German IFO Survey Builds Up Optimism For Growth In Q2 And Beyond

Notes/Observations

• Germany’s Q1 GDP revised lower in final reading but optimism that growth to reach pre-pandemic levels soon.
• Potential for a surge in the EU Q2 growth was reinforced by the German IFO Survey.

Asia:

• Singapore Q1 Final GDP revised higher (QoQ: 3.1% v 2.7%e; YoY: 1.3% v 0.9%e. The current Monetary policy stance remained appropriate and maintained its 2021 GDP growth forecast between 4.0-6.0% range.
• China NDRC unveiled a 5-year price mechanism reform plan to strengthen the management of market expectation on prices and price controls related to key commodities between 2021-2025.

Europe:

• EU Commission President Von Der Leyen announced that Belarus sanctions would target businesses and economy. €3.0B in EU investment aid to Belarus frozen until Belarus turns democratic. Regarding Ireland, she reiterated that there was no alternative to Irish protocol; the problems that had arisen stem from Brexit, not from the Irish protocol.
• Turkey govt has removed one of the four Central Bank Deputy Governors as Oguzhan Ozbas to be replaced by Semih Tumen (adviser to President Erdogan).
• UK Ministers had not yet given the proposal to impose a global minimum threshold for corporation tax it’s backing unless the Biden administration supported their demands to crack down on US tech titans.
• BOE Gov Bailey reiterated stance that inflation expectations remained well anchored, recent inflation influences were just temporary. Did not want to be dismissive about inflation concerns, have to watch inflation very carefully now.
• BOE’s Saunders noted that might need some modest monetary tightening in future.
• BOE’s Haldane noted that the view of inflation risks were tilted to the upside. The upside surprises to inflation could require policy action that could take the legs out of the recovery.

Americas:

• Fed’s Bullard (non-voter, dove) expected to see more inflation, most would be temporary. Did not want to talk about adjusting policy during a pandemic.
• Fed’s George noted inflation expectations had moved up and did not dismiss risk of higher inflation.
• US Dep Tsy Sec Adeyemo expected unified G7 support for a proposed 15%+ global minimum corp tax rate. A final agreement could have to wait until the G20 summit in Oct.
• US State Dept raised the travel advisory to ‘Do Not Travel’ amid COVID-19 for Japan and Sri Lanka.
• BOC Gov Macklem noted that BOC was comfortable with stimulus pullback.
• Various Republican Senators said to be disappointed with infrastructure talks. Reports still circulated that party could still support a $1T infrastructure plan.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.37% at 446.74, FTSE -0.09% at 7,045.06, DAX +0.71% at 15,547.10 , CAC-40 +0.01% at 6,409.31, IBEX-35 +0.22% at 9,226.00, FTSE MIB +0.29% at 24,962.50, SMI +0.61% at 11,294.54, S&P 500 Futures +0.32%].
• Market Focal Points/Key Themes: European indices open higher across the board and stayed in the green as the session progressed; sectors leading to the upside include real estate and technology; underperforming sectors include consumer discretionary and financials; Telit Communications reaches deal to be acquired by Trieste; Deutsche Wohnen confirms to be acquired by Vonovia; Shell sells interest in Deer Park refinery to Pemex; Sulzer confirms still considering Applicator Systems unit spin-off; Recticel rejects unsolicited offer from Greiner; corporate events scheduled during the upcoming US session include Tele2 CMD and earnings from Intuit and Agilent Technologies.

Equities

• Consumer discretionary: Deutsche Wohnen [DWNI.DE] +15% (to be acquired), Royal Mail [RMG.UK] +4% (analyst action).
• Financials: Aveva [AVV.UK] +4% (earnings).
• Technology: centrotherm [CTN.DE] +14% (earnings), Electrocomponents [ECM.UK] -1% (earnings).
• Telecom: Telit Communications [TELT.UK] +11% (to be acquired).

Speakers

• ECB’s Stournaras (Greece) stated that it was too early to shift from Pandemic Bond Buying Fund (PEPP) to conventional QE (APP) as regional economies remained fragile. Saw no need to change the pace of the PEPP program and backed the greening of the monetary policy portfolios.
• German IFO Economists noted that the upswing was picking up pace with Q2 GDP growth seen at 2.6% q/q. Hoping for a good summer; expectations for tourism and hospitality exploded in May.
• Finland govt 3rd supplementary budget for 2021 raised its net borrowing from €12.0B to €14.4B.
• Poland Dep PM Gowin 2021 GDP growth is likely to top 4.0%.
• Russia Dep Fin Min Kolychev noted that the domestic economy was recovering faster than expected.
• Indonesia Central Bank (BI) Policy Statement noted it would continue its accommodative policy. Decision to keep policy steady was in line to accelerate economic recovery and keep IDR currency (Rupiah) stable amid global uncertainty and low inflation. To keep rates steady until needed to boost the economy further until it saw signs of inflationary pressure (soonest seen in early 2022). To evaluate policy rate level at every meeting but stress focus would be on a mix. To use liquidity instruments before rates policy.
• Indian govt said to plan a stimulus package to support growth.

Currencies/Fixed Income

• USD is softer as various Fed officials noted that data supported its contention that the spike in inflation would likely be short-lived.
• EUR/USD hit a fresh 4.5 month high above 1.2250. Dealers looked past the German Q1 GDP contraction and saw the potential for a surge in the Q2 growth. The sentiment was reinforced by the German IFO Survey.
• China Major state banks said to have intervened and purchased USD to curb CNY (Yuan) strength after the pair tested 6.40 which was the strongest level for the Yuan since Jun 2018.

Economic data

• (NO) Norway Q2 Consumer Confidence: +2.5 v -3.2 prior.
• (FI) Finland Apr Unemployment Rate: 9.0% v 8.1% prior.
• (DE) Germany Q1 Final GDP Q/Q: -1.8% v -1.7%e; Y/Y: -3.4% v -3.3%e; GDP WDA (unadj) Y/Y: -3.1% v -3.0%e.
• (DE) Germany Q1 Private Consumption Q/Q: -5.4% v -3.5%e; Government Spending Q/Q: 0.2% v 0.4%e; Capital Investment Q/Q: +0.3% v -1.0%e.
• (UK) Apr Public Finances (PSNCR): £33.6B v £15.6B prior; Public Sector Net Borrowing: £31.0B v £32.8Be; Central Government NCR: £30.5B v £20.8B prior; PSNB (ex-banking groups): £31.7B v £31.0Be.
• (ES) Spain Apr PPI M/M: 2.9% v 2.6% prior; Y/Y: 12.8% v 6.4% prior.
• (AT) Austria Mar Industrial Production M/M: 2.4% v 3.5% prior; Y/Y: 12.7% v 1.7% prior.
• (TR) Turkey May Capacity Utilization: 75.3% v 75.9% prior.
• (TR) Turkey May Real Sector Confidence (seasonally adj): 107.1 v 107.4 prior; Real Sector Confidence (un adj): 110.3 v 111.0 prior.
• (ID) Indonesia Central Bank (BI) left the 7-Day Reverse Repo Rate unchanged at 3.50% (as expected).
• (SE) Sweden Apr PPI M/M: 1.7% v 1.1% prior; Y/Y: 5.6% v 3.8% prior.
• (DE) Germany May IFO Business Climate Survey: 99.2 v 98.1e; Current Assessment Survey: 95.7 v 95.5e; Expectations Survey: 102.9 v 101.0e.
• (CH) Swiss weekly Total Sight Deposits (CHF): 709.6B v 707.8B prior; Domestic Sight Deposits: 635.1B v 631.1B prior.

Fixed income Issuance

• (ID) Indonesia sold a total IDR32.55T vs. IDR30T target in bills and bonds.
• (IN) India sold total INR360B vs.INR360B indicated in 3-month, 6-month and 12-month bills.
• (UK) DMO opened book to sell 0.125% Mar 2029 inflation-linked bond (UKTi) via syndicate; guidance seen -0.5bps to 0.0bps to bonds.
• (EU) European Union opened book to sell EUR-denominated 0.25% Apr 2036 bond.
• (NL) Netherlands Debt Agency (DSTA) sold €1.7B vs. €1.0-2.0B indicated range in 2.75% Jan 2047 DSL bonds; Avg Yield: 0.406% v 0.067% prior.

Looking Ahead

• (NG) Nigeria Central Bank Interest Rate Decision: Expected to leave Interest Rates unchanged at 11.50%.
• (IL) Israel Apr Leading ‘S’ Indicator M/M: No est v 0.5% prior.
• (EU) Daily ECB Liquidity Stats.
• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (DE) Germany to sell €4.0B in 12-month Bulls.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2032, and 2035 bonds.
• 06:00 (UK) May CBI Retailing Reported Sales: 28e v 20 prior; Total Distribution Reported Sales: No est v 30 prior.
• 06:45 (US) Daily Libor Fixing.
• 07:00 (TR) Turkey to sell 2022 and 2027 bonds.
• 07:00 (MX) Mexico Apr Trade Balance: -$0.6Be v -$3.0B prior.
• 07:00 (BR) Brazil May FGV Consumer Confidence: No est v 72.5 prior.
• 07:40 (US) Fed’s Evans.
• 07:40 (SE) Sweden Central Bank (Riksbank) Gov Ingves on panel.
• 08:00 (PL) (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave base rate unchanged at 0.60%; Expected to leave Overnight Deposit Rate unchanged at. 0.05%.
• 08:00 (PL) Poland Apr M3 Money Supply M/M: 0.7%e v 1.4% prior; Y/Y: 12.4%e v 14.4% prior.
• 08:00 (BR) Brazil Mid-May IBGE Inflation IPCA-15 M/M: 0.6%e v 0.6% prior; Y/Y: 7.4%e v 6.2% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (US) Fed’s Barkin.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (FR) France Debt Agency (AFT) to sell €5.3-6.5B in 3-month, 6-month and 12-month bills.
• 09:00 (US) Mar FHFA House Price Index M/M: 1.2%e v 0.9% prior; Q/Q: No est v 3.8% prior.
• 09:00 (US) Mar S&P/Case-Shiller House Price Index (20-City) M/M: 1.30%e v 1.17% prior; Y/Y: 12.50%e v 11.94% prior.
• 09:00 (US) Mar S&P/Case-Shiller House Price Index (overall) Y/Y: No est v 11.97% prior.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:00 (FR) ECB’s Villeroy (France).
• 09:00 (IE) ECB’s Lane (Ireland, chief economist).
• 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement.
• 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (over 20-years).
• 10:00 (US) Apr New Home Sales: 950Ke v 1.021M prior.
• 10:00 (US) May Consumer Confidence: 119.0e v 121.7 prior.
• 10:00 (US) May Richmond Fed Manufacturing Index: 19e v 17 prior.
• 10:00 (MX) Mexico Q1 Current Account Balance: -$2.6Be v $17.4B prior.
• 10:00 (MX) Mexico Weekly International Reserve data.
• 10:00 (US) Fed Vice Chair Quarles testifies in Senate Banking Committee.
• 10:30 (CA) Canada to sell 3-month, 6-month and 12-month bills.
• 12:00 (RU) Russia Apr Industrial Production Y/Y: 6.5%e v 1.1% prior.
• 13:00 (US) Treasury to sell 2-Year Notes.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (KR) South Korea Jun Business Manufacturing Survey: No est v 98 prior; Non-Manufacturing Survey: No est v 82 prior.
• 18:45 (NZ) New Zealand Apr Trade Balance (NZD): No est v 0.0B prior; Exports: No est v 5.7B prior; Imports: No est v 5.7B prior.
• 19:50 (JP) Japan Apr PPI Services Y/Y: 0.9%e v 0.7% prior.
• 20:30 (AU) Australia Apr Leading Index M/M: No est v 0.4% prior.
• 21:30 (AU) Australia Q1 Construction Work Done: +2.0%e v -0.9% prior.
• 22:00 (NZ) Reserve Bank of New Zealand (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate (OCR) unchanged at 0.25%.
• 23:00 (CN) China to sell 1-year and 10-year bonds.