Euro Zone Data Continues To Miss Expectations

Notes/Observations

• Markets wrestling with positive tone struck with regards to US-China trade negotiations and the escalation of rhetoric between the US and Russia
• European economic data continues to miss expectations and further off cycle highs
• Miss in Sweden CPI data pushes off expectations of a potential summer rate hike

Asia:

• Bank of Korea (BOK) left its 7-Day Repo Rate unchanged at 1.50% (as expected). A stronger won currency could reduce room for policy rate increase; FX rate not the only factor for monetary policy
• Bank of Japan (BOJ Gov Kuroda reiterated that to maintain QQE with yield curve control for as long as needed to reach 2% inflation in stable manner
• BoJ Executive Dir Maeda: BOJ was moving steadily toward CPI goal; reiterated to continue monetary easing persistently as was still distant from price target. Medium and long-term inflation expectations were emerging from weakness.
• Japan govt said to be looking at new budget balancing goal by mid-2020 (Reminder: In late Jan, Japan Cabinet confirmed that the government would push back its forecast for achieving a primary budget surplus by two years to FY26/27)
• China Commerce Ministry (MOFCOM) official Gao stated that was misleading to say Tuesday’s speech by President Xi was a concession to the US on trade issue. China to retaliate without doubt if US escalated disputes
• PBoC Gov Yi Gang: Q1 data has been a bit better than expected (Note: China Q1 GDP release expected Apr 17th)
• World bank raises 2018 China GDP forecast to 6.5% from 6.4%

Europe:

• Germany said to advocate ECB place tougher bad loan standards on banks

Americas:

• FOMC Minutes from Mar 21st policy meeting showed that All policymakers believed that further tightening policy likely warranted, almost all agreed gradual approach appropriate
• White House econ adviser Kudlow stated that China Pres Xi’s speech this week was very important; was first time that China made a positive statement about trade. US economic growth may be “soft” in Q1 but should rebound of the rest of the year

Economic Data:

• (RO) Romania Mar CPI M/M: 0.3% v 0.2%e; Y/Y: 5.0% v 4.9%e
• (FR) France Mar Final CPI M/M: 1.0% v 1.0%e; Y/Y: 1.6% v 1.5%e
• (FR) France Mar Final CPI EU Harmonized M/M: 1.1% v 1.1%e; Y/Y: 1.7% v 1.7%e, CPI Ex-Tobacco Index: 102.42 v 102.40e
• (SE) Sweden Mar CPI M/M: 0.3% v 0.3%e; Y/Y: 1.9% v 2.0%e
• (SE) Sweden Mar CPIF M/M: 0.3% v 0.4%e; Y/Y: 2.0% v 2.1%e, CPI Level: 325.76 v 326.10e
• (SE) Sweden Mar Average House Prices (SEK): 3.033M v 3.164M prior
• (GR) Greece Jan Unemployment Rate: 20.6% v 20.8% prior
• (EU) Euro Zone Feb Industrial Production M/M: -0.8% v +0.1%e; Y/Y: 2.9% v 3.5%e

Fixed Income Issuance:

• (SE) Sweden sold SEK500M in I/L 2032 bonds; Avg Yield: -0.7603% v -0.4304% prior; Bid-to-cover: 3.14x v 3.74x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.2% at 375.7, FTSE -0.1% at 7249, DAX -0.1% at 12277, CAC-40 -0.2% at 5270.3, IBEX-35 -0.2% at 9713, FTSE MIB +0.3 at 23069, SMI flat at 8707, S&P 500 Futures flat]
• Market Focal Points/Key Themes: European Indices trade flat to slightly lower, with a bout of M&A news offsetting Middle Eastern tensions. On the M&A front Playtech trades higher after acquiring Snaitech, FirstGroup rises after rejecting a proposal from Apollo, DFDS is another notable gainer after acquiring UN Ro-Ro and raising their outlook, with Countrywide another gainer after acquiring Westleigh Group. On the earnings front French Supermarket giant Carrefour drops over 5% after a slight miss in Q1 results, while GEA and Gerresheimer are other notable fallers. Man Group, Dunelm and Stolt Nielson are among the gainers following results. In Switzerland Sulzer rises after Renova’s stake dropped below 50% and as a result no long blocked by US sanctions. Looking ahead notable earners include Airline giant Delta, Blackrock and Rite Aid.

Movers

• Consumer Discretionary [Carrefour [CA.FR] -5.6% (Earnings), Carpetright [CPR.UK] -4% (CVA Proposal and Equity capital raise update), Dunelm [DNLM.UK] +10.8% (Earnings), Sodexo [SW.FR] -1.5% (Earnings), Stolt Nielsen [SNI.NO] +2.2% (Earnings)]
• Industrials [Sulzer [SUN.CH] +12% (Renova (Russian oligarch) ownership is below 50%; No longer blocked party by US sanctions), DFDS [DFDS.DK] +6.1% (Acquisition, raised outlook), GEA Group -7% (prelim earnings), Gerresheimer [GXI.DE] -4.7% (Earnings)]]
• Financial [Man Group [EMG.UK] +6.5% (FUM update)]
• Technology [ Playtech [PTEC.UK] +8.6% (Acquistion)]

Speakers

• German Economic Ministry Monthly Report: Domestic economy continued with a solid upturn but at a slightly weaker pace. Exporters were less upbeat to due strong Euro currency. Trade conflict brought heightened risks
• Bank of England (BOE) Q1 Credit Conditions & Bank Liabilities Surveys. Total cost of bank funding increased a little in 2018 Q1 but remained low by historic standards. Availability of unsecured credit to consumers declined in quarter
• Norway Central Bank (Norges) Gov Olsen reiterated view that 1st potential rate hike was drawing closer (seen after summer) as inflation was on the way to gradual improvement.
• UK Brexit Min Davis: Virtually nothing will change for business during the transition period. Expected a lot of detail in a negotiated deal later this year. Parliament would not accept a Brexit deal without a vision for the future. Believed that a possibility of a no deal Brexit was a tiny percentage. Trade argument with EU will be about regulation, not tariffs. Aimed for invisible border on Ireland, not no border
• German CDU member Brinkhaus: EU Commission and Germany were far apart on Euro reforms
• ECB again lowered the emergency liquidity assistance (ELA) cap for Greece banks from €16.6B to €14.7B
• European Council said to extend sanctions on Iran by another year. Extended the travel ban and assets freeze against 82 people
• Russia Central Bank official Lipion: All options were on the table for rate decisions. Higher RUB currency (Ruble) might increase inflation expectations. No risk of not meeting monthly FX purchase plan
• China State Council guideline on implementing work Report reiterated its prudent but neutral monetary policy stance and proactive fiscal policy. Reiterated stance to keep reasonable growth of M2 money supply and credit
• Japan rating agency JCR raised South Korea sovereign rating from A+ to AA-; outlook stable
• India Finance Ministry official: To track yield for additional time before acting (**Note: Yields have been rising). Sudden spurt in yields had been a surprise and due to State bank issuance. Could not ask State banks for more active market participation

Currencies

• FX price action was subdued during the session. Markets wrestling with positive tone struck with regards to US-China trade negotiations and the escalation of rhetoric between the US and Russia.
• EUR/USD was lower 0.2% after more European data missed expectations. The pair at 1.2335 area after Euro Zone IP data came in below expectations. Analysts also noted that the Fed Minutes had a hawkish tilt which helped the greenback offset recent weakness on geopolitical concerns
• GBP/USD steady at 1.4170 while USD/JPY was little changed at 106.85 just ahead of the NY morning.
• The SEK currency was softer after Sweden Mar CPI came in below expectations. EUR/SEK cross hit a 9-year high just under the 10.38 area. Some analysts pushed back their view for 1st potential rate hike by Sweden Central Bank (Riksbank) from Sept to Dec

Fixed Income

• Bund Futures trade 8 ticks higher at 159.44 as European markets trade mixed amid Middle East tensions. Upside targets 159.75, while a return lower targets the158.25 level.
• Gilt futures trade at 122.49 lower by 2 ticks off the highs the seen in early trading. Support continues stands at 121.25 then 120.85, with upside resistance at 123.35 then 123.85.
• Thursday’s liquidity report showed Wednesday’s excess liquidity fell to €1.852T from €1.858T prior. Use of the marginal lending facility increased from €53M to €136M.
• Corporate issuance saw no deals priced in the primary market

Looking Ahead

• (IT) Italy Debt Agency (Tesoro) to sell €7.25-9.25B in 2021, 2025, 2038 and 2048 BTP Bonds
• 05:30 (ZA) South Africa Feb Total Mining Production M/M: No est v 1.0% prior; Y/Y: No est v 2.4% prior; Gold Production Y/Y: No est v -7.7% prior; Platinum Production Y/Y: No est v -13.6% prior
• 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
• 06:00 (IE) Ireland Mar CPI M/M: No est v 0.9% prior; Y/Y: No est v 0.5% prior
• 06:00 (IE) Ireland Mar CPI EU Harmonized M/M: No est v 0.9% prior; Y/Y: No est v 0.7% prior
• 06:00 (IE) Ireland Feb Property Prices M/M: No est v 0.9% prior; Y/Y: No est v 12.5% prior
• 07:00 (UR) Ukraine Central Bank Rate Decision: Expected to keep Key Rate unchanged at 17.00%
• 07:10 OPEC Monthly Report
• 07:30 ECB Account of March Policy Meeting
• 08:00 (BR) Brazil Feb Retail Sales M/M: 0.7%e v 0.9% prior; Y/Y: 3.5%e v 3.2% prior
• 08:00 (BR) Brazil Feb Broad Retail Sales M/M: +0.5%e v -0.1% prior; Y/Y: 6.1%e v 6.5% prior
• 08:00 (IN) India Mar CPI Y/Y: 4.2%e v 4.4% prior
• 08:00 (IN) India Feb Industrial Production Y/Y: 6.8%e v 7.5% prior – 08:05 (UK) Baltic Dry Bulk Index
• 08:15 (FR) ECB’s Coure (France) in Paris
• 08:30 (US) Initial Jobless Claims: 230Ke v 242K prior; Continuing Claims: 1.84Me v 1.808M prior
• 08:30 (US) Mar Import Price Index M/M: 0.1%e v 0.4% prior; Y/Y: 3.8%e v 3.5% prior; Import Price Index ex Petroleum M/M: 0.2%e v 0.5% prior
• 08:30 (US) Mar Export Price Index M/M: 0.2%e v 0.2% prior; Y/Y: No est v 3.3% prior
• 08:30 (CA) Canada Mar Teranet/National Bank HPI M/M: No est v -0.1% prior; Y/Y: No est v 7.5% prior, HPI Index: No est v 218.90 prior
• 08:30 (CA) Canada Feb New Housing Price Index M/M: 0.1%e v 0.0% prior; Y/Y: 3.0%e v 3.2% prior
• 08:30 (US) Weekly USDA Net Export Sales
• 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 6th: No est v $457.7B prior
• 10:30 (US) Weekly EIA Natural Gas Inventories
• 11:30 (NO) Norway Central Bank (Norges) Dep Gov Nicolaisen in Oslo
• 12:00 (DE) ECB’s Weidmann (Germany) in Berlin on strengthening Euro
• 13:00 (US) Treasury to sell 30-Year Bonds Reopening
• 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 7.50%
• 15:00 (AR) Argentina Mar National CPI M/M: 2.1%e v 2.4% prior; Y/Y: No est v 25.5% prior
• 15:00 (UK) BOE Gov Carney speaks at Canada Growth Summit in Toronto