Notes/Observations
- France Q1 Final GDP revised lower to show the country entering a double-dip technical recession.
- ECB’s rhetoric had turned substantially more dovish over the past week.
- Focus turns to US PPI data; concerns that Fed’s monetary policy remained too loose to contain accelerating inflation.
Asia:
- Japan Apr Jobless Rate: 2.8% v 2.7%e.
- Japan May Tokyo CPI Y/Y: -0.4% v -0.5%e; CPI (ex-fresh food) Y/Y: -0.2% v -0.2%e.
- BOJ said to be contemplating a 6-month extension to its Sept deadline for the pandemic relief program; could be announced as early as the next rate review (Jun 17-18th).
- China PBOC sets Yuan reference rate: 6.3858 v 6.4030 prior (Strongest since May 24, 2018).
Coronavirus:
- Japan Econ Min Nishimura confirmed the govt would seek to extend the coronavirus state of emergency in Tokyo and additional prefectures until June 20th.
Europe:
- UK PM Johnson said to be considering carbon tax on imports to target heavy carbon-emitting industries. Expected to be expanded into agriculture in an effect to protect UK farmers from foreign rivals.
Americas:
- Treasury Sec Yellen testified that she did not want inflation embedded in US economy, had to watch the current inflation situation very closely. Inflation seen recently was temporary, not endemic; Saw high rates of inflation through the end of the year.
- Fed’s Jackson Hole Summit to be held between Aug 27-28th in person (Reminder: Historically this has been a meeting where Fed Chairs and officials sometimes signaled shifts in policy).
Energy:
- Upcoming OPEC+ meeting on June 1st was expected to reaffirm plans to boost oil production in July.
Market Focal Points/Key Themes:
Equities
- European indices trade higher across the board with Stoxx 600 index renewing all-time highs amid US Pres Biden expected to unveil his FY22 budget later today; Outperforming sectors include financial services and insurance; Spanish banking giant Sabadell trade 2% lower in Madrid after providing some strategic targets; AstraZeneca trade slightly lower on EU cancer drug approval; upcoming US morning session earnings include Big Lots.
- Financials: Societa Cattolica di Assicurazioni [CASS.IT] +10% (earnings), Sabadell [SAB.ES] -2% (strategy update).
- Healthcare: AstraZeneca [AZN.UK] -1% (drug approval).
- Industrials: Systemair [SYSR.SE] +12% (trading update).
Speakers
- ECB’s Schnabel (Germany) reiterated the stance that premature removal of ECB support measures would be a grave mistake as both pandemic and economic crisis were far from over. The short-term economic outlook had improved. The financing conditions remained favorable and the recent rise in yields due to improved outlook.
- ECB’s Villeroy (France) stated that saw no reason to extend pandemic support for the banking sector beyond 2022 including capital buffers.
- BOE’s Haldane (chief economist): BOE should be prepared to reduce its stimulus.
- US and EU Leader joint draft statement said to commit to discourage fossil-fuel investment.
- China Securities Regulatory Commission (CSRC) said to vow to crack down on future market violations and to help manage commodity prices in coordination with other govt bodies.
Currencies/Fixed Income
- USD holding steady ahead of the PPI data set for release later today. Dealers had some concerns that Fed’s monetary policy remained too loose to contain accelerating inflation.
- ECB’s rhetoric had turned substantially more dovish over the past week. Markets expect the ECB to extend the current pace of its bond-buying program at its June 10th policy meeting, even though the economy was likely to improve.
- GBP’s recent rally stalled as dealers noted some concerns that the UK. Would not be able to fully re-open its economy later in June as the Indian variant case made up the majority of new infections (75%) and the average age of new infections fell to under 30 years.
Economic data
- (NL) Netherlands May Producer Confidence Index: 8.8 v 6.5 prior.
- (FI) Finland Q1 GDP Q/Q: -0.1% v +0.4% prior; Y/Y: -1.0% v -1.1% prior.
- (FI) Finland Apr House Price Index M/M: 2.2% v 0.3% prior; Y/Y: 4.9% v 2.5% prior.
- (DE) Germany Apr Import Price Index M/M: 1.4% v 1.0%e; Y/Y: 10.3% v 9.9%e.
- (NO) Norway Apr Retail Sales (with auto/fuel) M/M: +0.3% v -0.3%e.
- (FR) France Q1 Final GDP Q/Q: -0.1% v +0.4%e; Y/Y: 1.2% v 1.5%e (technical recession).
- (FR) France May Preliminary CPI M/M: 0.3% v 0.3%e; Y/Y: 1.4% v 1.4%e.
- (FR) France May Preliminary CPI EU Harmonized M/M: 0.4% v 0.3%e; Y/Y: 1.8% v 1.8%e.
- (FR) France Apr PPI M/M: -0.3% v +1.0% prior; Y/Y: 7.3% v 4.6% prior.
- (FR) France Apr Consumer Spending M/M: -8.3% v -4.0%e; Y/Y: 32.0% v 37.6%e.
- (ES) Spain Apr Adjusted Retail Sales Y/Y: 41.0% v 29.1%e; Retail Sales (unadj) Y/Y: 38.5% v 18.1% prior.
- (CH) Swiss May KOF Leading Indicator: 143.2 v 132.0e.
- (AT) Austria Apr PPI M/M: 1.0% v 1.0% prior; Y/Y: 4.6% v 2.8% prior.
- (HU) Hungary Mar Average Gross Wages Y/Y: 8.7% v 8.9%e.
- (TR) Turkey Apr Trade Balance: -$3.1B v -$3.1Be.
- (TR) Turkey May Economic Confidence: 92.6 v 93.9 prior.
- (SE) Sweden Q1 GDP Q/Q: 0.8% v 1.1%e; Y/Y: 0.0% v 0.0%e.
- (SE) Sweden Apr Retail Sales M/M: -1.4% v -1.5%e; Y/Y: 7.2% v 9.1% prior.
- (SE) Sweden Apr Household Lending Y/Y: 5.7% v 5.7% prior.
- (CN) Weekly Shanghai copper inventories (SHFE): 207.8K v 221.1K tons prior.
- (IT) Italy Apr PPI M/M: 1.2% v 1.0% prior; Y/Y: 7.9% v 3.0% prior.
- (NO) Norway May Unemployment Rate: 3.3% v 3.4%e.
- (RU) Russia Narrow Money Supply w/e May 21st (RUB): 14.07T v 14.08T prior.
- (PT) Portugal May Consumer Confidence Index: -16.7 v -21.0 prior; Economic Climate Indicator: +0.5 v -0.8 prior.
- (EU) Euro Zone May Economic Confidence: 114.5 v 112.3e; Industrial Confidence: 11.5 v 11.5e; Services Confidence: 11.3 v 6.3e; Consumer Confidence (final): -5.1 v -5.1 advance.
Fixed income Issuance
- (DK) Denmark sold a total of DKK3.84B in 3-month, 6-month, 9-month and 12-month.
- (IT) Italy Debt Agency (Tesoro) sold a total €6.5B vs. €5.5-6.5B indicated range in 5-year and 10-year BTP Bonds.
- Sold €3.0B vs. €2.5-3.0B indicated range in 0.00% Apr 2026 BTP bonds; Avg Yield: 0.17% v 0.17% prior; Bid-to-cover: 1.36x v 1.43x prior (Apr 29th 2021 under 0.50% Feb 2026 BTP).
- Sold €3.5B vs. €3.0-3.5B indicated range in 0.60% Aug 2031 BTP; Avg Yield: 0.94% v 0.88% prior; bid-to-cover: 1.32x v 1.44x prior.
- (IT) Italy Debt Agency (Tesoro) sold €2.0B vs. €1.5-2.0B indicated range in Apr 2026 CCTeu (floating rate Notes); Avg Yield: -0.07% v -0.06% prior; Bid-to-cover: 1.51x v 1.92x prior.
Looking Ahead
- Virtual G7 Finance Ministers and Central banks (ECB’s Lagarde on call).
- (BE) Belgium May CPI M/M: No est v 0.3% prior; Y/Y: No est v 1.2% prior.
- 05:20 (EU) Daily ECB Liquidity Stats.
- 05:30 (IN) India to sell combined INR260B in 2023, 2030 and 2061 bonds.
- 05:30 (ZA) South Africa to sell combined ZAR1.2B in I/L 2025, 2038 and 2046 Bonds.
- 06:00 (IE) Ireland Apr Retail Sales Volume M/M: No est v -1.9% prior; Y/Y: No est v 8.5% prior.
- 06:00 (PT) Portugal Apr Retail Sales M/M: No est v 2.2% prior; Y/Y: No est v -0.1% prior.
- 06:00 (UK) DMO to sell £3.0B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £1.5B respectively).
- 06:45 (US) Daily Libor Fixing.
- 07:00 (BR) Brazil May FGV Inflation M/M: 4.0%e v 1.5% prior; Y/Y: 36.9%e v 32.0% prior.
- 07:30 (IN) India Weekly Forex Reserve w/e May 21st: No est v $590.0B prior.
- 07:30 (IS) Iceland to sell 3-month and 6-month bills.
- Sells ISK in 3-month bills; Avg Yield: % v 1.006% prior; bid-to-cover: x v 1.73x prior.
- Sells ISK in 6-month bills; Avg Yield: % v 1.224% prior; bid-to-cover: x v 1.05x prior.
- 08:00 (ZA) South Africa Apr Monthly Budget Balance (ZAR): -55.0Be v -29.8B prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:00 (IN) India announces upcoming bill issuance (held on Wed).
- 08:30 (US) Apr Personal Income: -14.2%e v +21.1% prior; Personal Spending: 0.5%e v 4.2% prior; Real Personal Spending (PCE): 0.2%e v 3.6% prior.
- 08:30 (US) Apr PCE Deflator M/M: 0.6%e v 0.5% prior; Y/Y: 3.5%e v 2.3% prior.
- 08:30 (US) Apr PCE Core Deflator M/M: 0.6%e v 0.4% prior; Y/Y: 2.9%e v 1.8% prior.
- 08:30 (US) Apr Advance Goods Trade Balance: -$92.0Be v -$90.6B prior.
- 08:30 (US) Apr Preliminary Wholesale Inventories M/M: 0.7%e v 1.3% prior; Retail Inventories M/M: -2.0%e v -1.4% prior.
- 08:30 (BR) Brazil Apr Total Outstanding Loans (BRL): No est v 4.105T prior; M/M: No est v 1.5% prior; Personal Loan Default Rate: No est v 4.1% prior.
- 09:45 (US) May Chicago Purchase Managers Index: 68.0e v 72.1 prior.
- 10:00 (US) May Final University of Michigan Confidence: 83.0e v 82.8 prelim.
- 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Belgium, Switzerland sovereign debt; S&P on Ireland, Turkey sovereign debt).
- 13:00 (US) Weekly Baker Hughes Rig Count.
- (MX) Mexico Apr YTD Budget Balance (MXN): No est v -83.0B prior.
- (BR) Brazil Apr Total Formal Job Creation: No est v +184.1K prior.
