US-Led Syria Missile Attack Seen As A ‘One-Off Event’

Notes/Observations

• Limited spillover from military strikes on Syria; but hard for trading sentiment to look beyond geopolitics and trade war developments.
• Focus on US Retail sales; analysts expect a rebound in March data
• China Q1 GDP data due for release on Tuesday

Asia:

• Japan PM Abe said to plans to propose new framework for trade talks in hopes of persuading Trump to rejoin TPP
• Japan companies raised wages by avg 2.41% in 2018 (largest increase in 20-yrs)
• China PBoC raised the Open Market Operation (OMO) Interest Rate on the 14-Day Reverse Repo by 5bps to 2.70%
• Hong Kong money market rates rise after HKMA acted last week to defend currency peg
• Hong Kong Fin Sec Chan: Weakness in the HK$ was not too much of a concern, as the govt had prepared early and had enough money to deal with the capital outflow; HKMA had intervened in the FX market four times as of Sunday

Europe:

• BoE said to have warned lenders back in Dec that the withdrawal of its £127B low interest rate funding scheme poses systemic risks to the UK financial system. The term funding scheme (TFS) that was launched after the UK’s Brexit vote. The warning from the BoE came before the scheme ended in Feb 2018
• UK PM May to make Brexit appeal that will see her call on the Commonwealth (the former UK colonies) to boost trade and forge new relationships
• UK Q1 Visa Spending y/y: -1.4% v -1.3% prior (largest fall since Q4 2012)
• SNB’s Jordan reiterated view that now was not the right time to change Swiss monetary policy as FX market environment remained fragile. Noted that changes in monetary policy in other countries could give the SNB more room to maneuver
• Russia President Putin said to have warned of ‘chaos’ in international order if Syria was attacked again
• Moody’ raised Spain sovereign rating by 1 notch to Baa1 from Baa2; outlook Stable
• Fitch affirmed Luxembourg sovereign rating at AAA; outlook Stable
• S&P affirmed Poland sovereign rating at BBB+; outlook revised to Positive from Stable

Americas:

• US, UK and France launched missile strikes against Syrian chemical weapons facilities; Pentagon says the strikes successfully hit every target; Trump tweets “Mission Accomplished!”. 105 missiles were fired against 3 targets in Syria, including chlorine and sarin gas research facilities
• US Defense Sec Mattis: strikes are a “one time shot” to send a strong message to Assad
• US to implement new sanctions on Russia after Syria air strike that are aimed at companies dealing with equipment related to Syria
• UN Security Council: failed to adopted a Russian-drafted resolution that would have condemned Syrian strikes
• Treasury Semi-annual Currency Report again declined to name China as currency manipulator; added India to its ‘watchlist’. Kept China, Japan, Germany, South Korea and Switzerland on watchlist

Economic Data:

• (DE) Germany Mar Wholesale Price Index M/M: 0.0% v -0.3% prior; Y/Y: 1.2% v 1.2% prior
• (DK) Denmark Mar PPI M/M: -0.4% v 0.0% prior; Y/Y: 1.7% v 1.1% prior
• (NO) Norway Mar Trade Balance (NOK): 15.0B v 21.3B prior
• (IN) India Mar Wholesale Prices (WPI) Y/Y: 2.5% v 2.4%e
• (TR) Turkey Feb Industrial Production M/M: -0.2% v +0.1%e; Y/Y: 9.9% v 10.4%e
• (TR) Turkey Jan Unemployment Rate: 10.8% v 10.4% prior
• (CH) Swiss Mar Producer & Import Prices M/M: -0.2% v +0.3% prior; Y/Y: 2.0% v 2.3% prior
• (TR) Turkey Mar Central Gov’t Budget Balance (TRY): -20.2B v -1.9B prior
• (CH) SNB Total Sight Deposits for Week Ended Apr 13th (CHF): 575.1B v 574.9B prior

Fixed Income Issuance:

• None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.1% at 378.7, FTSE -0.3% at 7244, DAX +0.1% at 12449, CAC-40 +0.1% at 5311, IBEX-35 +0.1% at 9775, FTSE MIB +0.1% at 23358, SMI -0.2% at 8757, S&P 500 Futures +0.4%]

Market Focal Points/Key Themes:

• European Indices trade little changed in a lackluster session so far ahead of earnings which are set to ramp up the back end of this week. Shares of WPP trade lower after founder and CEO Sir Martin Sorrell resigned amid allegations of personal misconduct, having been with the company for 33 years. Elsewhere Software AG trades lower after missing estimates; Carr’s group trades sharply higher after strong results; Whitbread outperforms after Elliot discloses >5% stake and calls for spinoff of Costa Coffee chain; Shire divested Oncology unit for $2.4B.
• Looking ahead notable earners include banking giant Bank of America and M&T Bank.

Movers

• Consumer Discretionary [ WPP [WPP.UK] -3.8% (CEO Sorrell steps down), Whitbread [WTB.UK] +6.2% (Elliot stake over 5%) ]
• Materials [ Vedanta [VED.UK] -3.3% (Names new CEO), Amerisur Resources [AMER.UK] +3.8% (Earnings)]
• Consumer Staples [Carr’s Group [CARR.UK] +10.6% (Earnings)]
• Healthcare [Shire [SHP.UK] +1.9% (Divestment)]
• Technology [Software AG [SOW.DE] -4.1% (Prelim earnings), Rocket Internet [RKET.DE] +2.1% (Terminates share buyback)]

Speakers

• Sweden Government Spring Budget Proposal maintained 2018 GDP growth at 2.8% and 2019 GDP growth at 2.2%. It forecasted 2018 budget surplus at 1.0% of GDP
• Russia Dep Foreign Min Ryabkov stated that the govt would not delay in adopting further legislation in retaliation against US sanctions (**Note: Responds to reports that US to implement new sanctions on Russia after Syria air strike that are aimed at companies dealing with equipment related to Syria)
• EU said to consider widening sanctions against Iran
• Bank of Japan (BOJ) Deputy Gov Wakatabe: Doing what was needed to be done in order to achieve the 2% inflation target. Yield curve will steepen if central bank patiently maintains its current easing policy and help to heighten inflation expectations. Noted that the benefits outweighed the costs of its policy. Aware of the cumulative effect on bank profits from prolonged low rates and acknowledged that balance sheet loss was possible when interest rates are raised
• Japan Cabinet Office (Gov’t) Monthly Economic Report for Apr: Maintained its overall assessment that economy was recovering at a moderate pace
• Kuwait Oil Min Almarzooq: OPEC/Non-Opec production cuts to continue through end of 2018. Would consider extending cuts into 2019 when OPEC met at the June semi-annual meeting

Currencies

• FX markets were subdued in the session. Dealers noted that the US Treasury biannual report on FX policies of major trading partners delivered a relatively measured tone and did not name any country as a FX manipulator. Price action also saw limited spillover from weekend military strikes on Syria
• EUR/USD well contained within recent ranges and around 1.2360 just ahead of the NY morning.
• GBP/USD was firmer by 0.2% and trying to reach the 1.43 handle. Markets to focus on EU-UK meeting to discuss post-Brexit trading relationship during the week
• USD/JPY holding above the 107 level.

Fixed Income

• Bund Futures trade 40 ticks lower at 158.90 as Germany’s 10-year bond yield surges to a 3-week high. Upside targets 159.75, while a return lower targets the158.25 level.
• Gilt futures trade at 121.75 lower by 38 ticks and near the session lows. Support continues stands at 121.25 then 120.85, with upside resistance at 123.35 then 123.85.
• Monday’s liquidity report showed Friday’s excess liquidity rose to €1.869T from €1.855T prior. Use of the marginal lending facility increased from €136M to €561M.
• Corporate issuance saw $12.2B sold in the primary market last week

Looking Ahead

• (UK) EU-UK official meet to discuss post-Brexit trading relationship during the week
• (CO) Colombia Mar Consumer Confidence: -6.4e v -7.8 prior
• (BE) Belgium Debt Agency (BDA) announces upcoming OLO bond issuance for Thursday, Apr 19th
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills
• 06:00 (IL) Israel Mar Consumer Confidence: No est v 128 prior
• 06:00 (IL) Israel Q4 Final GDP Annualized (3rd Reading): No est v 3.6% prelim
• 06:00 (IE) Ireland Feb Trade Balance: No est v €5.5B prior
• 06:00 (IL) Israel to sell Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (RO) Romania to sell Bills
• 07:00 (RO) Romania to sell Bonds
• 07:00 (BR) Brazil Apr FGV Inflation IGP-10 M/M: 0.4%e v 0.5% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 07:30 (BR) Brazil Feb Economic Activity Index (Monthly GDP) M/M: +0.1%e v -0.6% prior; Y/Y: 0.8%e v 3.0% prior
• 08:00 (PL) Poland Mar CPI Core M/M: 0.2%e v 0.0% prior; Y/Y: 0.8%e v 0.8% prior
• 08:00 (RO) Romania Apr Central Bank Minutes
• 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming actions in week
• 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 08:05 (UK) Baltic Dry Bulk Index
• 08:30 (US) Apr Empire Manufacturing: 19.6e v 22.5 prior
• 08:30 (US) Mar Advance Retail Sales M/M: +0.4%e v -0.1% prior; Retail Sales Ex Auto M/M: 0.2%e v 0.2% prior, Retail Sales (Ex Auto and Gas): 0.4%e v 0.3% prior; Retail Sales Control Group: 0.3%e v 0.1% prior
• 08:55 (FR) France Debt Agency(AFT) to sell combined €4.5-5.7B in 3-month, 6-month and 12-month bills
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
• 09:00 (BE) Belgium Feb Trade Balance: No est v -€0.2B prior
• 09:30 (EU) ECB announces Covered-Bond Purchases
• 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
• 09:45 (UK) BOE to buy £1.22B in in APF Gilt purchase operation (3-7 years); Bid-to-cover: 3.07x prior
• 10:00 (US) Feb Business Inventories: 0.6%e v 0.6% prior
• 10:00 (US) Apr NAHB Housing Market Index: 70e v 70 prior
• 11:00 (CO) Colombia Feb Industrial Production Y/Y: 1.4%e v 1.0% prior
• 11:00 (CO) Colombia Feb Retail Sales Y/Y: 5.7%e v 6.2% prior
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 13:15 (US) Fed’s Bostic speaks on the Economy and Rural Market Trends
• 16:00 (US) Weekly Crop Progress Report
• 16:00 (US) Feb Total Net TIC Flows: No est v $119.7B prior; Net Long-term TIC Flows: No est v $62.1B prior