Notes/Observations
- Awaiting the unveiling of the EU Commission’s recovery fund; question is whether the Franco-German proposal serve as blueprint or will frugal group derail the stimulus impact??? – Grants or loans????
- Tensions simmer in Hong Kong ahead of China’s NPC security vote on Thursday
Asia:
- Japan Govt said to increase total JGB issuance for FY20/21 from ¥153T to ¥210T citing the 2nd extra budget (Note: entire 2nd budget of ¥30T to be funded by JGB issuance)
- China’s proposed resolution for a national security law in Hong Kong was amended to expand the scope of the measure to ban ‘activities’ that would seriously hurt national security (Note: Vote on measure expected on Thursday)
Coronavirus:
- Total Global cases: 5,589,932 (+1.7% d/d); total deaths: 350.5K (+1.2 d/d%)
Europe:
- ECB’s Schnabel (Germany) reiterated General Council view that prepared to expand stimulus if needed. Not adjust monetary policy in any way in response to the German Constitutional Court ruling on Bundesbank
- Chancellor of the Exchequer (Fin Min) Sunak plans to announce a ban on companies from adding more employees to the furlough progra
Americas:
- President Trump: we are doing something about China over Hong Kong legislation (declines to give any details); US will announce actions on China by the end of the week
- Sen Van Hollen (D-MD): will call for vote on sanctions bill over Hong Kong
- US Senator Marco Rubio (R-FL): If China’s rubber stamp legislature moves forward on Thursday with blowing up “One Country, Two Systems” in Hong Kong, the US State Department will have no option but to certify that Hong Kong is no longer autonomous and Sanctions should follow
Mid-East/Energy:
- IEA: 2020 Global oil investment to decline by $400M (-20% vs. +2% prior y/y view)
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.72% at 351.42, FTSE +1.14% at 6,136.87, DAX +1.17% at 11,639.55, CAC-40 +1.49% at 4,674.63, IBEX-35 +1.87% at 7,135.00, FTSE MIB +0.70% at 17,985.50, SMI -0.01% at 9,830.20, S&P 500 Futures +0.96%]
- Market Focal Points/Key Themes: European indices open modestly higher across the board and continued higher with notable exceptions AEX and SMI turning slightly negative; better performing sectors lead by financials; underperforming sectors include healthcare and utilities; German VCI projects significant drop in revenue for chemical and pharma sector during 2020; Renault, Nissan and Mitsubishi announce cooperation agreement; earnings expected in the upcoming US session include HP, VIPShop and Ralph Lauren
Equities
- Consumer discretionary: Elior [ELIOR.FR] +7% (earnings)
- Financials: Hammerson [HMSO.UK] +4% (CEO steps down), Aroundtown [AT1.DE] +4% (earnings)
- Industrials: Renault [RNO.FR] +13% (alliance)
- Technology: Infineon Technologies [IFX.DE] -2% (placement)
Speakers
- ECB chief Lagarde stressed that the Euro area would not have a new debt crisis following the pandemic. Not overly concerned about the high level of debt. All countries around the world had to respond, and as a result of that had to increase their debt.
- ECB’s De Cos (Spain):Fiscal policy should be the first line of defense to ensure that the temporary halt in economic activity doesn’t inflict permanent damage
- ECB’s De Guindos (Spain): 2020 GDP seen contracting between 8% to 12% range
- EU Commissions recovery fund proposal said to be comprised of €500B in grants and €250B in loans
- Italy PM Conte said to lay out seven priorities for use of funds Approx 20% of the €500B EU Recovery Fund could be earmarked for Italy
- EU Foreign Policy head Borrell: EU to weigh robust message to China over Hong Kong
- France Stats Agency (Insee): Q2 GDP could contract by 20%
- Sweden Central Bank (Riksbank) Skingsley: Interest rates move remains on the table. A lot of preparation was needed before Riksbank could purchase corporate bonds as part of its crisis response
- Germany Chemicals Association (VCI) saw a significant drop in Chemical/Pharmaceutical industry production and revenue in 2020 and would provide more detailed outlook in Q2
- Japan Finance Ministry formally released details on extra budget (as expected). To increase FY new bond issuance by ¥59.5T with total issuenace at ¥212.3T
- New stimulus package of ¥117.1T; partly funded by 2nd extra budget of ¥31.9T
- China Foreign Ministry spokesperson Zhao Lijan: To take countermeasures if others harmed China. Reiterated stance that Hong Kong was purely China’s internal affair that allows no foreign interference
Currencies/Fixed Income
- EUR/USD was slightly lower ahead of the unveiling of the EU Commission’s recovery fund. Dealers will look to determine whether the Franco-German proposal (grants over loans) serve as blueprint or will frugal four group (Austria, Netherlands, Denmark, Sweden) derail the optimism and prevent money from being given away without any strings attached. Pair staying below the 1.10 level by mid-session. Reports indicated that the size of the package to be €750B with grants comprosing 2/3 of the total.
- Tensions continued simmer in Hong Kong ahead of China’s NPC security vote on Thursday. Reports of dozens of arrests of protesters in parts of the city. China continued to stress that Hong Kong was purely an internal affair that allowed no foreign interference. EU and US said to consider sanctions on China.
Economic Data
- (FI) Finland Apr Preliminary Retail Sales Volume Y/Y: -0.5% v -0.3% prior
- (FI) Finland Apr Unemployment Rate: 8.1% v 7.3% prior
- (FI) Finland May Consumer Confidence: -9.0 v -13.9 prior; Business Confidence: -26 v -23 prior
- (FR) France May Consumer Confidence: 93 v 92e; Business Confidence: 59 v 69e; Manufacturing Confidence: 70 v 85e; Production Outlook Indicator: -49 v -55e; Own-Company Production Outlook: -12 v -20e
- (NO) Norway Mar AKU Unemployment Rate: 3.6% v 4.0%e
- (NO) Norway Apr Retail Sales (includes auto/fuel) M/M: +4.8% v -1.0%e
- (ES) Spain Mar Total Mortgage Lending Y/Y: -7.1% v +29.1% prior; House Mortgage Approvals Y/Y: -14.6% v +16.1% prior
- (HU) Hungary Apr Unemployment Rate: 3.8% v 4.6%e
- (SE) Sweden Apr PPI M/M: 0.0% v -1.2% prior; Y/Y: -3.0% v -3.6% prior
- (AT) Austria May Manufacturing PMI: 40.4 v 31.6 prior (3rd straight contraction)
- (CH) Swiss May Credit Suisse Expectations Survey: 31.3 v 12.7 prior
Fixed Income Issuance
- (FR) France Debt Agency (ATF) opened its book to sell EUR benchmark May 2040 bond via syndicate; guidance seen +7bps to Oats; order book over €56B
- (IS) Iceland to sell €500M in 6-year notes, guidance seen at +120bps to mid-swaps
- (IN) India sold total INR450B vs. INR450B indicatedin 3-month, 6-month and 12-month bills
- (IT) Italy Debt Agency (Tesoro) sold total €10.0B vs. €10.0B indicated in 6-month and 9-month Bills
- (UK) DMO sold ?3.75B in 0.125% Jan 2023 Bonds; Avg Yield: 0.030% v 0.101% prior; Bid-to-cover: 2.32x v 2.59x prior; tail: bps vs. 0.3bps prior
- (NO) Norway solds NOK2.0B vs. NOK2.0B indicated in 1.75% Sept 2029 Bonds; Avg Yield: 0.53% v 1.22% prior; Bid-to-cover: 2.91x v 3.84x prior
- (SE) Sweden sold total SEK15.0B vs. SEK15B in 3-month and 6-month bills
Looking Ahead
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
- 06:00 (ZA) South Africa Central Bank (SARB) Financial Stability Review
- 06:30 (UK) DMO to sell £1.5B in 1.75% July 2057 Gilts
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e May 22nd: % v -2.6% prior
- 07:00 (EU) ECB SSM chief Enria at virtual conference
- 07:00 (UK) Weekly PM Question time in House
- 07:30 (EU) European Finance Ministers (Eurogroup) meeting on EU Recovery Fund
- 07:45 (US) Goldman Economist Chain Store Sales
- 07:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (3-7 years)
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (7-20 years)
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)
- 10:00 (US) May Richmond Fed Manufacturing Index: -40e v -53 prior
- 11:30 (US) Treasury to sell 2-Year FRNs
- 12:30 (US) Fed’s Bullard
- 13:00 (MX) Mexico Central Bank (Banxico) Quarterly Inflation Report
- 13:00 (US) Treasury to sell 5-Year Notes – 14:00 (US) Fed Beige Book
- 15:00 (AR) Argentina Apr Trade Balance: $1.0Be v $1.2B prior; Total Exports : No est v $4.3B prior; Total Imports: No est v $3.2B prior
- 15:00 (US) Fed’s Bostic
- 16:30 (US) Weekly API Oil Inventories
- (BR) Brazil Apr Total Federal Debt (BRL): No est v 4.215T prior
- (CO) Colombia Apr Industrial Confidence: no est v -35 prior; Retail Confidence: No est v -30.8 prior
- 21:00 (NZ) New Zealand May ANZ Business Confidence: No est v -66.6 prior; Activity Outlook: No est v 61.2 prior (revised from -55.1)
- 21:30 (AU) Australia Q1 Private capital Expenditure: -2.6%e v -2.8% prior
- 22:00 (KR) South Korea Apr Department Store Sales Y/Y: No est v -40.3% prior; Discount Store Sales Y/Y: No est v -13.8% prior
- 22:05 (NZ) New Zealand to sell combined NZD1.05B in 2023, 2029 and 2037 Bonds
- 23:35 (JP) Japan to sell 2-Year JGB Bonds
