European PMI Services Continues The Trend Of Disappointing Data

• Focus on upcoming US jobs report. The US-China trade talks have produced positive headlines but provided little inspiration for risk to rally
• Major European PMI Services data was disappointing during the session (Beats: None ; Misses: Euro Zone, Germany, Italy, Spain; In-line: France)

Asia:

• RBA Quarterly Statement reiterated the view that the board saws no strong case for near-term move in cash rate; higher rates likely to be “appropriate” at some time if economy improved as expected
• China Apr Caixin PMI Services: 52.9 v 52.3e
• North Korea said to agree to full denuclearization by 2020 and accepted IAEA inspections of its nuclear facilities
• Japan, China and South Korea Finance leaders statement highlighted the risks posed by rising trade protectionism

Europe:

• Some UK officials said to believe that Brexit transition period will need to be extended potentially for years because any new customs regime will not be ready to come into force in time
• UK may not be able to leave customs union until 2023 as it would take 5 years to implement the technological Irish border fix
• Brexit Secretary Davis said to have hinted he might quit the Cabinet because of Britain’s customs union row
• UK PM May Conservative Party said to hold on to overall control of London’s Wandsworth council in local government elections
• NIESR cuts UK 2018 growth forecast from 1.9% to 1.5%. BoE would not raise interest rates in May (meeting is next week) but was still set to start continuing normalizing its policy and hike again in August

Americas:

• Treasury Sec Mnuchin stated that the US and China were having very good conversation on trade

Economic Data:

• (IN) India Apr Services PMI: 51.4 v 50.3 prior, Composite PMI: 51.9 v 50.8 prior
• (SE) Sweden Apr Services PMI: 60.1 v 59.2 prior
• (FR) France Mar Trade Balance: -€5.3B v -€5.0Be
• (FR) France Mar Current Account Balance: -€1.3B v -€0.9B prior
• (FR) France Mar YTD Budget Balance: -€33.1B v -€28.5B prior
• (ES) Spain Apr Net Unemployment M/M: -86.7K v -100.6Ke
• (HU) Hungary Mar Retail Sales Y/Y: 7.1% v 6.0%e
• (ES) Spain Apr Services PMI: 55.6 v 56.1e (53rd month of expansion), Composite PMI: 55.4 v 55.5e
• (ZA) South Africa Apr PMI (whole economy): 50.4 v 52.0e (3rd month of expansion)
• (SE) Sweden Mar Private Sector Production M/M: 0.0% v 0.3%e; Y/Y: 3.7% v 4.2%e
• (SE) Sweden Mar Industrial Orders M/M: -1.7% v +0.2% prior; Y/Y: -1.9% v +0.7% prior
• (SE) Sweden Mar Industry Production Value Y/Y: 7.3% v 5.1%e, Service Production Value Y/Y: 4.8% v 4.5%e
• (IT) Italy Apr Services PMI: 52.6 v 53.0e (22nd month of expansion), Composite PMI: 52.9 v 53.7e
• (FR) France Apr Final Services PMI: 57.4 v 57.4e (confirmed 22nd month of expansion), Composite PMI: 56.9 v 56.9e
• (DE) Germany Apr Final Services PMI: 53.0 v 54.1e (confirmed 58th month of expansion), Composite PMI: 54.6 v 55.3e
• (EU) Euro Zone Apr Final Services PMI: 54.7 v 55.0e (confirmed 58th month of expansion, Composite PMI: 55.1 v 55.2e
• (UK) Apr New Car Registrations Y/Y: +10.4% v -15.7% prior
• (RU) Russia Narrow Money Supply w/e Apr 27th: 9.91T v 9.87T prior
• (CN) China Q1 Preliminary Current Account: -$28.2B v +62.3B q/q
• (TW) Taiwan Apr Foreign Reserves: $457.1B v $457.2B prior
• (EU) Euro Zone Mar Retail Sales M/M: 0.1% v 0.5%e; Y/Y: 0.8% v 1.9%e

Fixed Income Issuance:

• None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +0.2% at 385.5, FTSE +0.5% at 7537, DAX +0.2% at 12713, CAC-40 -0.3% at 5487, IBEX-35 +0.2% at 10058, FTSE MIB +0.4% at 24157, SMI +0.4% at 8878, S&P 500 Futures -0.1%]
• Market Focal Points/Key Themes: European Indices trade mixed this morning ahead of US Non Farm Payrolls and after mixed earnings this morning. The French CAC underperforms weighed down by banking names, with BNP Paribas and SocGen both trading lower after missing estimates. In the UK HSBC trades lower after a profit miss. In other notable earners BMW trades lower after weaker Revenue numbers, Airliners IAG trades higher while Air France trades lower after warning on lower operating profits due to the recent strikes. Looking ahead notable earners include Alibaba, Celgene and Aon.

Movers

• Consumer Discretionary [ Int Cons Airlines [IAG.UK] +5.7% (Earnings), Pearson [PSON.UK] +5.1% (Earnings), Air France [AF.FR] -7% (Earnings), Oriflame [ORI.SE] -17% (Earnings) ]
• Industrials [BMW [BMW.DE] -1.6% (Earnings), Basf [BAS.DE] +1.1% (Earnings) ]
• Financials [HSBC [HSBA.UK] -3% (Earnings), BNP Paribas [BNP.FR] -2.5% (Earnings), SocGen [GLE.FR] -6.5% (Earnings)]
• Energy [Vestas Wind [VWS.DK] -3% (Earnings) )

Speakers

• ECB’s Constancio (Portugal, term expires in May): Caution in removing stimulus is justified by the subdued inflation dynamics. Unconventional tools should be used when ever needed
• France Survey of Industrial Investment noted that businesses were planning on increasing investment by 5% in 2018 (compares to 4% in prior survey)
• The five largest European nations said to be favorable to a digital tax
• US delegation in China said to have reiterated its demand that China narrow its trade surplus by $200B by 2020. US asked China not to target US farmers in trade moves and halt some subsidies for made-in China by 2025. US also asked China to issue investment negative list by July 1st . Asked China to strengthen IP protection and enforcement. The US requested to meet China quarterly for review process
• US and China said to have reached consensus on some issues in trade talks but have areas of major disagreements in others that still exist

Currencies

• The USD was holding onto slight gains near 2018 highs against most major pairs ahead of the US jobs report for April. Monetary policy divergence had remained the overall theme in recent months. Divergence among the G3 trajectories has placed the USD into a higher gear in recent weeks
• EUR/USD remained below the 1.20 level as major Services PMI data disappoint in most cases and highlighted the recent ECB cautiousness on normalization.
• Emerging market currencies continue to experience turmoil. Argentina Central Bank hiked rated by another 300bps for the 2nd time in a week to stem capital outflows while the Turkish Lira continued to probe record lows against the USD

Fixed Income

• Bund Futures trade 2 ticks higher at 159.20 ahead of the US employment report. Upside targets 159.75, while a return lower targets the 157.25 level.
• Gilt futures trade at 122.65 higher by 15 ticks, near the highs made in April. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.
• Friday’s liquidity report showed Thursday’s excess liquidity fell to €1.900T from €1.901T prior. Use of the marginal lending facility decreased from €74M to €53M.
• Corporate issuance saw 9 issuers raise $8.8B in the primary market

Looking Ahead

• (RU) Russia Apr Sovereign Wealth Funds: Wellbeing Fund: $B v $65.9B prior
• (IN) India to sell combined INR120B in 2020, 2026, 2031, 2033 and 2046 bonds
• 05:30 (ZA) South Africa to sell ZAR600M in I/L 2029, 2038 and 2050 bonds
• 06:00 (UK) DMO to sell combined £2.5B in 1-month, 6-month and 12-month Bills (£0.5B, £0.5B and £1.5B respectively)
• 06:30 (IS) Iceland to sell 2022 and 2028 RIKB Bonds
• 06:45 (US) Daily Libor Fixing
• 07:30 (IN) India Weekly Forex Reserves
• 07:30 (TR) Turkey Apr Effective Exchange Rate (REER): No est v 83.42 prior
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:00 (RU) Russia Apr CPI M/M: 0.4%e v 0.3% prior; Y/Y: 2.5%e v 2.4% prior; CPI YTD: 1.2%e v 0.8% prior, CPI Core M/M: 0.2%e v 0.1% prior; Y/Y: 1.9%e v 1.8% prior
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (US) Apr Change in Nonfarm Payrolls: +192Ke v +103K prior, Change in Private Payrolls: +190Ke v +102K prior, Change in Manufacturing Payrolls: +20Ke v +22K prior
• 08:30 (US) Apr Average Hourly Earnings M/M: 0.2%e v 0.3% prior; Y/Y: 2.7%e v 2.7% prior; Average Weekly Hours: 34.5e v 34.5 prior
• 08:30 (US) Apr Unemployment Rate: 4.0%e v 4.1% prior, Underemployment Rate: No est v 8.0% prior, Labor Force Participation Rate: 62.9%e v 62.9% prior
• 09:00 (BR) Brazil Apr Services PMI: No est v 50.4 prior, Composite PMI: No est v 51.5 prior
• 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 27th: No est v $463.8B prior
• 09:00 (DE) ECB’s Weidmann (Germany) in Frankfurt
• 10:00 (CA) Canada Apr Ivey Purchasing Managers Index (seasonally adj): No est v 59.8 prior; PMI unadj: No est v 64.7 prior
• 11:00 (CO) Colombia Mar Exports: $3.4Be v $2.9B prior
• 11:00 (EU) Potential sovereign ratings after EU close (France and Luxembourg Sovereign Debt to be rated by Moody’s)
• 12:00 (US) Fed’s Dudley (dove, FOMC voter)
• 13:00 (US) Weekly Baker Hughes Rig Count data
• 15:00 (US) Fed’s Williams (moderate, voter)
• 17:30 (US) Fed’s Quarles (hawk, FOMC voter)
• 20:00 (US) Fed’s Bostic (FOMC voter, dove):