Quiet Session As Focus Turns To Friday’s US Jobs Report

Notes/Observations

• German Apr Retail sales data misses expectations.
• Focus turning to the upcoming US jobs report on Friday and next week’s ECB meeting.

Asia:

• South Korea May CPI registered its 2nd month above target and fastest annual pace since Apr 2012 (YoY: 2.6% v 2.6%e).
• Australia Q1 GDP beats consensus with growth above pre-covid level (Q/Q: 1.8% v 1.5%e; YoY1.1% v 0.6%e).
• BOJ Adachi stated that the domestic economy was improving as a trend due to the boost from external demand but high uncertainty remained. Must be ready for a long battle to reach 2.0% CPI; Premature policy normalization could be costly.
• China Vice Premier Liu He held talks with US Treasury Sec Yellen, both expressed willingness to maintain communications and that economic ties are important.

Europe:

• BOE’s Cunliffe stated that BOE was watching the housing market carefully as it was being driven by the tax holiday.
• Germany Econ Min Altmaier saw 2021 GDP growth between 3.4-3.7%.
• Turkey President Erdogan stated that he had spoken with the central bank governor and stressed the need to lower interest rates to slow inflation.

Americas:

• Fed’s Brainard saw inflation somewhat higher in the near term but broadly unchanged after the economy fully reopened.

Energy:

• OPEC+ ministers have agreed to extend existing plans to ease oil production cuts in June and July (as expected).
• Saudi Oil Min Abdulaziz noted that OPEC+ did not discuss the return of Iranian oil. OPEC+ to hold monthly meetings until the end of the supply agreement.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.15% at 450.78, FTSE +0.26% at 7,098.65, DAX -0.02% at 15,564.85, CAC-40 +0.04% at 6,491.76, IBEX-35 +0.10% at 9,199.00, FTSE MIB +0.16% at 25,362.50, SMI +0.37% at 11,476.72, S&P 500 Futures -0.07%].

Market Focal Points/Key Themes:

Equities

• European indices open mixed and little changed but trending to the upside and new all-time highs as the session progressed; better performing sectors include energy and consumer discretionary; techs and materials leading to the downside; Wizz Air in London trade slightly lower after earnings and outlook release; Lufthansa in Frankfurt rises as much as 3% on press report German govt considering participating in Lufthansa capital raise; earnings expected in the upcoming US session include Advance Auto Parts and Splunk after the close.
• Consumer discretionary: Bloomsbury Publishing [BMY.UK] +5% (earnings; special dividend), Wizz Air [WIZZ.UK[ -1% (earnings).
• Consumer staples: Clas Ohlson [CLASB.SE] -3% (earnings).
• Technology: Auto1 [AG1.AV] -8% (placement).
• Materials: Lonza Group [LONN.CH] +1% (agreement with Moderna).

Speakers

• ECB’s Knot (Netherlands) stated that the recovery in Europe was faster than expected but added that a sustainable recovery was only possible if pandemic was contained globally.
• RBA Dep Gov Debelle stated that did not expect wage growth to be high enough until 2024.
• Japan Chief Cabinet Sec Kato stated that was not considering an extra budget at this time.
• Philippines Central Bank (BSP) Gov Diokno noted that the current policy setting was appropriate but open to doing more monetary easing if necessary.

Currencies/Fixed Income

• USD moved away from multi-month lows against numerous pairs in a quiet session. Focus was turning to the US jobs report due out on Friday.
  EUR/USD drifted back below the 1.22 level after German Apr retail sales data missed consensus. Pair remained well contained within the 1.20-1.24 range. Focus moving towards next week’s ECB meeting.
• GBP/USD continued to experience profit-taking after testing 3-year highs earlier in the week. Pair at 1.4130 by mid-session.
• TRY currency (Lira) was weaker and near record lows on central bank independence concerns after Turkey President Erdogan stated that he had spoken to central bank governor about the need to lower interest rates to slow inflation.

Economic data

• (DE) Germany Apr Retail Sales M/M: -5.5% v -2.5%e; Y/Y: 4.4% v 10.1%e
• (NO) Norway Q1 Current Account Balance (NOK): 94.3B v 5.1B prior..
• (FR) France Apr YTD Budget Balance: -€91.4B v -€60.1B prior.
• (ES) Spain May Net Unemployment Change: -129.4K v -115.0Ke.
• (BR) Brazil May FIPE CPI (Sao Paolo): 0.4%e.
• (UK) Apr Net Consumer Credit: -£0.4B v +£0.5Be; Net Lending: £3.3B v £7.0Be.
• (UK) Apr Mortgage Approvals: 86.9K v 81.0Ke.
• (UK) Apr M4 Money Supply M/M: 0.1% v 0.7% prior; Y/Y: 9.1% v 10.8% prior; M4 (ex-IOFCs): 6.4% v 9.7% prior.
• (EU) Euro Zone Apr PPI M/M: 1.0% v 1.0%e; Y/Y: 7.6% v 7.5%e.

Fixed income Issuance

• (IN) India sold total INR360B vs. INR360B indicated in 3-month, 6-month and 12-month bills.
• (ID) Indonesia sold total IDR11.0T vs. IDR10.0T target in Islamic bills and bonds.
• (DK) Denmark sold total DKK3.8B in 2024 and 2031 DGB Bonds.
• (SE) Sweden sold total SEK5.0B vs. SEK5.0B indicated in 2025 and 2032 Bonds.
• ((NO) Norway sold NOK3.0B vs. NOK3.0B indicated NOK3.0B in 1.75% Mar 2025 Bonds; Avg Yield: 1.40% v 0.52% prior; bid-to-cover: 1.73x v 1.62x prior.
• (UK) DMO sold £2.75B in 0.25% July 2031 Gilts; Avg Yield: 0.941% v 0.924% prior; bid-to-cover: 2.64x v 2.67x prior; Tail: 0.1bps v 0.1bps prior.

Looking Ahead

• (US) Major auto makers report May sales throughout the session.
• (RO) Romania May International Reserves: No est v $43.2B prior.
• 05:20 (EU) Daily ECB Liquidity Stats.
• 05:30 (DE) Germany to sell €4.0B 0% Apr 2026 BOBL.
• 05:30 (GR) Greece Debt Agency (PDMA) to sell 26-Week Bills.
• 06:00 (IE) Ireland May Unemployment Rate: No est v 5.8% prior.
• 06:15 (NL) ECB’s Elerson (Netherlands, SSM).
• 06:30 (UK) DMO to sell £2.0B in 0.875% Jan 2046 Gilts.
• 07:00 (RU) Russia to sell 2025 and 2031 OFZ Bonds.
• 07:00 (US) MBA Mortgage Applications w/e May 28th: No est v -4.2% prior.
• 07:00 (MX) Mexico May Vehicle Domestic Sales: No est v 83.6K prior.
• 07:00 (MX) Mexico Apr Leading Indicators M/M: No est v 0.26 prior.
• 07:00 (UK) Weekly PM Question time in House.
• 08:00 (BR) Brazil Apr Industrial Production M/M: -0.2%e v -2.4% prior; Y/Y: 36.2%e v 10.5% prior.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:30 (CA) Canada Apr Building Permits M/M: -5.0%e v +5.7% prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (SG) Singapore May Purchasing Managers Index: 51.0e v 50.9 prior; Electronics Sector Index: No est v 50.7 prior.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (over 20-years).
• 11:00 (DK) Denmark May Foreign Reserves (DKK): No est v 438.7B prior.
• 12:00 (US) Fed’s Harker.
• 12:00 (CA) Canada to sell 30-year bonds.
• 13:00 (MX) Mexico Central Bank (Banxico) Quarterly Inflation Report (QIR).
• 13:10 (EU) ECB chief Lagarde.
• 14:00 (US) Federal Reserve Beige Book.
• 14:00 (US) Fed’s Evans and Kaplan on panel.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (KR) South Korea May Foreign Reserves: No est v $452.3B prior.
• 18:00 (NZ) New Zealand Government 10-Month Financial Statements.
• 18:30 (AU) Australia May Performance of Construction Index: No est v 59.1 prior.
• 19:00 (AU) Australia May Final PMI Services: No est v 58.2 prelim; PMI Composite: No est v 58.1 prelim.
• 20:01 (IE) Ireland May PMI Services: No est v 57.7 prior; PMI Composite: No est v 58.1 prior.
• 20:30 (SG) Singapore May PMI (whole economy): No est v 51.8 prior.
• 20:30 (HK) Hong Kong May PMI (whole economy): No est v 50.3 prior.
• 20:30 (JP) Japan May Final PMI Services: No est v 45.7 prelim; PMI Composite: No est v 48.1 prelim.
• 21:00 (NZ) New Zealand May Commodity Price Index: No est v 2.3% prior.
• 21:30 (AU) Australia Apr Trade Balance: A$8.3Be v A$5.6B prior; Exports M/M: +7%e v -2% prior; Imports M/M: -3%e v +4% prior.
• 21:30 (AU) Australia Apr Final Retail Sales M/M: 1.1%e v 1.1% prelim.
• 21:45 (CN) China May Caixin PMI Services: 56.2e v 56.3 prior; PMI Composite: No est v 54.7 prior.
• 23:35 (JP) Japan to sell 10-Year JGB Bonds.