BOE Expected To Add To Its Stimulus Measures

Notes/Observations

• No surprises from most central bank decisions in session (Indonesia cut; SNB, Norges hold policy steady; lone exception was Taiwan which kept its policy steady and not cut)
• Awaiting BOE decision with more stimulus expected

Asia:

• New Zealand Q1 GDP registered its largest quarterly contraction since 1991 (Q/Q: -1.6% v -1.0%e; Y/Y: -0.2% v +0.3%e)
• Australia May Net Employment Change: –227.7K v 75.0Ke; Unemployment Rate: 7.1% v 6.9%e
• China PBOC cut the 14-Day Reverse rep Rate again by another 20bps to 2.35%
• China PBOC Govt Yi Gang stated that economic fundamentals were sound and that monetary policy was still within normal range. Reiterated pledge to keep liquidity reasonably ample . Saw 2020 new yuan loans of ~CNY20T (record, up ~23% y/y); aggregate financing >CNY30T
• Japan Govt said to be planning to raise economic assessment in June (1st upward revision since Jan 2018)

Coronavirus:

• Total global cases 8,349,519 (+2.3% d/d); total death: 449.0K, (+1.7% d/d)
• Beijing has shut down all hotels and similar entities in areas considered high risk amid the city’s latest #COVID19 outbreak

Europe:

• ECB’s Weidmann (Germany) said to be trying to calm the waters between the ECB and German high court over recent ruling
• Italy said to be considering a series of temporary measures and extensions of current ones to ease firing and prevent a massive bout of unemployment. Might favor an easier and/or prolonged access to temporary contracts to keep as many people in work

Americas:

• DOJ said to be considering filing criminal charges against former NSA Bolton as it moved toward seeking an order to block his forthcoming book about the Trump Administration
• Fed’s Mester (hawk, voter): economy would likely to see uncertain recovery over H2’20; saw US contracting by 6% this year. 2 will show most severe effects of pandemic shutdown on economic activity
• Brazil Central Bank (BCB) cut Selic Target Rate by 75bps to 2.25% (as expected)

Energy:

• OPEC+ JMMC technical panel said not to make any recommendation for further extension of the current oil production cuts

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.14% at 366.52, FTSE +0.39% at 6,277.85, DAX +0.15% at 12,401.15, CAC-40 +0.17% at 5,003.12, IBEX-35 -0.04% at 7,476.00, FTSE MIB +0.77% at 19,736.50, SMI -0.07% at 10,194.60, S&P 500 Futures +0.25%]
• Market Focal Points/Key Themes: European indices open modestly lower across the board, but turned around to trade mixed later in the session; outperforming sectors lead by technology and utilities; energy leading under-performing sectors; EU’s Gentiloni still sees tourism and transportation suffering from covid; reportedly China steel to raise prices by 3.7%; Norway Seafood Council reports 34% drop in salmon sales to China; focus on interest rate decisions through the day; earnings expected in the upcoming session include Commercial Metals, Regis and Kroger

Equities

• Consumer discretionary: Ted Baker [TED.UK] -2% (placement), Zalando [ZAl.DE] +5% (analyst upgrade)
• Financials: Safestore [SAFE.UK] +4% (earnings)
• Industrials: Bauer [B5A.DE] -5% (withdraws outlook)
• Technology: Wirecard [WDI.DE] -36% (delay of Q1 final results), cyan [CYR.DE] -12% (cuts outlook)

Speakers

• SNB Policy Statement maintained itss expansionary monetary policy as it remained necessary to ensure appropriate monetary conditions in Switzerland. Reiterated its language on FX that the CHF currency (Franc) was highly valued and remained willing to intervene more strongly in the FX market
• SNB President Jordan post rate decision press conference noted that the low point in economic activity was seen in April. Economic activity picked up in May as lockdown measures eased. Saw Q2 GDP as likely being better than Q1 reading and was optimistic that 2021 GDP would be positive
• Germany Chancellor Merkel reiterated stance that EU must act quickly and decisively on recovery package. Reiterated view of no final decisions on EU finances at the upcoming EU on-line summit and would only be an exchange of views (**Note: summit scheduled for Fri, Jun 19th). Reiterated hope for an agreement on EU Recovery fund before the summer break and stressed that an agreement could only be made at a physical meeting of EU leaders later on
• France Fin Min Le Maire confirmed receipt of letter from US Tsy Sec Mnuchin regarding US desire to stop talks on digital services tax, called the letter as ‘provocative’. Stressed that France to impose a digital tax in 2020
• EU Economic Commissioner Gentiloni (Italy): EU would come forward with its own digital tax if one could not be resolved on a global level
• Spain govt confirmed €2.5B stimulus plan for tourism
• Hungary Central Bank Gov Matolcsy: Domestic economy could rebound more quickly than anticipated. Could return to swift growth in Q3 and see modest growth for 2020. Increasing investment to be key to recovery in aftermath of virus Indonesia Central Bank Policy Statement noted that it still had room to cut interest rates due to low inflation and manageable current account deficit and would maintain its QE program
• Indonesia Central Bank Gov Warjiyo pre-rate decision press conference noted that the easing of lockdown measures gradually was supporting economy and that growth might improve in Q3. It saw Q2 GDP contracting as domestic demand had fallen sharply. It would support economic recovery program. Saw IDR currency (Rupiah) pressure easing; reiterated that currency is undervalued and has scope to appreciate
• Taiwan Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Domestic economy was normal as virus outbreak was contained but would pay close attention to developments of situation. Would hold extra-ordinary meetings if necessary
• Taiwan Central Bank Staff Projections: cut its 2020 GDP growth forecast from 1.9% to 1.5% and cut the 2020 CPI forecast from 0.6% to 0.0%
• China city of Beijing said to halt all cross-province bus service from Fri, Jun 19th
• China CDC expert: Beijing virus outbreak has been contained

Currencies/Fixed Income

• The GBP was slightly softer ahead of the BOE rate decision. Dealers expecting stimulus expected with a £100B increase in QE seen likely. Pair trading at 1.2520 area ahead of the MPC decision.
• EUR/USD steady at 1.1250 as more chatter circulated that the upcoming EU Leader online summir will not make any decision on the Recovery Fund proposal or agree on a amended 7-year budget. Optimism remains that an agreement would occur at a physical meeting in July on the key issues.
• USD/JPY holding below the 107 as the safe-haven flows continued to watch developments on the Korean Peninsula and various hotspots on the coronavirus front.

Economic Data

• (NL) Netherlands May Unemployment Rate: 3.6% v 3.4% prior
• Swiss May Trade Balance (CHF): 2.8B v 4.0B prior; Real Exports M/M: -0.2% v -9.9% prior; Real Imports M/M: +13.0% v -17.5% prior; Watch Exports Y/Y: -67.9% v -81.3% prior
• (ID) Indonesia Central Bank (BI) cut Reverse Repo Rate by 25bps to 4.25% (as expected)
• -(CH) SNB Interest Rate left Sight Deposit Interest Rate unchanged at -0.75% and Policy Rate unchanged at -0.75% (both as expected)
• (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.00% (as expected)
• (ES) Spain Apr Trade Balance: -€1.5B v -€2.0B prior
• (IT) Italy Apr Total Trade balance: -€1.2B v +€5.7B prior; Trade Balance EU: -€1.0B v +€0.6B prior
• (PL) Poland Jun Consumer Confidence: -19.4 v -22.0e
• (PL) Poland May Employment M/M: -1.4% v -0.7%e; Y/Y: -3.2% v -2.7%e
• (PL) Poland May Average Gross Wages M/M: -3.1% v -2.3%e; Y/Y: 1.2% v 1.6%e
• (GR) Greece Q1 Unemployment Rate: 16.2% v 16.8% prior

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €5.88B vs. €5.0-6.0B indicated range in 2023, 2025, 2026 and 2030 bonds
• Sold €2.20B in 0.00% Apr 2023 SPGB; Avg Yield: -0.242% v -0.215% prior; Bid-to-cover: 2.15x v 1.59x prior (Jun 4th 2020)
• Sold €1.62B. in 0.0% Jan 2025 SGPB bonds; Avg Yield: -0.075% v -0.0.028% prior; Bid-to-cover: 2.14x v 1.95x prior (Jun 14th 2020)
• Sold €1.03B in 5.90% July 2026 SPGB; Avg Yield: 0.083% v 0.862% prior; Bid-to-cover: 2.19x v 1.85x prior (Feb 7th 2019)
• Sold €1.03B in 1.25% Oct 2030 SPGB; Avg Yield: 0.528% v 0.711% prior; Bid-to-cover: 3.94x (highest since 2016) v 1.29x prior
• (FR) France Debt Agency (AFT) sold total €10.99B vs. €9.5-11.0B in 2023, 2025, 2026 and 2028 bonds
• Sold €2.220B in 0.00% Feb 2023 Oat; Avg Yield: -0.56% v -0.51% prior; Bid-to-cover: 3.02x v 2.77x prior
• Sold €2.984B in 0.00% Mar 2025 Oat; Avg Yield: -0.48% v -0.22% prior; Bid-to-cover: 2.16x v 1.66x prior
• Sold €3.170B in 0.00% Feb 2026 Oat; Avg Yield: -0.40% v -0.28% prior; bid-to-cover: 2.48x v 2.28x prior
• Sold €2.825B in 0.75% May 2028 Oat; Avg Yield: -0.25% v -0.10% prior; Bid-to-cover: 1.97 v 1.60 prior
• (IE) Ireland Debt Agency (MTNA) sold €750M vs. €750M indicated in 6-month Bills; Avg Yield: -0.490% v -0.430% prior; Bid-to-cover: 3.80x v 4.95x prior

Looking Ahead

• (IL) Israel Jun 12-month CPI Forecast: No est v 0.6% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds
• 05:50 (FR) France Debt Agency (AFT) to sell €1.5-2.5B in inflation-linked new 0.10% Mar bonds (Oatei)
• 06:00 (CZ) Czech Republic to sell CZK10B in 6-month bills
• 06:00 (RO) Romania to sell RON200M in 3.65% Sept 2031 Bonds
• 06:00 (RO) Romania to sell RON500M in 12-month bills
• 06:30 (EU) ECB allotment in TLTRO-3 operation
• 06:45 (US) Daily Libor Fixing
• 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rate unchanged at 0.10%; Expected to increase Total Asset Purchase Program by £100B to £745B
• 07:00 (BR) Brazil Jun IGP-M Inflation (2nd Preview): 1.4%e v 0.0% prior
• 07:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (3-7 years)
• 08:00 (PL) Poland Central Bank (NBP) May Minutes
• 08:00 (BR) Brazil Apr Economic Activity Index (Monthly GDP) M/M: -10.2%e v -5.9% prior; Y/Y: -15.3%e v -1.5% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (US) Jun Philadelphia Fed Business Outlook: -21.4e v -43.1 prior
• 08:30 (US) Initial Jobless Claims: 1.290Me v 1.542M prior; Continuing Claims: 19.85Me v 20.929M prior
• 08:30 (CA) Canada Apr Wholesale Trade Sales M/M: -10.6%e v -2.2% prior
• 08:30 (CA) Canada May ADP Payroll Estimates: No est v -226.7K prior
• 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 Gold and Forex Reserve w/e Jun 12th: No est v $565.2B prior
• 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)
• 10:00 (US) May Leading Index: +2.4%e v -4.4% prior
• 10:30 (US) EIA Weekly Natural Gas Inventories
• 11:30 (US) Treasury to sell 4-week and 8-week Bills
• 12:00 (RU) Russia May PPI M/M: -4.4%e v -7.2% prior; Y/Y: -15.4%e v -10.4% prior
• 12:15 (US) Fed’s Mester
• 13:00 (US) Treasury to sell 5-Year TIPS
• 19:30 (JP) Japan May National CPI Y/Y: 0.2%e v 0.1% prior; CPI Ex-fresh food (core) Y/Y: -0.1%e v -0.2% prior; CPI Ex-fresh Food/Energy (core-core) Y/Y: 0.5%e v 0.2% prior
• 19:50 (JP) BOJ Apr Minutes
• 21:30 (AU) Australia May Preliminary Retail Sales M/M: No est v -17.7% prior
• 23:00 (CN) China to sell 30-year Upsized Government Bond
• 23:30 (HK) Hong Kong to sell HKD0.8B in 1-month Bills
• 23:30 (JP) Japan to sell 3-Month Bills