Notes/Observations
- PMI services data out of China and Europe aided risk appetite
- More reports circulating that Germany to cancel international travel (inter-EU) ban on Jun 15th
- Italian 10-year syndicate racks up record demand ahead of ECB decision on Thursday; speculation that ECB will increase its Pandemic bond buying program
- Asia:
- Australia Q1 GDP data registers its 1st recession in almost three decades (Q/Q: -0.3% v -0.4%e; Y/Y: 1.4% v 1.4%e
- Australia May Final CBA PMI Services: 26.9 v 25.5 prelim (4th consecutive month of contraction
- China Apr Caixin PMI Services registers its highest level since Oct 2010: (55.0 v 47.3e)
- Japan May Final PMI Services: 26.5 v 25.3 prelim (4th consecutive month of contraction)
- BoJ said to consider doubling the size of its new small company lending facility [vs ~¥30.0T current size]
Coronavirus:
- Total Global cases: 6,382,951; Total deaths: 380.3K – G7 Finance Ministers to hold telephone conference about coronavirus measures on Wed
Europe:
- Germany Govt coalition recent talks on Covid-19 stimulus continue into Wed
- German IFO Institute: export expectations among carmakers improved in May
- UK PM Johnson reportedly plans to take ‘direct control’ of govt handling of coronavirus response
Americas:
- US DoD has moved 1.6K Army troops to Washington DC region to support civil authorities
Mid-East/Energy:
- Weekly API Crude Oil Inventories: -0.5M v +8.7M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +1.17% at 363.96, FTSE +1.27% at 6,299.20, DAX +1.79% at 12,237.05, CAC-40 +1.66% at 4,939.67, IBEX-35 +1.23% at 7,499.00, FTSE MIB +2.27% at 19,402.50, SMI +1.14% at 10,064.55, S&P 500 Futures +0.37%]
- Market Focal Points/Key Themes: European indices open modestly higher across the board and moved notably higher as the session progressed; financial and energy sector best performing sectors; worst performers include consumer discretionary and health care sectors; IFO says German carmakers are more optimistic about exports; Renault signs credit line with French government; TUI and Boeing reach deal to delay delivery of 737 MAX planes’; earnings expected in the upcoming US session include American Eagle and Campbell’s Soup
Equities
- Consumer discretionary: Lufthansa [LHA.DE] +3% (final earnings), Wizz Air [WIZZ.UK] +1.5% (earnings), Elekta [EKTAB.SE] -6% (CEO resigns)
- Materials: Voestalpine [VOE.AT] +5% (earnings)
- Industrials: Daimler [DAI.DE] +3% (US car sales), Chemring Group [CHG.UK] +20% (earnings)
Speakers
- EU trade chiefs to discuss pharmaceutical tariff during week of Jun 8th. Could seek to cut tariffs on antibotics, vaccines and insulin and seek tariff elimination on medical equipment
- Germany said to plan lifting travel ban for EU member states, Britain, Iceland, Norway, Liechtenstein and Switzerland from Jun 15th (**Note: confirms reports from last month)
- German Foreign Min Maas: Lockdown measures are being gradually scaled back
- BoE Gov Bailey reportedly told banks to step up plans for the UK to leave the EU without a trade deal
- Romania Central Bank spokesperson Suciu: Could not afford another rate cut
- Japan Chief Cabinet Suga needed to pay close attention of virus impact on jobs and consider minimum wage based upon severe economy
- China Foreign Ministry spokesperson: Any threat to Hong Kong security comes from foreign forces. Recent remarks from UK officials interfered with internal affairs. Reiterated that reports of World Heath Organization virus frustrations were untrue
Currencies/Fixed Income
- Unwinding of safe-haven flows keeping the USD and JPY currencies on soft footing
- EUR/USD continued its firm tone and climbed higher for the 7th straight session. The pair at 2 1/2 month highs above the 1.12 level. Pair testing its 100-week moving average with good support building at the 1.10 level. Momentum could take the pair back towards the 2020 highs of 1.15. Euro benefiting on more stimulus talk as Germany Govt coalition continued negotiations on its 2nd Covid-19 package. More reports that Germany would to cancel its international travel (inter-EU) ban on Jun 15th as global markets began moving to reopening.
Economic Data
- (CH) Swiss Q1 GDP Q/Q: -2.6% v -2.1%e; Y/Y: -1.3% v -0.9%e
- (RU) Russia May PMI Services: 35.9 v 21.5e (3rd straight contraction); PMI Composite: 35.0 v 13.9 prior
- (NO) Norway Q1 Current Account (NOK): 66.1B v 21.5Be
- (SE) Sweden May PMI Services: 40.9 v 39.0 prior (3rd straight contraction); PMI Composite: 40.5 v 38.3 prior
- (TR) Turkey May CPI M/M: 1.4% v 0.8%e; Y/Y 11.4% v 10.9%e, CPI Core Index Y/Y: 10.3% v 10.1%e
- (TR) Turkey May PPI M/M: 1.5% v 1.3% prior; Y/Y: 5.5% v 6.7% prior
- (ES) Spain May Services PMI: 27.9 v 25.0e (3rd straight contraction); Composite PMI: 29.2 v 29.0e
- (ZA) South Africa May PMI (whole economy): 32.5 v 34.8e (13th straight contraction and record low)
- (IT) Italy May Services PMI: 28.9 v 26.1e (3rd straight contraction); Composite PMI: 33.9 v 28.5e
- (FR) France May Final Services PMI: 31.1 v 29.4e (confirmed 3rd straight contraction); Composite PMI: 32.1 v 30.5e
- (DE) Germany May Net Unemployment Change: +238.0K v +190.0Ke; Unemployment Claims: 6.3% v 6.2%e
- (DE) Germany May Final Services PMI: 32.6 v 31.4e (confirmed 3rd straight contraction); Composite PMI: 32.8 v 31.4e
- (EU) Euro Zone May Final Services PMI: 30.5 v 28.7e (confirmed 3rd straight contraction); Composite PMI: 31.9 v 30.5e
- (IT) Italy Apr preliminary Unemployment Rate: 6.3% v 9.3%e (**Note: lower reading appears to methodology quirk)
- (BR) Brazil Apr FIPE CPI (Sao Paulo): -0.2% v -0.3%e
- (UK) May Final PMI Services PMI: 29.0 v 28.0e; Composite PMI: 30.0 v 29.1e (confirmed 3rd straight contraction)
- (UK) May Official Reserves Changes: $1.0B v $1.4B prior
- (NG) Nigeria May PMI (whole economy):40.7 v 37.1 prior
- (EU) Euro Zone Apr Unemployment Rate: 7.3% v 8.2%e
- (EU) Euro Zone Apr PPI M/M: -2.0% v -1.8%e; Y/Y: -4.5% v -4.2%e
- (BE) Belgium Apr Unemployment Rate: 5.6% v 5.3% prior
Fixed Income Issuance
- (IT) Italy Debt Agency (Tesoro) opened its book to sell new Dec 2030 BTP; guidance seen +12bps to 2030 BTP; order book over €85B
- (IN) India sold total INR vs. INR450B indicated in 3-month, 6-month and 12-month bills
- (EE) Estonia to sell EUR-denominated 10-year bonds; guidance seen +55-60bps to mid-swaps
- (DK) Denmark sold total DKK5.98B in 2022 and 2029 DGB bonds
- (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2023 and 2029 bonds
- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 2025 bonds; Avg Yield: 0.33% v 1.31% prior; bid-to-cover: 2.79x v 2.52x prior
- (UK) DMO sold €3.25B2.25% Sept 2023 Gilts; Avg Yield: -0.002% v +2.73% prior; Bid-to-cover: 2.46x v 1.82x prior; Tails:0.3 bps v 0.2bps prior
Looking Ahead
- (UR) Ukraine May Official Reserve Assets: No est v $25.7B prior
- (UK) EU-UK negotiations on future relationship
- G7 Finance Ministers to hold telephone conference about coronavirus measures
- 05:30 (DE) Germany to sell €4.0B in 0.00% Apr 2025 BOBL
- 05:30 (GR) Greece Debt Agency (PDMA) to sell €1.0B in 26-week Bills
- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-Month Bills
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays) –
- 06:00 (IE) Ireland May Unemployment Rate: No est v 5.4% prior
- 06:30 (UK) DMO to sell £1.5B in 1.625% Oct 2054 Gilts; Avg Yield: % v 0.495% prior; Bid-to-cover: x v 2.60x prior; Tails: bps v 0.2bps prior (May 6th 2020)
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications w/e May 29th: No est v 2.7% prior
- 07:00 (MX) Mexico May Domestic Vehicle Sales: No est v 34.9K 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 (BR) Brazil Apr Industrial Production M/M: -30.1%e v -9.1% prior; Y/Y: -34.3%e v -3.8% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:15 (US) May ADP Unemployment Change: -9.00Me v -20.24M prior
- 08:30 (CA) Canada Q1 Labor Productivity Q/Q: +2.0%e v -0.1% prior
- 08:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (7-20 years)
- 09:00 (BR) Brazil May PMI Services: No est v 27.4 prior; PMI Composite: No est v 26.5 prior
- 09:00 (SG) Singapore May Purchasing Managers Index (PMI): 45.0e v 44.7 prior; Electronics Sector Index: No est v 42.8 prior
- 09:45 (US) May Final Markit Services PMI: 37.3e v 36.9 prelim; Composite PMI: No est v 36.4 prelim
- 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)
- 10:00 (US) May ISM Non-Manufacturing Index: 44.4e v 41.8 prior
- 10:00 (US) Apr Factory Orders: -13.4%e v -10.4% prior (revised from -10.3%); Factory Orders (ex-transportation): No est v -3.6% prior (revised from -3.7%)
- 10:00 (US) Apr Final Durable Goods Order: -17.2%e v -17.2% prelim; Durables (ex-transportation): -7.4%e v -7.4% prelim; Capital Goods Orders (non-defense/ex-aircraft): -5.8%e v -5.8% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v -5.4% prelim
- 10:00 (CA) Bank of Canada Interest Rate Decision: Expected to keep Interest rate unchanged at 0.25%
- 10:30 (US) Weekly DOE Crude Inventories
- 11:00 (DK) Denmark May Foreign Reserves (DKK): No est v 450.9B
- 13:00 (NZ) New Zealand May QV House Prices Y/Y: No est v 7.1% prior
- 19:00 (KR) South Korea Apr Current Account Balance: No est v $6.2B prior; Balance of Goods (BOP): No est v $7.0B prior
- 20:01 (IE) Ireland May PMI Services: No est v 13.9 prior; PMI Composite: No est v 17.3 prior
- 21:00 (NZ) New Zealand May Commodity Prices M/M: No est v -1.1% prior
- 21:00 (AU) Australia to sell A$2.0B in 2023 bonds
- 21:30 (AU) Australia Apr Trade Balance (A$): 7.5Be v 10.6B prior; Exports M/M: -14.0%e v +15.0% prior; Imports M/M: -6.0%e v -4.0% prior
- 21:30 (AU) Australia Apr Final Retail Sales M/M: -17.9e v -17.9% prelim
- 23:30 (TH) Thailand May CPI M/M: +0.7%e v -2.3% prior; Y/Y: -3.35e v -3.0% prior; CPI Core Y/Y: 0.3%e v 0.4% prior
- 23:35 (JP) Japan to sell 30-Year JGB Bonds
