HomeContributorsFundamental AnalysisRisk-On Appetite Finding Fresh Legs On Optimism The Global Economy Will Reopen...

Risk-On Appetite Finding Fresh Legs On Optimism The Global Economy Will Reopen Soon

Notes/Observations

  • Risk appetite aided reopening optimism and another human trial of Covid-19 vaccine hopeful (NVAX)
  • UK said to be looking at opening non-essential stores from June 15th
  • German govt said to be prepared to lift travel warnings on almost three dozen countries and replaced by more detailed travel advice (Note: japan govt fully lifted a state of emergency on Monday)
  • Singapore govt adds to its stimulus program

Asia:

  • Hong Kong Chief Exec Lam reiterated view that National Security law is not against basic law; critics are ignoring constitutional China/Hong Kong relationship
  • Singapore Q1 Final Q1 GDP revised better but remained in contraction (QoQ: -4.7%; YoY: -0.7%). Govt again cuts its 2020 GDP outlook for the 3rd time to a range between -7% to -4%
  • Singapore Central Bank (MAS): Monetary policy stance remained unchanged and appropriate; Affirms next policy review remains in October (semi-annual review)
  • China PBOC Gov Yi Gang reiterated its prudent monetary policy stance of being more flexible. Reiterates view that economic fundamentals were unchanged despite many uncertainties
  • BOJ Gov Kuroda reiterated stance that wasready to ease “without hesitation” if needed

Coronavirus:

  • Total global cases 5,495,061 (+1.6%); total deaths: 345.2K (+0.3%)
  • NVAX Initiated Phase 1/2 clinical trial of COVID-19 vaccine NVX-CoV2373; result is expected in early July.

Europe:

  • EU said to be looking at ways to finance €500B in debt for recovery fund with new environmental taxes and corporate levies suggested
  • PM Johnson said to be prepared to reopen the economy starting Jun 15th
  • German IFO Institute: Mood among exporters had improved after the disastrous month of April but all sectors expect further declines
  • EBA Chairman Campa: EU must present united front to shield pandemic impacted banks; That could be in the form of a TARP-style precautionary recapitalization; the EU recovery fund could play a role

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +1.16% at 349.20, FTSE +1.77% at 6,099.22, DAX +0.92% at 11,496.34, CAC-40 +1.57% at 4,611.22, IBEX-35 +1.58% at 6,965.00, FTSE MIB +1.34% at 17,832.50, SMI +0.03% at 9,827.16, S&P 500 Futures +2.05%]
  • Market Focal Points/Key Themes: European indices open higher across the board and remained positive as the session progressed; risk sentiment buoyed by expectations around economic reopening; better performing sectors lead by consumer discretionary; underperforming sectors include telecom and healthcare; Fraport, TUI moving higher after press reports German government looking to end travel warning; Aston Martin gains after CEO replacement; upcoming earnings during US session include Booz Allen, AutoZone and Mechel.

Equities

  • Consumer discretionary: Aston Martin Lagonda Global Holdings [AML.UK] +37% (new CEO), EasyJet [EZJ.UK] +12% (CFO steps down; German borders opening), Lufthansa [LHA.DE] +5% (rescue package), Softcat [SCT.UK] -6% (trading update)
  • Healthcare: Novavax [NVV1.DE] +15% (COVID-19 vaccine trial)
  • Technology: Wirecard [WDI.DE] -1.5% (update on audit)

Speakers

  • ECB’s Villerory (France): Pandemic Funds (PEPP) could be made more flexible if needed; should not be bound by capital keys. He added that was not sure if equities belong in the new toolkit. No need to change interest rates at this time . Recovery was underway but the process would be slow and gradual . ECB must counteract disinflationary pressure
  • BOE’s Haldane (Chief Economist): Q2 GDP likely contracted by over 20%. Jobs might not return to pre-crisis level until 2023. Are reviewing evidence on negative rates
  • EU said to be prepared to drop maximalist approach to fisheries in next round of Brexit negotiations
  • German govt said to be prepared to lift travel warnings on almost three dozen countries and replaced by more detailed travel advice. Warnings to be lifted for all of EU members, UK, Iceland, Switzerland, Liechtenstein and Norway
  • EU said to be prepared to drop maximalist approach to fisheries in next round of Brexit negotiations
  • UK Junior Min Ross (Scotland Office minister) said to resign in protest of behavior of PM Advisor Cummings (**Note: Cummings was accused of ignoring strict government lockdown advice)
  • Sweden Fin Min Andersson: 2020 GDP seen -7.0%
  • Singapore Fin Min Heng: To introduce S$33B supplementary budget; to focus on creating jobs and protecting the livelihood of workers. Have set aside 20% of GDP in support packages to date
  • Russia Energy Min Novak said to discuss compliance of OPEC+ production cut agreement with major Russian oil companies. Could look to extend the production cuts beyond June

Currencies/Fixed Income

  • Unwinding of safe haven plays was the theme of the session. Dealers cited the gradual lifting of coronavirus restrictions and news of a potential vaccine from Novavax as helping to bolster overall market sentiment
  • EUR/USD higher by 0.5% to be above the 1.0950 area.
  • GBP/USD was bolstered by optimism the UK could ease its lockdown restrictions. Pair higher by 0.8% in session to near 1.2300 . The GBP received an added that on reports that EU was prepared to drop maximalist approach to fisheries in next round of Brexit negotiations
  • 10-year Italy/German Gov’t bond spread moves under 200bps for 1st time since mid-April. Focus turns to EU Commission recovery plan which is expected to be formally unveiled mid-week (Wed)

Economic Data

  • (NO) Norway Q2 Consumer Confidence: -7.6 v -12.0e
  • (DE) Germany Jun GfK Consumer Confidence: -18.9 v -18.0e
  • (CH) Swiss Apr Trade Balance (CHF): 4.0B v 4.0B prior; Real Exports M/M: -10.0% v -3.1% prior; Real Imports M/M: -17.8% v -6.0% prior; Swiss Watch Exports Y/Y: -81.3% v -21.8% prior
  • (DK) Denmark Apr Retail Sales M/M: +0.4% v -4.5% prior; Y/Y: -2.6% v -4.9% prior
  • (JP) Japan Apr Final Machine Tool Orders Y/Y: -48.3% v -48.3% prelim
  • (ZA) South Africa Mar Leading Indicator: 104.0 v 100.0e
  • (SE) Sweden 1Q Residential Construction: 0.7% – (PL) Poland Apr Unemployment Rate: 5.8% v 5.7%e
  • (PL) Poland Q1 Unemployment Rate: 3.1% v 3.1%e

Fixed Income Issuance

  • (NL) Netherlands Debt Agency (DSTA) sold €4.99B vs. €3.0-5.0B indicated range in new 0.00% Jan 2027 DSL Bonds: Avg Yield: -0.382%
  • (IT) Italy Debt Agency (Tesoro) sold €4.0B vs. €3.5-4.0B indicated range in 0.00% May 2022 CTZ; Avg Yield: 0.441% v 1.001% prior; Bid-to-cover: 1.42x v 1.63x prior
  • (IT) Italy Debt Agency (Tesoro) sold €1.0B vs. €0.5-1.0B indicated range in 0.40% May 2030 I/L Bonds (BTPei); Real Yield: 1.29% v 1.77% prior; Bid-to-cover: 1.55x v 1.52x prior

Looking Ahead

  • 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
  • 05:30 (EU) ECB allotment in weekly 7-Day Main Refinancing Tender (MRO) (prior €0.1B with 9 bids recd)
  • 05:30 (DE) Germany to sell €5.0B in new 0.00% Jun 2022 Schatz
  • 05:30 (ZA) South Africa to sell combined ZAR6.1B in 2026, 2030 and 2035 bonds
  • 05:40 (UK) BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)
  • 06:00 (UK) May CBI Retailing Reported Sales: -65e v -55 prior; Total Distribution: No est v -68 prior
  • 06:30 (EU) ECB allotment in weekly LTRO operation at fixed 0.0% rate vs. €8.7B prior (prior €8.7B with recd 47 bids
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (MX) Mexico Q1 GDP Q/Q: -1.6%e v -1.6% prelim; Y/Y: -1.6%e v -1.6% prior; GDP Nominal Y/Y: 1.1%e v 1.6% prelim
  • 07:00 (MX) Mexico Mar IGAE Economic Activity Index (Monthly GDP) M/M: -3.9%e v -0.2% prior; Y/Y: -3.5%e v -0.6% prior
  • 07:00 (BR) Brazil May FGV Construction Costs M/M: 0.3%e v 0.2% prior
  • 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
  • 07:45 (UK) BOE to buy ÂŁ1.5B in APF Gilt purchase operation (3-7 years)
  • 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.90%; Expected to leave Overnight Deposit Rate unchanged at -0.05%
  • 08:00 (BR) Brazil Mid-May IBGE Inflation IPCA-15 M/M: -0.4%e v 0.0% prior; Y/Y: 2.1%e v 2.9% prior
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:30 (US) Apr Chicago Fed National Activity Index: No est v -4.19 prior
  • 08:30 (BR) Brazil Apr Current Account Balance: $3.1Be v $0.9B prior; Foreign Direct Investment (FDI): $1.5Be v $7.6B prior
  • 08:30 (CL) Chile Central Bank Traders Survey
  • 08:45 (UK) BOE to buy ÂŁ1.5B in APF Gilt purchase operation (7-20 years)
  • 09:00 (RU) Russia Apr Unemployment Rate: 5.5%e v 4.7% prior; Real Wages Y/Y: 3.1%e v 5.7% prior
  • 09:00 (RU) Russia Apr Real Retail Sales Y/Y: -17.7%e v +5.6% prior
  • 09:00 (US) Mar FHFA House Price Index M/M: 0.5%e v 0.7% prior; Q/Q: No est v 1.2% prior
  • 09:00 (US) ) Mar S&P/CaseShiller ( 20-City) M/M: 0.30%e v 0.45% prior; Y/Y: 3.40%e v 3.47% prior; House Price Index (HPI): No est v 219.75 prior
  • 09:00 (US) )Mar S&P/CaseShiller (overall) Y/Y: No est v 4.16% prior; House Price Index (HPI): No est v 213.16 prior
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
  • 09:45 (UK) BOE to buy ÂŁ1.5B in APF Gilt purchase operation (20+ years)
  • 10:00 (US) May Consumer Confidence: 87.0e v 86.9 prior
  • 10:00 (US) Apr New Home Sales: 480Ke v 627K prior
  • 10:00 (MX) Mexico Weekly International Reserve data
  • 10:30 (US) May Dallas Fed Manufacturing Activity Index: -62.0e v -73.7 prior
  • 11:30 (US) Treasury to sell 13-week and 26-week Bills
  • 13:00 (US) Treasury to sell 2-Year Notes
  • 15:00 (AR) Argentina Mar Supermarket Sales Y/Y: No est v 5.3% prior; Shop Center Sales Y/Y: No est v 10.9% prior
  • 17:00 (NZ) RBNZ Financial Stability Report
  • 17:00 (KR) South Korea Jun Business Manufacturing Survey : No est v 50 prior; Non-Manufacturing Survey: No est v 50 prior
  • 21:30 (AU) Australia Q1 Construction Work Done: -1.55e v -3.0% prior
  • 21:30 (CN) China Apr Industrial Profits Y/Y: No est v -34.9% prior
Trade The News
Trade The Newshttp://www.tradethenews.com/
All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

Featured Analysis

Learn Forex Trading