PMI data shows Euro Zone recovery continuing at a very modest pace

Notes/Observations

- Quiet start to week with China, Singapore, Taiwan, UK and Ireland closed for holidays

- Manufacturing data showed Euro Zone recovery was continuing at a very modest pace and with core countries remaining weak

- China recent spat of data shows little need for any additional stimulus

 

Overnight news:

Asia:

- Japan Fin Min Aso reiterated view that one-sided speculative moves in FX were "extremely concerning"; To monitor markets and take action as necessary

- China Apr Manufacturing PMI (Govt official): 50.1 v 50.3e (2nd straight month of expansion)

Europe:

- Greece said to have agreed with creditors on a framework for bad loans sale to distressed debt fund

Americas:

- US Treasury Dept releases semi-annual currency report; puts 5 countries on new 'Monitoring List' (China, Japan, Korea, Taiwan, and Germany). Treasury found that no economy currently satisfied all three criteria to be named a currency manipulator, however, five major trading partners of the United States met two of the three criteria

Energy:

- Energy Sec Moniz: Rebalance of oil markets looks credible and seen in one year

 

Economic data

- (IN) India Apr PMI Manufacturing: 50.5 v 52.4 prior (4th month of expansion but lowest since Dec)

- (JP) Japan Apr Vehicle Sales Y/Y: +7.2 v -3.2% prior (1st increase in three months)

- (SE) Sweden Apr PMI Manufacturing: 54.0 v 53.0e

- (NL) Netherlands Apr Manufacturing PMI: 52.6 v 53.6 prior (34th month of expansion)

- (NO) Norway Apr Manufacturing PMI: 48.0 v 47.8e (12th month of contraction)

- (TR) Turkey Apr PMI Manufacturing: 48.9 v 49.2 prior (2nd straight contraction)

- (HU) Hungary Apr Manufacturing PMI: 52.2 v 51.7 prior (4th month of expansion)

- (PL) Poland Apr PMI Manufacturing Apr: 51.0 v 53.0e (19th month of expansion)

- (ES) Spain Apr Manufacturing PMI: 53.5 v 53.0e

- (CZ) Czech Republic Apr PMI Manufacturing: 53.6 v 54.4e

- (CH) Swiss Apr PMI Manufacturing: 54.7 v 52.9e (5th month without a contraction

- (IT) Italy Apr Manufacturing PMI: 53.5 v 53.0e (15th month of expansion)

- (FR) France Apr Final Manufacturing PMI: 48.0 v 48.3e (confirmed 2nd month of contraction)

- (DE) Germany Apr Final Manufacturing PMI: 51.8 v 51.9e (confirms its 17th straight month of expansion)

- (EU) Eurozone Apr Final Manufacturing PMI: 51.8 v 51.5e (confirms 34th straight month of expansion)

Fixed Income Issuance:

- None seen

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 flat at 3,035, FTSE 100 closed, DAX +0.8% at 10,119, CAC-40 +0.3% at 4,441, IBEX-35 +0.4% at 9,062, FTSE MIB -0.2% at 18,568, SMI +0.2% at 7,976, S&P 500 Futures +0.2%]

Market Focal Points/Key Themes: European equity indices opened mixed in the morning session after a sharp sell-off in Asia, with oil currently giving back recent gains adding to risk-off sentiment; FTSE 100 closed for UK early Mayday bank holiday; Financial stocks weighing down in the Eurostoxx with shares of Unicredit, Deutsche Bank, and Intesa Sanpaolo leading the losses; Credit Suisse and Julius Baer leading the losses in the SMI; Overall, market participants remaining cautious ahead of ECB President Mario Draghis speech later today; Upcoming scheduled US earnings include CNA Financial, Diamond Offshore Drilling, Loews, and Sysco (pre-market).

 

Equities (as of 09:45 GMT)

- Financials: [Intesa Sanpaolo ISP.IT -0.2% (To sell Setefi, Intesa Sanpaolo Card unit to Advent, Bain Cap, Clessidra for €1.04B)]

- Healthcare: [Bayer BAYN.DE -0.5% (Gadobutrol awarded FDA approval in US for MRA), Epigenomics ECX.DE +3.2% (China FDA names blood-based Septin9 colorectal cancer test a most innovative medical product for 2015)]

- Industrials: [LPKF Laser & Electronics LPK.DE -13.4% (Q1 results, cuts jobs, cuts outlook)]

- Technology: [Soitec SOI.FR +1.7% (prelim FY15/16 results)]

 

Speakers

- Japan PM Abe planned to fire a G7 version of his three arrows to send a clear message to the world and sought to discuss how G7 members view the global economy

- Russia Apr oil production 10.84M bpd vs. 10.91M bpd m/m (Reminder: Mar oil production of 10.91M bpd was the highest level in nearly 30 years)

- IEA Chief Economist Birol: Oil price might have bottomed towards the end of the year depending on global growth. Expected the market to balance in 2017 at the latest

 

Currencies

- The focus remained on the yen currency as USD/JPY edged closer to the 105 neighborhood. The question remains as to where and when Japan would act to counter yen currency strength. Some analysts saw the pair possibility testing 105 as soon as this Week. Japan Fin Min Aso reiterated view that one-sided speculative moves in FX were "extremely concerning" and would continue to monitor markets and take action as necessary. (Note: BOJ last intervened in FX back in Nov 2011 under a stealth JPY intervention). USD/JPY hit fresh 18 month lows during Asia at 106.14 before consolidating.

- EUR/USD was moving towards the 1.15 area in quiet trading despite mixed PMI Manufacturing data from major European countries.

- Late Friday the US Treasury Dept released its semi-annual currency report which placed 5 countries on a new 'Monitoring List' (China, Japan, Korea, Taiwan, and Germany).

Fixed Income:

- Bund futures trade at 162.14, up 26 ticks in quiet trade with the closure of the UK market. PMI readings out of Europe were mixed with French manufacturing PMI remaining in contraction. Resistance remains at 162.79 double top followed by 163.17 with a break above seeing 163.75 with continuation seeing a move towards 164.60 contract highs. Support moves to recent lows between 161.47-58.

- Monday's liquidity report showed Friday's excess liquidity rose to €783.9B a rise of €23B from €760.9B prior. This was primarily due to AFs and MonPol portfolios falling to €384.1B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to €142M from a prior €167M.

- Corporate issuance was quiet again, with the weeks volume coming at $27B via 18 issuers in 29 tranches, which was the lowest in 4 weeks as earnings keeping many corporates in blackout. Friday saw $2.75B come to market, which put the Month's issuance at $99B ex SSA, and for corporates only came in at over $86B which was at the lower end of the analyst estimates.

 

Looking Ahead

- (IT) Italy Apr Budget Balance: No est v -€20.9B prior

- (BR) Brazil Mar CNI Capacity Utilization: No est v 77.6% prior - 05:30 (DE) ECBs Weidmann (Germany) in Leipzig

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month Bills

- 06:00 (IT) Italy Fin Min Padoan in Brussels

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

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

- 08:00 (CZ) Czech Apr Budget Balance (CZK): No est v 43.6B prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:50 (US) Fed's Lockhart introductory remarks in Florida

- 08:50 (FR) France Debt Agency (AFT) to sell combined €5.1-6.3B in 3-month, 6-month and 12-month bills

- 09:00 (BR) Brazil Apr PMI Manufacturing: No est v 46.0 prior

- 09:00 (MX) Mexico Apr IMEF Manufacturing Index: 51.2e v 51.6 prior; (MX) Non-Manufacturing Index: 51.0e v 50.8 prior

- 09:30 (CA) Canada Apr Manufacturing PMI: No est v 51.5 prior

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

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

- 09:45 (US) Apr Final Markit Manufacturing PMI: 50.8e v 50.8 prelim

- 10:00 (US) Apr ISM Manufacturing: 51.4e v 51.8 prior; Prices Paid: 52.0e v 51.5 prior

- 10:00 (US) Mar Construction Spending M/M: +0.5%e v -0.5% prior

- 10:00 (MX) Mexico Mar Total Remittances: $2.4Be v $2.1B prior

- 10:00 (MX) Mexico Central Bank Economist Survey

- 10:00 (EU) ECBs Draghi in Frankfurt

- 10:30 (MX) Mexico Apr PMI Manufacturing: No est v 53.2 prior

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

- 12:00 (IT) Italy Apr New Car Registrations Y/Y: No est v 17.4% prior

- 12:30 (DE) German Chancellor Merkel in Frankfurt

- 12:30 (CH) SNB's Jordan speaks in Lucerne

- 13:00 (DE) ECBs Lautenschlaeger (Germany) in Lucerne- 14:00 (BR) Brazil Apr Trade Balance: $4.7Be v $4.4B prior, Total Exports: $15.4Be v $16.0B prior, Total Imports: $10.7Be v $11.6B prior

- 16:00 (US) Weekly Crop Progress Report

- 17:30 (US) Feds Williams (non-voter) in LA

- 19:00 (KR) South Korea Apr CPI M/M: +0.1%e v -0.3% prior; Y/Y: 1.0%e v 1.0% prior; CPI Core Y/Y: 1.6%e v 1.7% prior

- 21:30 (AU) Australia Mar Building Approvals M/M: No est v 3.1% prior; Y/Y: No est v -9.0% prior

- 21:45 (CN) China Apr PMI Caixin Manufacturing: 49.8e v 49.7 prior

- 23:30 (MY) Malaysia Apr PMI Manufacturing: No est v 48.4 prior

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