Awaiting Trump’s Decision On Iran Nuclear Accord

Notes/Observations

• All eyes will be on the announcement from US President Trump on the Iran nuclear deal at 14:00 ET (18:00 GMT)
• Germany Mar Industrial production come in above expectations
• Italian Center-right parties reject President Mattarella’s call for a neutral govt to be in place until year-end to put together a 2019 budget plan before any new election

Asia:

• Australia Mar Retail Sales M/M: 0.0% v 0.2%e; Q1 Retail Sales Ex Inflation Q/Q: 0.2% v 0.6%e
• New Zealand Q2 2-year Inflation Expectation Survey: 2.01% v 2.11% prior
• China Apr Trade Balance (USD): $28.8B v +$27.8Be; Exports Y/Y: +12.9% v +8.0%e; Imports Y/Y: 21.5% v 16.0%e . (Note: Trade surplus with US +$22.2B v $15.4B m/m)

Europe:

• ECB’s Praet (Belgium, chief economist): euro area data pointed to some moderation but remained consistent with a broad-based and solid expansion. Reiterated view that an ample degree of monetary stimulus remained key to meeting the ECB’s inflation goal of 2%. Measures of underlying inflation had yet to show a convincing sign of sustained upward trend
• ECB’s Smets (Belgium): recent economic data was consistent with continued robust expansion; ECB might have better understanding of data at June or July meetings. ECB could announce phaseout of QE over the summer
• Italy President Mattarella confirmed there was no possibility of forming a political govt; urged parties to support a “neutral” non-partisan govt. Was against having an early election in the summer because of need for 2019 budget
• Italy 5-Star Party leader Di Maio stated that he would not support a neutral govt; new elections should be held in July
• Italy’s Northern League: Italy must have a center-right govt or else immediate elections; ruled out Presidents suggestion of neutral government
• PM May has delayed discussion of a customs partnership with the EU until next Wednesday, May 16th
• ESM chief Regling reiterated that Euro Zone Finance Ministers could then consider prolonging loan repayment periods to provide Greece with further debt relief

Americas:

• US President Trump expected to make decision on Iran deal later on Tuesday
• Reports circulated that US and European diplomats were near a deal on Iran seeking to persuade PresidentTrump to stay in Iran nuclear deal
• Fed’s Barkin (FOMC voter): Fed policy was still fairly accommodative (Doesn’t comment on how many rate hikes he sees in 2018)

Economic Data:

• (NL) Netherlands Apr CPI M/M: 0.4% v 0.4%e; Y/Y: 0.9% v 0.9%e
• (NL) Netherlands Apr CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: 0.7% v 0.7%e
• (CH) Swiss Apr Unemployment Rate: 2.7% v 2.9%e; Unemployment Rate (seasonally adj)2.7% v 2.9%e
• (DE) Germany Mar Current Account Balance: €29.1B v €27.0Be; Trade Balance: €25.2B v €22.5B); Exports M/M: +1.7% v +1.8%e; Imports M/M: -0.9% v +1.0%e
• (DE) Germany Mar Industrial Production M/M: 1.0% v 0.8%e; Y/Y: 3.2% v 3.0%e
• (FI) Finland Mar Preliminary Trade Balance: -€0.2B v -€0.3B prior – (CH) Swiss Q1 UBS Real Estate Bubble Index: 1.10 v 1.21 prior
• (NO) Norway Mar Industrial Production M/M: -0.7% v -0.5% prior; Y/Y: 0.2% v 1.8% prior
• (NO) Norway Mar Manufacturing Production M/M: -0.1% v +0.2% prior; Y/Y: 0.9% v 0.2% prior
• (ZA) South Africa Apr Gross Reserves: $49.5B v $49.5Be; Net Reserves: $43.1B v $43.4Be
• (HU) Hungary Mar Industrial Production M/M: -0.7% v 0.0%e; Y/Y: 1.9% v 3.0%e
• (UK) Halifax House Prices M/M: -3.1% v -0.2%e; 3M/Y: 2.2% v 3.2%e
• (SE) Sweden Apr Budget Balance (SEK): B v 6.4B prior
• (TW) Taiwan Apr CPI Y/Y: 2.0% v 1.8%e; CPI Core Y/Y: 1.3% v 1.5%e; WPI Y/Y: 2.5% v 1.2%e

Fixed Income Issuance:

• (ID) Indonesia sold IDR0T (nil) in 3-month, 9-month Bills, 5-year, 10-year and 20-year Bonds (rejects all bids)
• (NL) Netherlands Debt Agency (DSTA) sold €1.79B vs. €1.5-2.5B indicated range in 0.75% July 2028 DSL bonds; Avg Yield: 0.676% vs. 0.791% prior
• (ES) Spain Debt Agency (Tesoro) sold total €4.505B vs. €4.0-5.0B indicated range in 6-month and 12-month bills (Apr 3rd )
• Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month Bills; Avg Yield: -0.8349% v -0.8596% prior; bid-to-cover: x v 3.46x prior
• (CH) Switzerland sold CHF513.7M in 3-month Bills; Yield: -0.858% v -0.849% prior
• (AT) Austria Debt Agency (AFFA) sold €1.15B vs. €1.15B indicated in 2028 and 2047 RAGB bonds
• Sold €650M in 0.75% 2028 RAGB bond; Avg Yield: 0.707% v 0.666% prior; Bid-to-cover: 2.21x v 2.45x prior
• Sold €350M in 1.5% Feb 2047 RAGB; Avg Yield: 1.459% v 1.477% prior; Bid-to-cover: 2.28x v 2.08x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.4% at 388.5, FTSE +0.1% at 7577, DAX -0.7% at 12864, CAC-40 -0.5% at 5506, IBEX-35 -0.2% at 10124, FTSE MIB -2.1% at 24027, SMI -0.4% at 8944, S&P 500 Futures -0.3%]
• Market Focal Points/Key Themes: European Indices trade mostly lower with the exception of the FTSE 100 which trades slightly higher after being closed for UK Bank Holiday yesterday. The Dax leads the decliners after outperformance yesterday, with shares of Deutsche Post a notable decliner after a miss on the top and bottom line. LafargeHolcim another decliner after a fall in EBITDA, with EOAN, Uniper, Munich Re, PNL, DSM and Axel Springer other decliners after earnings. To the upside Zalando trades higher after a Revenue beat. In the M&A space Virgin Money trades higher after confirming bid interest from CYBG, First Group trades lower after Apollo dropped their pursuit for the company. Shire trades higher after the board recommends the takeover offer from Takeda. Looking ahead notable earners include JD.com, Veritiv, Aramark and Crocs.

Movers

• Consumer Discretionary [ FirstGroup [FGP.UK] -6.4% (Apollo drops takeover attempt), Sky [SKY.UK] -1.5% (Comcast has filed formal notice to EC of intention to acquire Sky), Zalando [ZAL.DE] +3.5% (Earnings)]
• Industrials [ Deutsche Post [DPW.DE] -6.2% (Earnings), LafargeHolcim [LHN.CH] -3.1% (Earnings), Virgin Money [VM.UK] +8.3% (Confirm approach by CYBG), PNL [PNL.NL] -3.1% (Earnings)]
• Financials [Munich Re [MUV2.DE] -0.9% (Earnings)]
• Healthcare [Shire [SHP.UK] +4% (Confirms take over £49.0/shr by Takeda),
• Energy [Uniper [UN01.DE] -1.0% (Earnings)]

Speakers

• Sweden Central Bank (Riksbank) Apr Minutes: Members did discuss development of the exchange rate. Forecast for the repo rate had been revised down since the monetary policy meeting in February and indicated that slow increases in the repo rate would not be initiated until towards the end of the year.
• Riksbank Gov Ingves: Rate of inflation had developed well in line with target but was still not moving lastingly around the target. No completely on firm footing regarding inflation. Rapid SEK currency (Krona) appreciation could impede inflation
• Riksbank Dep Gov Ohlsson (dissenter): Inflation around 2% was decisive argument for rate hike
• Riksbank Member Skingsley: Significant part of recent SEK currency (Krona) weakness was seen as temporary; likely to support a rate hike in Oct or Dec
• Riksbank Member Floden: Supported the Repo rate path outlook but preferred smaller revision of forecasts. Hardly appropriate to support a rate hike in July and wanted to see clearer signs of underlying inflation not taken a weaker course
• Sweden Central Bank (Riksbank) Dep Gov Jansson (speech) stated that inflation needed continued support by monetary policy. Domestic economy was strong with inflation close to the 2% target
• Turkey President Erdogan reiterated view that weakness in TRY currency (Lira) had no fundamental or technical basis
• Fed Chair Powell (in Geneva) stated that Fed policy normalization was manageable for emerging markets. Risk sentiment would bear close watching as normalization proceeded. Many emerging markets had adopted more flexible exchange rates, and reduced their vulnerabilities. Some investors and institutions might not be well positioned

Currencies

• USD continued its firm tone and was at fresh 2018 highs against numerous pairs
• EUR/USD could not sustain initial gains above the 1.19 as Germany finally had some decent economic data. Italian political concerns seemed to weigh on sentiment. Italy 5-year Credit Default Swap at approx 91bps and at 2-week highs as the Center-right rejected President Mattarella’s call for a neutral govt to be in place until year-end to put together a 2019 budget plan before any new election.
• GBP/USD probed below the 1.35 level despite some analysts concerns that there were some hawkish risks at Thursday’s BoE meeting (market currently not pricing anything at this time). Dealers noting that current UK economic conditions were at five year lows and un-phased by any potential for a hawkish surprise

Fixed Income

• Bund Futures trade 8 ticks lower at 159.18 as Italian/German 10-year gap hits the widest in 3-weeks at 127bps. Upside targets 159.75, while a return lower targets the 157.25 level.
• Gilt futures trade at 122.54 lower by 2 ticks, approaching the highs made in March. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.
• Tuesday’s liquidity report showed Monday’s excess liquidity fell to €1.892T from €1.898T prior. Use of the marginal lending facility decreased from €14M to €12M.

Looking Ahead

• (PT) Bank of Portugal Reports Apr ECB financing to Portuguese Banks: €B v €22.0B prior
• (RU) Russia Apr Light Vehicle Car Sales Y/Y: 15%e v 14% prior
• (AR) Argentina Central Bank (BCRA) Interest Rate Decision: Expected to leave 7-Day Repo Reference Rate unchanged at 40.00%
• (UK) Commons reconvenes after May recess
• 05:30 (AU) Australia Govt announces 2018/19 budget
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (EU) ECB allotment in 7-day Main Financing Tender ( – 05:30 (DE) Germany to sell €750M in 2030 and 2046 Inflation-linked bonds (Bundei)
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.4-2.8B 6-month and 12-month Bills
• 05:30 (ZA) South Africa to sell combined ZAR2.4B in 2031, 2040 and 2044 bonds
• 06:00 (US) Apr NFIB Small Business Optimism: 104.7e v 104.7 prior
• 06:30 (EU) ESM to sell €2.0B in 3-month bills – 06:45 (US) Daily Libor Fixing
• 07:00 (RU) Russia announces upcoming OFZ bond auction (held on Wed)
• 07:00 (CL) Chile Apr CPI M/M: 0.1%e v 0.2% prior; Y/Y: 1.7%e v 1.8% prior, CPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: No est v 1.6% prior
• 07:00 (BR) Brazil Apr FGV Inflation IGP-DI M/M: 0.6%e v 0.6% prior; Y/Y: 2.7%e v 0.8% prior
• 07:45 (US) Weekly Goldman Economist Chain Store Sales
• 08:00 (HU) Hungary Central Bank (MNB) Apr Minutes
• 08:05 (UK) Baltic Dry Bulk Index
• 08:15 (CA) Canada Apr Annualized Housing Starts: 220.0Ke v 225.2K prior
• 08:55 (US) Weekly Redbook Sales
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (US) Mar JOLTS Job Openings: 6.10Me v 6.052M prior
• 10:00 (FI) ECB’s Liikanen (Finland)
• 10:30 (TR) Turkey Apr Cash Budget Balance (TRY): No est v -6.7B prior
• 11:30 (US) Treasury to sell 4-Week Bills
• 12:00 (US) DOE Short-Term Crude Outlook
• 13:00 (US) Treasury to sell 3-Year Notes
• (AR) Argentina Central Bank (BCRA) Expected to leave 7-Day Repo Reference Rate unchanged at 40.00%
• 16:30 (US) Weekly API Oil Inventories