European confidence data mixed in session

EU Mid-Market Update: Markets await FED and BOJ rate decisions; European confidence data mixed in session

 

Notes/Observations

- Entering 24-hour spree of high-level event risk highlighted by FED and BOJ rate decisions

- European confidence data mixed in session (France and Sweden miss, Germany beat, Italy mixed)

- UK GDP YoY reading registers a slight beat (2.1% v 2.0%e) but matches its slowest annual pace in three years

 

Overnight news Asia:

- Australia Q1 Consumer Prices comes in below expectations to a 7-year low and opens the door for more RBA rate cuts (QoQ: -0.2% v +0.2%e, YoY: 1.3% v 1.7%e)

- China Mar Industrial Profits YoY: +11.1% v -4.7% prior

Europe:

- Spain King Philipe sees no party able to form a majority govt, must call new elections

- Greece PM Tsipras said to request an special EU summit to secure a summer bailout deal; plans for Thursday Eurogroup meeting dropped

- France Mar Change in Jobseekers: -11.0Ke v 38.4K prior

Americas:

-Democrat Primaries: Clinton won 4 of 5 (Maryland, Delaware, Connecticut and Pennsylvania); Sanders won Rhode Island

-Republican Primaries: Donald Trump won all 5 ((Maryland, Delaware, Connecticut, Pennsylvania and Rhode Island)

Energy:

- Weekly API Oil Inventories: Crude: -1.1M v +3.1M prior; First draw in 3 weeks

- Venezuela Oil Min proposes non-OPEC producers attend the June 2nd OPEC meeting in Vienna

 

Economic data

- (JP) Japan Apr Small Business Confidence: 47.8 v 48.5e

- (DE) Germany Mar Import Price Index M/M: 0.7% v 0.3%e; Y/Y: -5.9% v -6.2%e

- (DE) Germany May GfK Consumer Confidence: 9.7 v 9.4e

- (FI) Finland Apr Consumer Confidence Index: 9.8 v 10.4 prior; Business Confidence: -8 v -5 prior

- (CH) Swiss Mar UBS Consumption Indicator: 1.51 v 1.45 prior

- (FR) France Apr Consumer Confidence: 94 v 95e

- (SE) Sweden Apr Consumer Confidence: 97.1 v 99.0e; Manufacturing Confidence: 107.9 v 111.7e, Economic Tendency Survey: 104.6 v 106.1e

- (EU) Euro Zone Mar M3 Money Supply Y/Y: 5.0% v 5.0%e

- (IT) Italy Apr Consumer Confidence Index: 114.2 v 115.0e; Business Confidence: 102.7 v 102.5e, Economic Sentiment: 102.7 v 100.1 prior

- (UK) Q1 Advance GDP Q/Q: 0.4% v 0.4%e; Y/Y: 2.1% v 2.0%e

Fixed Income Issuance:

- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 6-month Bills; Avg Yield: -0.172% v -0.050% prior; Bid-to-cover: 1.75x v 1.62x prior

- (SE) Sweden sold total SEK4.0B vs. SEK4.0B indicated in 2026 and 2039 Bonds

- (IN) India sold total INR150B in 3-month and 12-month Bills

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.1% at 3,121, FTSE -0.2% at 6,274, DAX flat at 10,261, CAC-40 +0.1% at 4,537, IBEX-35 +0.7% at 9,344, FTSE MIB -0.1% at 18,649, SMI +0.2% at 8,095, S&P 500 Futures -0.2%]

 

Equities

Market Focal Points/Key Themes: European equity indices are trading mixed across the board after a session of many corporate earnings releases, with market participants awaiting the Federal Reserves policy decision later today; Commodity and mining stocks in the FTSE 100 trading mixed with shares of Anglo American, Randgold Resources and Royal Dutch Shell trading higher but with Rio Tinto and BHP Billiton trading lower despite WTI and Brent continuing its rally in the morning session; Barclays leading the gains in the index after releasing its Q1 results; Standard Chartered the notable laggard after also releasing its Q1 results; Shares of Munich Re leading the losses in the Eurostoxx after the CEO stated at its AGM that Q1 results are to be below year ago level and well below expectations; Shares of Volkswagen pairing back some recent losses after receiving an analyst upgrade, also currently leading the gains in the index; Shares of Adidas notably trading higher in the Dax after raising their FY16 outlook and providing prelim Q1 results.

A plethora of upcoming scheduled US earnings include AFLAC, Anthem, Avery Dennison, Franklin Resources, Baker Hughes, Boston Scientific, Comcast, Cenovus Energy, Dr Pepper Snapple, Federal-Mogul, General Dynamics, The Goodyear Tire & Rubber Co, Hess, International Paper, Jones Lang LaSalle, Coca-Cola FEMSA, Lear Corp, L-3 Communications, Lexmark, Mondelez, NASDAQ OMX, Northrop Grumman, Owens Corning, Rockwell Automation, State Street, and United Technologies (pre-market).

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Adidas ADS.DE +6.6% (prelim Q1, raises FY16 outlook), Darty DRTY.UK -0.6% (Conforama confirms its 160p/shr bid final and will not be increased), Home Retail Group HOME.UK -0.5% (FY16 results), Kesko KESB.FI -1.9% (Q1 results)]

- Consumer Staples: [Kerry Group KYGA.UK -2.6% (Q1 sales)]

- Energy: [Neste Oil NES1V.FI -7.8% (Q1 results), Norsk Hydro NHY.NO -2.7% (Q1 results), ProSafe PRS.NO -23.0% (To evaluate alternatives to improve financial situation), Statoil STL.NO +3.7% (Q1 results), Total FP.FR +1.7% (Q1 results)]

- Financials: [Banco Santander SAN.ES +2.4% (Q1 results), Barclays BARC.UK +3.0% (Q1 results), Foxtons FOXT.UK -2.4% (Q1 results), London Stock Exchange LSE.UK -0.1% (Q1 results), Munich Re MUV2.DE -4.4% (CEO: Q1 results to be lower y/y, below expectations), Nordea NDA.SE -0.3% (Q1 results), Scor SCR.FR -2.2% (Q1 results)]

- Healthcare: [Novartis NOVN.CH -0.2% (Receives three FDA Breakthrough therapy designations for Ilaris to treat rare types of Periodic Fever Syndromes), Oasmia Pharmaceutical OASM.SE +3.6% (positive overall survival results from Phase III study of Apealea/Paclical), Stallergenes GENP.FR +4.1% (Reports positive phase II Japanese Cedar Immunotherapy tablets results)]

- Industrials: [Assa Abloy ASSAB.SE +3.7% (Q1 results), Kion Group KGX.DE -2.5% (Q1 results), Konecranes KCR1V.FI -7.7% (Q1 results), Outotec OTE1V.FI -5.7% (Q1 results), Peugeot UG.FR -1.4% (Q1 sales)]

- Technology: [Cap Gemini CAP.FR +3.4% (Q1 sales), OSRAM Licht OSR.DE +0.2% (Q2 results), Rocket Internet RKET.DE -6.2% (committed to invest up to €100M of a funding round of at least €300M of Global Fashion Group S.A, analyst upgrade), STMicroelectronics STM.FR +6.7% (Q1 results), Wirecard WDI.DE +6.9% (prelim Q1 results)]

- Utilities: [Iberdrola IBE.ES -0.5% (Q1 results)]

 

Speakers

- ECB's Coeure (France) reiterated Council view that not discussing 'helicopter money'. Only sharp EUR currency appreciation would be a concern.

- ECB's Hansson (Estonia) saw much stronger impact from ECB's corporate bond buying but would not comment on specific target for corporate bond buying scheme. Talk of helicopter money is irrelevant

- Bank of Spain (BOS) Monthly Report: Q1 consumption remains dynamic

- German Finance Ministry official Spahn: Greece needed structural reforms, not debt relief

- Poland Central Bank's Gatnar: MPC might consider a tighter bias at some point. Inflation to turn positive in H2 2016

- Malaysia Central Bank Dep Gov Muhammad Ibrahim named to succeed Zeti as BNM gov

- Iran reportedly seeing offshore oil company's capacity being expanded

 

Currencies

- Focus in FX was on central bank decisions highlighted by FED and BOJ.

- Fed expected to maintain its rate stance with nuances of the policy statement and the possibility of a rate hike in June

- USD/JPY stayed above the 111.0 area in directionless trade ahead of the Fed and BoJ policy decisions. Overall it appeared to be a close call whether BOJ further would ease policy at its meeting Thursday. Dealers will watch the 110 level to gauge the impact of the BOJ decision with any disappointment likely to send the yen firmer. There was growing speculation that BOJ would implement further monetary easing to bolster inflation, which remained well below its 2% target. BOJ might also again delay the timing of attaining its 2%inflation target, currently expected around the first half of fiscal 2017.

- The AUD/USD slumped after Q1 CPI data QoQ reading registered a 7-year low at -0.2% and keeping the door open for more RBA rate cuts.

Fixed Income:

- Bund futures trade at 161.68, up 5 ticks retracing slightly as the downward momentum continues. Action is more subdued ahead of the FED rate decision later today. Futures now trading at March 16th lows with continued down side eyeing 161.45 followed by 160.81 contract lows. Resistance moves to 162.06 with a break above seeing 162.31 with continuation targeting 162.80.

- Gilt futures trade at 119.20 up 12 ticks as UK Q1 GDP came in line with estimates. Having traded fresh contract lows of 118.93 yesterday, a move lower would look to close this morning's opening gap with further momentum seeing 118.55 followed by 118.19. Resistance moves to 119.56 with a move above eyeing 119.89 then 120.32 followed by 120.79 head and shoulder support. Short Sterling futures consolidating this morning following further curve steepening yesterday. Jun17Jun18 trade at 24/25 trading above March 11th high steepening some 14bp in the past 3 weeks.

- Wednesday's liquidity report showed Tuesday's excess liquidity fell to €765.1B a fall of €8.7B from €773.8B prior. This was primarily due to AFs and MonPol portfolios rising to €362.7B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €35M from a prior €40M.

- Corporate issuance saw a quieter day with $5.9B expected to price via 5 issuers. This brings the weeks issuance to $18.5B, and $90.7B for the month. 40% of the weeks issuance has been from financials.

Political/In the Papers:

- (BR) Brazil Supreme Court could block new election proposal

 

Looking Ahead

- 05:30 (DE) Germany to sell €1.0B in 2.50% Aug 2046 Bunds

- 06:00 (UK) Apr CBI Industrial Reported Sales: 13e v 7 prior; Total Distribution: No est v 20 prior

- 06:00 (CZ) Czech Republic to sell 2018 and 2023 bonds

- 06:00 (EU) EUs Tusk in Brussels

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell to sell combined RUB25B in 2025 and 2027 OFZ bonds

- 07:00 (US) MBA Mortgage Applications w/e Apr 22nd: No est v 1.3% prior

- 07:00 (UK) PM Cameron weekly question time in House of Commons

- 07:30 (CL) Chile Central Bank (BCCh) Apr Meeting Minutes

- 07:30 (CL) Chile Central Bank's Traders Survey

- 08:00 (DE) German Chancellor Merkel in Dusseldoff

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Mar Advance Goods Trade Balance: -$62.8Be v -$62.9B prior

- 09:00 (MX) Mexico Mar Unemployment Rate (Seasonally adj): 4.3%e v 4.3% prior; Unemployment Rate NSA (Unadj): 3.9%e v 4.2% prior

- 10:00 (US) Mar Pending Home Sales M/M: 0.5%e v 3.5% prior; Y/Y: 0.8%e v 5.1% prior

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 11:30 (BR) Brazil Currency Flows Weekly

- 14:00 (US) FOMC Interest Rate Decision: Expected to leave Interest Rate unchanged at 0.25%

- 14:00 (FR) France Fin Min Sapin with Eurogroup chief Dijsselbloem press conference

- 17:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave Official Cash Rate unchanged at 2.25%

- 17:00 (BR) Brazil Central Bank (BCB) Interest Rate Decision: (no set time) Expected to leave Selic Rate unchanged at 14.25%

- 19:30 (JP) Japan Mar Jobless Rate: 3.3%e v 3.3% prior, Job-To-Applicant Ratio: 1.28e v 1.28 prior

- 19:30 (JP) Japan Mar Overall Household Spending Y/Y: -4.1%e v 1.2% prior

- 19:30 (JP) Japan Mar National CPI Y/Y: 0.0%e v 0.3% prior; CPI Ex Fresh Food (Core) Y/Y: -0.2%e v 0.0% prior, CPI Ex Fresh Food and energy (core-core): 0.8%e v 0.8% prior

- 19:30 (JP) Japan Apr Tokyo CPI Y/Y: -0.2%et v -0.1% prior; CPI Ex Fresh Food Y/Y: -0.3%e v -0.3% prior, CPI Ex Food/Energy Y/Y: 0.5%e v 0.6% prior

- 19:50 (JP) Japan Mar Retail Sales M/M: +0.5%e v -2.3% prior; Retail Trade Y/Y: -1.4%e v 0.4% prior (revised from 0.5%), Large Retailers Sales: No est v 2.2% prior

- 19:50 (JP) Japan Mar Preliminary Industrial Production M/M: +2.8%e v -5.2% prior; Y/Y: -1.6%e v -1.2% prior

- 19:50 (JP) Japan Mar Dept Store Sales supermarkets: -0.9%e v +2.2% prior

- 21:30 (AU) Australia Q1 Import Price Index Q/Q: No est v -0.3% prior; Export price index Q/Q: no est v -5.4% prior

- 22:00 (KR) South Korea Mar Department Discount Store Sales Y/Y: No est v -1.9% prior; Discount Store Sales Y/Y: No est v -7.0% prior

- 22:30 (SG) Singapore Q1 Preliminary Unemployment Rate: 2.0%e v 1.9% prior

- (JP) Bank of Japan (BOJ) Monetary Policy Statement (no set time): Expected to keep policy steady; Expected to leave Interest on Excess Reserves (IOER) unchanged at -0.10%, maintain Annual Rise in Monetary Base at ¥80T