Calm Waters In Session

Notes/Observations

• Increasingly likely that Northern League and Five Star will form an anti-euro, anti-austerity full on populist coalition in Italy

Asia:

• RBNZ Gov Orr: Move lower in NZD currency (Kiwi) after Thursday’s rate decision ‘a good thing’

Europe:

• PM May Cabinet said to be divided into two rival groups to fight out how Britain should manage its EU customs arrangements after Brexit. Brexiteers favor a plan called “max-fac” which relies on tech as part an attempt to minimize border checks. The other camp favor the PM’s option under which the UK would collect tariffs on Brussel’s behalf
• BOE Gov Carney stated that he expected interest rate rise this year if there were not any shocks to the economy

Americas:

• Commerce Secretary Wilbur Ross tells CNBC that he thinks China ‘agreed to the concept’ of reducing the trade deficit
• US Treasury Official: US/China officials set to meet in Washington on Friday, May 11th to discuss trade disputes (Note: meeting is a follow up to last week’s high-level talks and prepares the way for Vice Prem Liu He’s visit)

Energy:

• Iran Oil Min Zanganeh: prefers $65/bbl crude prices; Iran needs foreign investment but can survive without it

Economic Data:

• (DK) Denmark Apr CPI M/M: 0.5% v 0.3%e; Y/Y: 0.8% v 0.6%e
• (DK) Denmark Apr CPI EU Harmonized M/M: 0.6% v 0.3%e; Y/Y: 0.7% v 0.5%e
• (ES) Spain Apr Final CPI M/M: 0.8% v 0.8%e; Y/Y: 1.1% v 1.1%e
• (ES) Spain Apr Final CPI EU Harmonized M/M: 0.8% v 0.8%e; Y/Y: 1.1% v 1.1%e
• (ES) Spain Apr CPI Core M/M: 0.8% v 0.5% prior; Y/Y: 0.8% v 1.0%e
• (ES) Spain Mar House transactions Y/Y: -3.1% v +16.2% prior
• (HK) Hong Kong Q1 GDP Q/Q: 2.2% v 0.8%e; Y/Y: 4.7% v 3.4%e
• (CN) China Apr Aggregate Financing (CNY): 1.56T v 1.350Te
• (CN) China Apr M2 Money Supply Y/Y: 8.3% v 8.5%e
• (CN) China Apr New Yuan Loans (CNY): 1.18T v 1.100Te

Fixed Income Issuance:

• None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx50 -0.3% at 3,557, FTSE flat at 7,700, DAX -0.3% at 12,977, CAC-40 -0.4% at 5,524; IBEX-35 +0.1% at 10,258, FTSE MIB -0.1% at 24,015, SMI -0.2% at 8,970 , S&P 500 Futures +0.1%]
• Market Focal Points/Key Themes: European markets opened mixed after several were closed for holiday, remaining mixed as the session progressed; commodities kept materials stocks under pressure; healthcare sector outperforming; ZPG to be acquired supporting Rightmove and Autotrader; Denmark closed for holiday; upcoming results expected in the US session include Thomson Reuters among others

Equities

• Healthcare: Cosmo Pharmaceuticals COPN.CH -21% (FDA decision)
• Industrials: OCI OCI.NL +3.0% (results, Ferrovial FER.ES -2.4% (results), Sika SIK.CH +10% (deal with Saint-Gobain)
• Materials: Arcelormittal MT.NL +2.6% (results)
• Technology: ZPG ZPG.UK +29.6% (takeover)
• Telecom: Tiscali TIS.IT +5.5% (results)

Speakers

• BOE’s Broadbent: Recent slowdown seen as temporary, Q1 economic weakness was partly due to weather (in-line with recent MPC statement). Right to wait and assess the health of the economy. BOE message was that interest rates will rise gradually
• Czech Central Bank (CNB) May Minutes: Policy makers agreed that economy was facing inflation pressures from positive output growth and tight labor market. Several members argued that an immediate rate hike would not be consistent with current flexible inflation targeting framework. Weaker FX for an extended period would make it possible to tighten monetary condition via interest rates
• Turkey President Chief Adviser Ertem reiterated view that TRY currency (Lira) to stabilize after the June elections
• Philippines Central Bank (BSP) Gov Espenilla: Liquidity tools provided the scope for further reserve rate cuts
• Japan Fin Min Aso reiterated government to work together with BoJ and use all available policy means to achieve strong growth
• BoJ Gov Kuroda stated that Govt had made progress to restore fiscal health; more needed to be done on structural reforms. Reiterated shares a view with govt
• BoJ Assistant Gov Maeda stated that could continue to purchase bonds under the Yield Control scheme (YCC)

Currencies

• FX market experienced a very quiet session on Friday with the major pairs little changed from their opening levels in Asia.
• USD consolidating its recent strength in the after math of a soft CPI reading from Thursday
• EUR/USD steady at 1.1920 area. The Italian political scene to likely see the Northern League and Five Star partie form an anti-euro, anti-austerity coalition in Italy. Markets will be on the lookout if the govt makes good on their populists promises or whether they get watered down by the realities of power. Analysts note that it would be interesting to see how it politicizes the ECB end of QE decision

Fixed Income

• Bund Futures trades at 159.09 up 2 ticks reclaiming the 159 handle in quiet range bound trade with upside momentum above 158.25 targeting 159.42. Support lies at 158.81 then 158.52.
• Gilt futures trade at 122.34 higher by 2 ticks, consolidating above 122 following the BoE rate decision. Continuation above 122.50 targets 122.69, while a move below lows targets 121.82 and 121.67.
• Friday’s liquidity report showed Thursday’s excess liquidity stayed steady at €1.901T. Use of the marginal lending facility increased from €170M to €227M.
• Corporate issuance saw $14.2B come to market via 5 issuers as issuance for the week passes $30B.

Looking Ahead

• (IT) Italy Debt Agency (Tesoro) to sell €5.25-6.75B in 2021, 2025 and 2033 BTP Bonds
• 06:00 (PT) Portugal Apr Final CPI M/M: No est v 0.7% prelim; Y/Y: No est v 0.4% prelim
• 06:00 (PT) Portugal Apr Final CPI EU Harmonized M/M: No est v 1.0% prelim; Y/Y: No est v 0.3% prelim
• 06:00 (IE) Ireland Mar Industrial Production M/M: No est v -3.8%% prior; Y/Y: No est v 3.0% prior
• 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)
• 06:45 (US) Daily Libor Fixing
• 07:30 (IN) India Weekly Forex Reserves
• 08:00 (IN) India Mar Industrial Production Y/Y: 6.1%e v 7.1% prior
• 08:00 (BR) Brazil Mar Retail Sales M/M: +0.2%e v -0.2% prior; Y/Y: 5.5%e v 1.3% prior
• 08:00 (BR) Brazil Mar Broad Retail Sales M/M: +0.7%e v -0.1% prior; Y/Y: 6.7%e v 5.2% prior
• 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming bond issuance
• 08:00 (IN) India announces upcoming bill issuance (held on Wed)
• 08:15 (UK) Baltic Dry Bulk Index
• 08:30 (US) Apr Import Price Index M/M: 0.5%e v 0.0% prior; Y/Y: 3.9%e v 3.6% prior; Import Price Index ex Petroleum M/M: 0.2%e v 0.1% prior
• 08:30 (US) Apr Export Price Index M/M: 0.4%e v 0.3% prior; Y/Y: No est v 3.4% prior
• 08:30 (CA) Canada Apr Net Change in Employment: +20.0Ke v +32.3K prior; Unemployment Rate: 5.8%e v 5.8% prior
• 08:30 (US) Fed’s Bullard (non-voter)
• 09:00 (MX) Mexico Mar Industrial Production M/M: -0.5%e v +0.4% prior; Y/Y: -3.6%e v +0.7% prior; Manufacturing Production Y/Y: -2.6%e v +0.9% prior
• 09:00 (RU) Russia Mar Trade Balance: $12.9Be v $12.2B prior; Exports: $34.7Be v $31.2B prior; Imports: $21.6Be v 19.0B prior
• 09:00 (CA) Bank of Canada (BOC) Wilkins
• 09:15 (EU) ECB chief Draghi in Florence
• 10:00 (US) May Preliminary University of Michigan Confidence: 98.3e v 98.8 prior
• 11:00 (CO) Colombia Mar Industrial Production Y/Y: -2.5%e v +1.5% prior
• 11:00 (CO) Colombia Mar Retail Sales Y/Y: 2.8%e v 5.0% prior
• 11:00 (CO) Colombia Mar Trade Balance: -$0.4Be v -$0.5B prior
• 11:00 (EU) Potential sovereign ratings after European close (Egypt Sovereign Debt to be rated by S&P; Moody’s on Slovenia
• 12:00 (IS) Iceland Apr International Reserves (ISK): No est v 652B prior
• 13:00 (US) Weekly Baker Hughes Rig Count data