Risk Appetite Dented On Coronavirus Concerns

Notes/Observations

• Concerns over a second wave of coronavirus in the US (confirmed cases tops the 2M mark (pick up in cases in LA county and Texas and other states; infections rise after reopening)
• Fed recently warned that of a slow economic recovery from the coronavirus pandemic.

Asia:

• Chinese state-owned companies said to have bought at least two cargoes of US soybeans for Dec shipment from US
• North Korea Ministry of Foreign Affairs warns US: Do not interfere with relations between North and South Korea if US wants “smooth” presidential elections Coronavirus: – Total global cases 7,360,239 (+1.6% d/d); total death: 416.2K, (+1.2% d/d)

Europe:

• EU Brexit Negotiator Barnier stated that UK was seeking a trading relationship that was too close to that of an EU member. Reiterated stance that UK was cherry picking the best parts of the single market without the obligations Americas: Fed keep policy steady (as expected) and saw near zero rates through 2022. to continue to assess Yield Control (YCC) in upcoming meetings; the Fed expected a better understanding of economy’s trajectory in the future

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -2.62% at 358.50, FTSE -2.66% at 6,160.91, DAX -2.75% at 12,186.03, CAC-40 -2.94% at 4,904.95, IBEX-35 -3.47% at 7,398.00, FTSE MIB -3.37% at 19,092.50, SMI -1.65% at 9,979.40, S&P 500 Futures -1.96%]
• Market Focal Points/Key Themes: European indices open broadly lower across the board and continued to slide as the session wore on; depressed sentiment being attributed to FOMC, concern of second wave of covid cases; consumer discretionary sector led to the downside; best performing sectors include healthcare and utilities; French FinMin sees economy back to normal by summer; earnings expected in the upcoming US session include Adobe, Lululemon and PVH Corp

Equities

• Consumer discretionary: Just Eat Takeaway [JET.UK] +1% (acquires GrubHub; trading update)
• Financials: CMC Markets [CMCX.UK] +12% (earnings)
• Industrials: Fiat Chrysler [FCA.IT] -6% (facing full scale antitrust probe in the EU), Babcock [BAB.UK] -7% (earnings)

Speakers

• ECB’s Lane (Ireland, chief economist): Reiterates stance that ECB prepared to do everything to restart economy. General Council acted to counter substantial negative inflation shock. Noted that ECB was the only central bank with two QE programs running concurrently and would be the “anchor of stability” for crisis-hit countries including Italy
• France Fin Min Le Maire: domestic economy must restart quicker; can rebound strongly as soon as 2021
• UK Gov Cabinet member Gove reiterated govt stance of ruling out an extension of transition period to Brexit. UK did seek to have an agreement with EU. He added that EU’s Barnier had indicated a possible willingness to move on fisheries and State aid issues
• Sweden Central Bank (Riksbank) Jansson: Financial markets are calmer at this time
• Ireland European Min: Sense of frustration was growing in EU-UK Brexit negotiations
• EU Commission: no formal work under way regarding establishing a EU bad bank
• German DIW Institute saw German 2020 GDP at -9.4% due to the fallout from the coronavirus pandemic before a gradual recovery into 2021. Recent government stimulus package to help limit the damage
• World Health Organization’s (WHO) Covid-19 Envoy Nabarro: Coronavirus pandemic is in its early stages
• Thailand Central Bank official Don reiterated view that monetary policy must remain accommodative to help support its economic recovery. Extending liquidity to the business was more important that rate level
• BOJ Gov Kuroda reiterated view that govt and BOJ needed to take all means availably flexibly due to uncertainty over coronavirus. Reiterated BOJ was ready to take any new steps needed without hesitation
• China Foreign Ministry spokesperson Hua Chunying: To evaluate impact from Australia investment law and urged country to safeguard foreign investor interest
• China Commerce Ministry (MOFCOM) spokesperson Gao Feng: Imported more soybeans in May based upon its own needs
• China Cabinet official: China and US should resume timely communication on trade and other issues (*Reminder: On May 7th China and US trade chiefs held a phone call regarding progress on implementation of the phase-1 trade agreement and its first contact between the countries since the agreement was signed back in mid-January)

Currencies/Fixed Income

• Risk aversion flows aided the USD, JPY and CHF currencies against other major pairs as US Fed painted gloomy picture and concerns over a second wave of coronavirus in the US
• GBP/USD was lower by 0.5% at 1.2685 over concerns about U.K.-EU trade deal talks. Ireland European Min noted of a sense of frustration growing in EU-UK Brexit negotiations and chief negotiator Barnier reiterated that UK was cherry picking the best parts of the single market without the obligations

Economic Data

• (SE) Sweden May PES Unemployment Rate: 5.1% v 4.8% prior
• (FR) France Q1 Final Private Sector Payrolls Q/Q: -2.5% v -2.3%e; Total Payrolls: -2.0% v +0.4% prior
• (ES) Spain Apr House transactions Y/Y: -39.2% v -18.6% prior
• (SE) Sweden May CPI M/M: 0.6% v 0.3%e; Y/Y: 0.0% v -0.4%e
• (SE) Sweden May CPIF M/M: 0.6% v 0.3%e; Y/Y: 0.0% v -0.3%e; CPI Level: 334.91 v 334.40e
• (SE) Sweden May CPIF (ex-energy) M/M: 0.6% v 0.3%e; Y/Y: 1.2% v 0.9%e
• (IT) Italy Apr Industrial Production M/M: -19.1% v -24.0%e; Y/Y: -42.5% v -41.1%e; Industrial Production NSA Y/Y: -40.7% v -27.2% prior
• (IS) Iceland May International Reserves (ISK): 904B v 971B prior

Fixed Income Issuance

• (SE) Sweden sold total SEK1.0B vs. SEK1.0B indicated in 2027 and 2032 inflation-linked bonds
• (UK) DMO sold £3.25B in 1.00% Apr 2024 Gilts; Avg Yield: -0.041% v +0.123% prior; bid-to-cover: 2.52x v 2.55x prior; Tail: 0.6bps

Looking Ahead

• (EU) European Finance Ministers (Eurogroup) meeting
• (IT) Italy Debt Agency (Tesoro) to sell €8.0-9.5B in 3-year, 7-year and 20-year BTP Bonds
• (PE) Peru Apr Trade Balance: No est v -$0.3B prior
• 05:30 (ZA) South Africa Apr Total Mining Production M/M: -59.3%e v -1.0% prior; Y/Y: -59.4%e v +7.0% prior; Platinum Production Y/Y: No est v 8.7% prior; Gold Production Y/Y: No est v 11.5% prior
• 06:00 (IE) Ireland May CPI M/M: No est v -0.4% prior; Y/Y: No est v -0.1% prior
• 06:00 (IE) Ireland May CPI EU Harmonized M/M: No est v -0.3% prior; Y/Y: No est v -0.1% prior
• 06:00 (IL) Israel May Trade Balance: No est v -$2.0B prior
• 06:00 (RO) Romania to sell 600M in 6-month Bills
• 06:30 (UK) DMO to sell £3.25B in new 0.125% Jan 2028 Gilt
• 06:45 (US) Daily Libor Fixing
• 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to cut Key Interest Rate by 120bps to 7.00%
• 07:00 (MX) Mexico Apr Industrial Production M/M: -15.1%e v -3.4% prior; Y/Y: -20.2%e v -5.0% prior; Manufacturing Production Y/Y: -24.7%e v -6.1% prior
• 07:00 (ZA) South Africa Apr Manufacturing Production M/M: -3.1%e v -2.3% prior; Y/Y: -4.9%e v -2.1% prior
• 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 (US) May PPI Final Demand M/M: +0.1%e v -1.3% prior; Y/Y: -1.2%e v -1.2% prior
• 08:30 (US) May PPI (ex-food/energy) M/M: -0.1%e v -0.3% prior; Y/Y: 0.4%e v 0.6% prior
• 08:30 (US) May PPI (ex-food/energy/trade) M/M: -0.1%e v -0.9% prior; Y/Y: -0.6% v -0.3% prior
• 08:30 (US) Initial Jobless Claims: 1.55Me v 1.877M prior; Continuing Claims: 20.00Me v 21.487M prior
• 08:30 (CL) Chile Central Bank Traders Survey
• 08:30 (US) USDA Weekly Export Sales
• 08:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (7-20 years)
• 09:00 (RU) Russia Apr Trade Balance: $6.0Be v $9.3B prior; Exports: $22.8Be v $29.6B prior; Imports: $17.6Be v $20.3B prior
• 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 5th: No est v $563.9B prior
• 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)
• 10:30 (US) EIA Weekly Natural Gas Inventories
• 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
• 12:00 (CA) Canada to sell C$6.0B in 0.25% 2022 Bonds
• 13:00(US) Treasury to sell 30-Year Bonds
• 15:00 (AR) Argentina May National CPI M/M: No est v 1.5% prior; Y/Y: No est v 45.6% prior
• 17:00 (KR) South Korea May Export Price Index M/M: No est v -1.6% prior; Y/Y: No est v -5.9% prior
• 17:00 (KR) South Korea May Import Price Index M/M: No est v -5.1% prior; Y/Y: No est v -14.1% prior
• 18:30 (NZ) New Zealand May Manufacturing PMI: No est v 26.1 prior
• 18:45 (NZ) New Zealand May Food Prices M/M: No est v 1.0% prior
• 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 0.25%
• 21:10 (JP) BOJ Outright Bond Purchase operation for 1~3 and 3~5
• 22:30 (KR) South Korea to sell KRW750B in 50-Year Bond
• 23:00 (CN) China to sell 50-Yr Government Bond
• 23:00 (TH) Thailand Central Bank to sell THB10B in 2023 Bonds – 23:30 (JP) Japan to sell 3-Month Bills