR.UK] -4% (confirms job cuts)
• Technology: Playtech [PTEC.UK] +4% (earnings)

Speakers

• Italy PM Conte said to ask EU Commission President Von der Leyen for more funds in EU’s €500B rescue package. Italy said to be concerned opposition from hawkish northern European leaders could water down the proposal
• Sweden Central Bank (Riksbank) Financial Stability Report: Pandemic was increasing risks to sector; prepared to provide necessary liquidity. Saw risk of higher credit losses if crisis was prolong
• Norway Central Bank (Norges) Expectations Surveyraised its 12-month inflation Expectation from 1.8% to 2.5% and raised its 2-3-year inflation Expectation from 3.2% to 3.5%
• Iceland Central Bank (Sedibanki) Policy Statement: Saw 2020 GDP contracting by 8.0% as tourism seen declining by 80% in year. Forecasted 2021 GDP growth of approx 5.0%. Unemployment looking to rise to 12.0% in Q3 and average 9.0% for 2020
• Ukraine President Zelenskiy: Likely to sign MOU with IMF this month
• Japan Econ Min Nishimura: Moving towards containment of virus outbreak
• Japan LDP Party (ruling party) proposal for coronavirus stimulus said to stress that both Govt and BOJ must maintain policy mix via adopt a strong fiscal policy step under powerful monetary easing Thailand Central Bank (BOT) Policy Statement noted that the vote to cut rates was 4-3. The rate cut to help economy as it saw 2020 GDP contracting more than prior forecast and CPI falling more compare to previous forecast. Saw domestic demand and tourism falling more than prior forecasts. Ready to use tools as appropriate and concerned by THB currency (baht) strength
• Philippines Central Bank (BSP) Gov Diokno: To proceed slowly in cutting the Reserve Requirement Ratio (RRR) (**Note: BSP previously saw 200bps of RRR cuts still on the table)

Currencies/Fixed Income

• USD remained on soft footing against most major pairs.
• EUR/USD remained new 2-week highs as EU Recovery fund providing some tailwinds to the recent price momentum.
• GBP/USD lower by 0.1% after UK CPI data hit a 4-year low and remained well below BOE target (YoY: 0.8% v 0.9%e). Data likely to embolden the BOE to expand its quantitative easing program. BOE had recently ramped up its negative rate rhetoric and soft inflation data gave it additional momentum.

Economic Data

• (NL) Netherlands May Consumer Confidence Index: -31 v -22 prior
• (NL) Netherlands Apr Unemployment Rate: 3.4% v 3.3%e
• (NL) Netherlands Mar Consumer Spending Y/Y: -6.7% v +0.9% prior
• (UK) Apr CPI M/M: -0.2% v -0.1%e; Y/Y: 0.8% v 0.9%e (slowest annual pace since 2016); CPI Core Y/Y: 1.4% v 1.4%e; CPIH Y/Y: 0.9% v 1.0%e
• (UK) Apr RPI M/M: 0.0% v 0.0%e; Y/Y: 1.5% v 1.6%e; RPI-X (Ex-mortgage interest payments) Y/Y: 1.6% v 1.8%e; Retail Price Index: 292.6 v 292.8e
• (UK) Apr PPI Input M/M: -5.1% v -4.3%e; Y/Y: -9.8% v -8.8%e
• (UK) Apr PPI Output M/M: -0.7% v -0.5%e; Y/Y: -0.7% v -0.5%e
• (UK) Apr PPI Output Core M/M: -0.1% v 0.0%e; Y/Y: 0.6% v 0.7%e
• (NL) Netherlands Apr House Price Index M/M: 0.7% v 0.8% prior; Y/Y: 7.3% v 7.0% prior
• (AT) Austria Apr CPI M/M: 0.0% v 0.3% prior; Y/Y: 1.5% v 1.6% prior
• (DK) Denmark May Consumer Confidence Indicator: -8.8 v -11.9 prior
• (CZ) Czech Apr PPI Industrial M/M: -0.5% v -0.8%e; Y/Y: -0.8% v -1.1%e
• (TR) Turkey May Consumer Confidence: 59.5 v 54.9 prior
• (TH) Thailand Central Bank (BOT) cuts Benchmark Interest Rate by 25bps to 0.50% (as expected)
• (SE) Sweden Q1 Industry Capacity: 89.2% v 89.4% prior
• (SE) Sweden Q1 Total Number of Employees Y/Y: 0.3% v 0.4% prior
• (TW) Taiwan Apr Export Orders Y/Y: +2.3% v -3.7%e
• (EU) Euro Zone Mar Current Account Balance: €27.4B v €40.2B prior
• (SE) Sweden Apr Preliminary Retail Sales: Y/Y: -3.0% v +0.6% prior
• (PL) Poland Apr Employment M/M: -2.4% v -0.8%e; Y/Y: -2.1% v -0.5%e
• (PL) Poland Apr Average Gross Wages M/M: -3.7% v -0.8%e; Y/Y: 1.9% v 4.5%e
• (TW) Taiwan Q1 Current Account Balance: $18.2B v $17.0B prior
• (UK) Mar ONS House Price Index Y/Y: 2.1% v 1.5%e
• (IT) Italy Mar Current Account Balance: €4.1B v €4.8B prior
• (GR) Greece Mar Current Account Balance: -€1.1B v -€1.1B prior
• (IS) Iceland Central Bank (Sedibanki) cut its 7-Day Term Deposit Rate by 75bps to 1.00%
• (EU) Euro Zone Apr Final CPI Y/Y: % v 0.4%e; CPI Core Y/Y: % v 0.9%e; CPI M/M: % v 0.3%e
• (BE) Belgium May Consumer Confidence Index: # v -26 prior
• (CY) Cyprus Apr CPI Harmonized M/M: % v 0.2% prior; Y/Y: % v 0.1% prior

Fixed Income Issuance

• (IN) India sold total INR450B vs. INR450B indicated in 3-month, 6-month and 12-month bills
• (DK) Denmark sold total DKK6.38B in 2022 and 2029 DGB bonds
• (UK) DMO sold £3.25B in 0.75% July 2023 Gilts; Avg Yield: -0.003% v +1.042% prior; Bid-to-cover: 2.15x v 1.95x prior; tail: 0.4bps v 0.7bps prior
• (FR) France Debt Agency (AFT) sold total €9.995B vs. €8.5-10.0B indicated range in 2023, 2025 and 2026 bonds (4 tranches) Bonds
• Sold €2.480B in 0.00% Feb 2023 Oat; Avg Yield: -0.51% v -0.59% prior; Bid-to-cover: 2.77x v 2.29x prior
• Sold €1.985B in 1.75% May 2023 Oat; Yield: -0.53% v -0.66% prior; bid-to-cover: 2.80x v 1.66x prior
• Sold €2.051B in 1.00% Nov 2025 Oat; Avg Yield: -0.33% v -0.02% prior; Bid-to-cover: 3.06x v 2.88x prior
• Sold €3.479B in 0.00% Feb 2026 Oat; Avg Yield: -0.28% v -0.16% v -0.16%; bid-to-cover:2.28x v 2.60x prior

Looking Ahead

• (CO) Colombia Apr Consumer Confidence Index: No est v -23.8 prior
• (MX) Citibanamex Survey of Economists
• (BR) Brazil May CNI Industrial Confidence: No est v 34.5 prior
• 05:30 (UK) BOE Gov Bailey with members Broadbent, Cunliffe at Treasury Select Committee
• 05:30 (DE) Germany to sell €4.0B in 0% Feb 2030 Bunds
• 05:30 (PT) Portugal Debt Agency (IGCP) to sell 6-month and 12-month bills
• 05:30 (EU) ECB allotment in 18-month LTRO operation
• 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
• 05:50(FR) France Debt Agency (AFT) to sell €0.75-1.25B in 2025, 2030, 2036 Inflation-Linked bonds (Oatei)
• 06:00 (CZ) Czech to sell 2025, 2027 and 2040 bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (US) MBA Mortgage Applications w/e May 15th: No est v 0.3% prior
• 07:00 (BR) Brazil May IGP-M Inflation (2nd Preview): -0.3%e v 1.0% prior
• 07:00 (ZA) South Africa Feb Retail Sales M/M: 0.4%e v 0.9% prior; Y/Y: 1.1%e v 1.2% prior
• 07:00 (UK) Weekly PM Question time in House
• 07:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (3-7 years)
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (CA) Canada Apr CPI M/M: -0.6%e v -0.6% prior; Y/Y: -0.1%e v +0.9% prior; Consumer Price Index: 135.9e v 136.6 prior; CPI Core- Median Y/Y: 1.9%e v 2.0% prior; CPI Core- Common Y/Y: 1.7%e v 1.7% prior; CPI Core- Trim Y/Y: 1.8%e v 1.8% prior
• 08:30 (CA) Canada Apr Teranet House Price Index M/M: No est v 0.6% prior; Y/Y: No est v 3.8% prior; House Price Index (HPI): No est v 230.83 prior – 08:30 (CA) Canada Mar Wholesale Trade Sales M/M: -4.8%e v +0.7% prior
• 08:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (7-20 years)
• 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)
• 10:00 (EU) Euro Zone May Advance Consumer Confidence: -23.7e v -22.7 prior
• 10:30 (US) Weekly DOE Oil Inventories
• 12:00 (CA) Canada to sell 2.0% Sept 2023 notes
• 13:00 (US) treasury to sell new 20-year notes
• 14:00 (US) FOMC Apr Minutes
• 12:00 (US) Fed’s Bullard (dove)
• 15:00 (AR) Argentina Mar Economic Activity Index (Monthly GDP) M/M: No est v -1.1% prior; Y/Y: -7.9%e v -2.2% prior
• 17:00 (KR) South Korea Apr PPI Y/Y: No est v -0.5% prior
• 19:00 (AU) Australia May Preliminary PMI: No est v 44.1 prior; PMI Services: No est v # prior; PMI Composite: No est v # prior
• 19:50 (JP) Japan Apr Trade Balance: -¥503.1Be v ¥5.4B prior (revised from ¥4.9B); Adjusted Trade Balance: -¥719.3Be v -¥190.0B prior ; Exports Y/Y: -22.2%e v -11.7% prior; Imports Y/Y: -13.2%e v -5.0% prior
• 20:00 (KR) South Korea 1st 20Days of May Imports Y/Y: No est v -18.6% prior; Exports Y/Y: No est v -26.9% prior
• 20:30 (JP) Japan May Preliminary PMI Manufacturing: No est v 41.9 prior; PMI Services: No est v # prior; PMI Composite: No est v # prior
• 21:00 (CN) China Apr Swift Global Payments (CNY): No est v 1.9% prior
• 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 Years and 3~5 Years maturities
• 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Standing Deposit Rate currently at 6.00%; Standing Lending Rate currently at 7.00%
• 22:05 (NZ) New Zealand to sell 2025, 2027 and 2033 bonds
• 23:00 (KR) South Korea Q1 Short-Term External Debt
• 23:00 (NZ) New Zealand Apr Credit Card Spending M/M: No est v -9.1% prior; Y/Y: No est v -8.2% prior
• 23:00 (TH) Thailand Central Bank to sell THB30B in 2022 Bonds