German IFO survey misses expectations

Notes/Observations

- German April ZEW survey misses expectations (Business Climate: 106.6 v 107.1e)

- Key monetary policy decisions during the week (FED, RBNZ, Brazil, BOJ and Russia)

 

Overnight news

Asia:

- BOJ officials said to want the govt to do more to support and spur economic growth

- Japan PM Abe to create an extra budget to address the economic damage caused by deadly earthquakes in Kumamoto earlier this month. Wants to pass the budget before the current parliamentary session ends on June 1st and comes ahead of an upper house election in July

- China's total debt (including domestic and foreign borrowing) has risen to a record 237% of GDP in Q1

Europe:

- Austria 1st round Presidential elections: Freedom Party (far right) tops voting with runoff in May. Freedom Party 36% vote with Greens: 20%

 

Economic data

- (SG) Singapore Mar CPI M/M: 0.0% v 0.1%e; Y/Y: -1.0% v -1.0%e; Core CPI Y/Y: 0.6% v 0.6%e

- (CZ) Czech Apr Business Confidence: 12.7 v 14.2 prior; Consumer Confidence: 2.0 v 2.5 prior, Composite (Consumer & Business) Confidence: 10.5 v 11.9 prior

- (SE) Sweden Mar Unemployment Rate (miss): 7.7% v 7.5%e; Unemployment Rate (Seasonally Adj): 7.2% v 7.0%e, Unemployment Rate Trend: 7.1% v 7.1% prior

- (DE) Germany Apr IFO Business Climate (miss): 106.6 v 107.1e; Current Assessment: 113.2 v 113.8e, Expectations Survey: 100.4 v 100.9e

- (PL) Poland Mar Unemployment Rate: 10.0% v 10.0%e (1st improvement in 5 months)

Fixed Income Issuance:

- (NO) Norway sold NOK4.0B vs. NOK4.0B indicated in 6-month Bills; Avg yield: 0.55% v 0.65% prior; Bid-to-cover: 2.39x v 2.14x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 -1.0% at 3,107, FTSE -0.6% at 6,273, DAX -1.3% at 10,239, CAC-40 -0.9% at 4,528, IBEX-35 -0.9% at 9,152, FTSE MIB -1.4% at 18,423, SMI -0.5% at 8,072, S&P 500 Futures -0.4%]

Market Focal Points/Key Themes: European equity indices are trading lower across the board as session losses in WTI and Brent are currently adding to risk-off sentiment; Commodity and mining stocks leading the losses in the FTSE 100 with Anglo American and BHP Billiton the notable laggards; shares of Koninklijke Philips in the Netherlands leading the losses in the Eurostoxx after releasing worse than prior years Q1 bottom line results; Financial stocks generally trading lower in Europe; upcoming scheduled US earnings include First Data Corp, Halliburton, Roper Technologies, and Xerox Corp (pre-market).

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [GVC Holdings GVC.UK +3.3% (FY15 results), St. Ives SIV.UK -44.1% (trading update)]

- Consumer Staples: [Eurofins Scientific ERF.FR +3.1% (Q1 sales)]

- Healthcare: [Koninklijke Philips PHIA.NL -4.6% (Q1 results), Merck KGaA MRK.DE +3.0% (Phase III TAILOR landmark study met primary endpoint), Novartis NOVN.CH +0.1% (To sell its 33% stake in Roche), Roche ROG.CH -1.0% (Novartis to sell its 33% stake, estimated value of $13.8B), UCB UCB.BE -0.9% (Q1 results)]

- Industrials: [TNT Express TNTE.NL -0.1% (Q1 results)]

- Materials: [Covestro 1COV.DE -1.9% (Q1 results)]

 

Speakers

- ECB's Constancio (Portugal): ECB policy contributed to financial integration and reiterated view that banking union should be completed. Financial market integration in EMU has slowed recently

- Spain Fin Min de Guindos reiterated that the govt 2016 budget deficit target of 3.6% was reachable

- German IFO economists saw Q1 GDP growth at +0.6% and Q2 at +0.3%. Domestic economy's mood was good but not euphoric with consumption remaining a very strong pillar of support

- Turkey Presidential advisor: Expect interest rates to continue falling

- India said to be considering raising the import duty for refined copper

- Japan Fin Min Aso: To submit extra budget in Mid-May. No plan for economic stimulus in budget. To raise sales tax as planned

- China PBoC said to ask banks to limit April new Yuan Loans to 70% of month's target

- China Commerce Ministry (MOFCOM): Simply applying trade protection measures cannot solve steels fundamental problems

- IMF official Ahmed: Saudi Arabia, other gulf states are acting to repair budgets and encouraged by Gulf's economic reform plan. The IMF forecasted 2016 economic growth in the six-nation Gulf Cooperation Council at 1.8% vs. 3.3% y/y

- Iran Foreign Min Zarif stated that govt did not recognize US Supreme Court ruling on assets

- Indonesia Opec Governor Widhyawan Prawiraatmadja stated that he did not see a producer meeting in advance of the upcoming June 2nd meeting

- UAE Oil Energy Ministry: Continued to seek stability in oil market

- Iran said to reach pre-sanction export levels by end of May

 

Currencies

- A slight pickup in risk aversion helped to firm the EUR and JPY currencies but overall FX price action was quiet ahead of some key central bank rate decision this week.

- EUR/USD was firmer by 0.3% to test above 1.1250 despite weaker German IFO survey. Dealers noted that eventually interest rate differentials and political uncertainties should weigh the EUR as they become increasingly evident

- GBP/USD registered a fresh six-week high to test 1.4470 during the Asian session building upon the recent improvement in Brexit polls shoing the stay camp gaining momentum.

- USD/JPY consolidated some of last Fridays move after reports circulated that BOJ officials wanted the govt to do more to support and spur economic growth. USD/JPY was lower by 0.5% but holding above the 111 level ahead of the NY morning. Market awaiting BOJ decision to see whether a mix of easing measures via a powerful package would be announce this week

Fixed Income:

- Bund futures trade at 162.66, up 17 ticks consolidating off the 162.34 base supported by weaker equities. A move below 162.34 sees support at 162.22 with a move lower targeting 162.00 then 161.88. Resistance remains at 162.87 with a move higher seeing 163.34 with a eventual target of 164.60 contract highs.

- Gilt futures trade at 119.65 up 9 ticks in quiet trade bouncing from fresh contract lows traded on Friday. A break below 119.39 lows would target 119.16 followed by 118.88. Resistance remains at 120.32 followed by 120.79 head and shoulder support, then 121.43 high. Short Sterling futures flattening slightly this morning with the front end down 1bp, and the back end up 1bp. Jun17Jun18 trade at 20/21 off slightly from Friday's high.

- Monday's liquidity report showed Friday's use of the marginal lending facility fell to €40M from a prior €41M.

- Corporate issuance was another quiet day on the domestic front, with the weeks volume at $22.2B ex SSA, bringing the months issuance to $72.15B. May is expected to see a pick up with analysts estimated primary volumes in the region of $110-125B, which is down from last years $157B. Euro denominated issuance last week saw €26.3B come to market, and this morning saw Unilever sell €1.3B in 4,8 and 12 year bonds to kick start the week.

Political/In the Papers:

- BOE might have asked clearing houses on on how they would cope in event UK did exit from the European Union

 

Looking Ahead

- (DE) German Chancellor Merkel to host G5 leaders in Hanover

- (EU) ECB members Constancio (Portugal), Coeure (France) and SSM chief Nouy in Frankfurt

- 05:30 (DE) Germany to sell €1.5B in 12-month BuBills

- 06:00 (UK) Apr CBI Industrial Trends Total Orders: -17e v -14 prior, Selling Prices: No est v -1 prior, Business Optimism: No est v -4 prior

- 06:00 (RO) Romania to sell 3.25% 2021 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (IN) India announces details of upcoming bond auction (held on Fridays)

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 07:30 (TR) Turkey Apr Real Sector Confidence (Seasonally Adj): No est v 104.1 prior; Real Sector Confidence (unadj): 109.0e v 106 prior

- 07:30 (TR) Turkey Apr Capacity Utilization: 75.0%e v 74.3% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (BR) Brazil Mar Federal Debt Total (BRL): No est v 2.819T prior

- 08:50 (FR) France Debt Agency (AFT) to sell combined €5.3-6.5B in 3-month, 6-month and 12-month bills

- 09:00 (BE) Belgium Apr Business Confidence: -4.0e v -4.2 prior

- 09:00 (MX) Mexico Feb Retail Sales M/M: 0.1%e v 2.7% prior; Y/Y: 5.1%e v 5.2% prior

- 09:30 (EU) ECB announces Covered-Bond Purchases

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 10:00 (US) Mar New Home Sales: 520Ke v 512K

- 10:30 (US) Apr Dallas Fed Manufacturing Activity: -10.0e v -13.6 prior

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

- 13:00 (US) Treasury to sell 2-Year Notes

- 16:00 (US) Weekly Crop Progress Report

- 19:00 (KR) South Korea Q1 Preliminary GDP Q/Q: 0.4%e v 0.7% prior; Y/Y: 2.7%e v 3.1% prior

- 21:00 (PH) Philippines Feb Trade Balance: -$1.5Be v -$2.6B prior, Imports: No est v $6.8B prior; Y/Y: 12.0%e v 30.8% prior

- 23:00 (TH) Thailand to sell combined THB80B in 3-month and 6-month Bills

- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills

- (CO) Colombia Mar Retail Confidence: No est v 25.4 prior; Industrial Confidence: No est v 10.4 prior