Major European Services PMI revised lower

Notes/Observations

- Major European Services PMI revised lower and barely hold onto to expansion territory (France, Germany and Euro Zone all revised lower)

- Robust Spanish growth helping bring overall jobless numbers down

- Recent string of disappointing UK data has BoE starting to look more likely to consider easing policy rather than tighten

 

Overnight news

Asia:

- China govt reportedly pressuring economists to improve their economic forecasts for China

- China NDRC: Housing inventory level high; China facing downward pressure on investment into economy

Americas:

- Ted Cruz withdrew from the Republican Presidential Nomination race after Trump won the Indiana primary

- Bernie Sanders won Democratic Indiana Primary

Energy:

- Weekly API Oil Inventories: Crude: +1.3M v -1.1M prior

- Uncontrolled wildfire in Canadian province of Alberta forced the evacuation of the entire population of Fort McMurray and curb oil sands production

 

Economic data

- (IN) India Apr PMI Services: 53.7 v 54.3 prior, PMI Composite: 52.8 v 54.3 prior

- (SE) Sweden Apr PMI Services (miss): 52.6 v 56.0e

- (FR) France Mar Trade Balance (miss): -€4.4B v -€4.2Be

- (HU) Hungary Mar Retail Sales Y/Y: 4.2% v 5.1%e

- (ES) Spain Apr Net Unemployment (beat) M/M: -83.6K v -81.7Ke

- (ES) Spain Apr Services PMI (beat): 55.1 v 55.0e (30th month of expansion), Composite PMI: 55.2 v 54.8e

- (IT) Italy Apr Services PMI (beat): 52.1 v 51.9e (16th month of expansion); Composite PMI: 53.1 v 52.4 prior

- (FR) France Apr Final Services PMI (miss): 50.6 v 50.8e (confirmed move back into expansion), Composite PMI: 50.2 v 50.5e

- (GE) Germany Apr Final Services PMI (miss): 54.5 v 54.6e (confirms 34th month of expansion), Composite PMI: 53.6 v 53.8e

- (EU) Euro Zone Apr Final Services PMI (miss): 53.1 v 53.2e (confirms 34th month of expansion), Composite PMI: 53.0 v 53.0e

- (GR) Greece Apr Manufacturing PMI: 49.7 v 49.0 prior (3rd month of contraction)

- (UK) Apr Construction PMI (miss): 52.0 v 54.0e (38th month of expansion but lowest since Jun 2013)

- (EU) Euro Zone Mar Retail Sales M/M: -0.5% v -0.1%e; Y/Y: 2.1% v 2.6%e

Fixed Income Issuance:

- (IN) India sold total INR150B vs. INR150B indicated in 3-month and 6-month Bills

- (DK) Denmark sold total DKK560M in 2018 and 2025 Bonds

- (EU) ECB allotted $0 (nil) in 7-day USD Liquidity Tender at fixed 0.86% vs. $1.2B prior

- (FR) France Debt Agency (AFT) sold total €7.93B vs. €7.0-8.0B indicated range in 2025, 2026 and 2031 Oats

- Sold €1.845B in 6.0% Oct 2025 Oats; Avg yield 0.39% v 1.02% prior; Bid-to-cover: 1.83x v 2.03x prior

- Sold €4.12B in 0.50% May 2026 Oat; Avg Yield: 0.57% v 0.43% prior; Bid-to-cover: 1.72x v 1.67x prior

- Sold €1.965B in 1.50% 2031 Oat; Avg Yield 1.02% v 0.87% prior; Bid-to-cover: 1.83x v 2.92x prior

- (GR) Greece Debt Agency (PDMA) sold €1.138B vs. €825M indicated in 26-week Bills; Avg Yield: 2.97% v 2.97% prior; Bid-to-cover: 1.3x v 1.3x prior

- (NO) Norway sold NOK3.0B vs NOK3.0B indicated in 2026 bonds; Yield 1.43% v 1.20% prior; Bid-to-cover: 2.15x v 2.07x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.6% at 2,960, FTSE -0.6% at 6,147, DAX -0.5% at 9,982, CAC-40 -0.3% at 4,358, IBEX-35 -0.3% at 8,745, FTSE MIB +0.1% at 17,986, SMI -0.1% at 7,846, S&P 500 Futures -0.3%]

Market Focal Points/Key Themes: European equity indices opened mixed across the board after a raft of corporate earnings releases; WTI and Brent again trading lower in continuation from recent losses adding to negative sentiment in commodity stocks in the FTSE 100; BHP Billiton the laggard in the index after Brazil prosecutors filed a $43.5B civil lawsuit for collapsed tailings dam in November; Randgold and Anglo American also weighing down the index; Shares of Sainsbury trading lower after Nielsen report announced lower 12 week sales; Shares of Next leading the percentage gains in the FTSE 100 despite releasing disappointing Q1 results whilst cutting outlook, providing some support in the index; Shares of AB InBev leading the losses in the Eurostoxx after releasing worse than expected Q1 results; Shares of Societe Generale and Siemens proving some support in the index after both releasing better than expected Q1 results.

A plethora of upcoming scheduled US earnings include Avis Budget, Clear Channel Outdoor Holdings, CDW, Dominion Resources, Delphi Automotive, HollyFrontier, Humana, ICE, IMS Health, Magellan Midstream Partners, The Mosaic Company, Noble Energy, PG&E, The Priceline Group, Performance Food Group, Spectra Energy, Sempra Energy, Triumph Group, TransCanada, Time Warner, Univar, and Zoetis (pre-market).

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Air France-KLM AF.FR -5.1% (Q1 results), Anheuser-Busch InBev ABI.BE -3.2% (Q1 results), Continental CON.DE -1.7% (Q1 results, raises outlook), Next NXT.UK +3.7% (Q1 trading update)]

- Consumer Staples: [Imperial Brands IMB.UK -0.8% (H1 results)]

- Energy: [Royal Dutch Shell RDSA.NL -1.0% (Q1 results)]

- Financials: [Societe Generale GLE.FR +4.1% (Q1 results)]

- Industrials: [Maersk MAERSKB.DK +5.1% (Q1 results), Thales HO.FR +1.2% (Q1 sales)]

- Materials: [BHP Billiton BLT.UK -6.5% (Brazil prosecutors file $43.5B civil lawsuit for collapsed tailings dam in November), Glencore GLEN.UK -2.4% (Q1 production)]

- Technology: [Siemens SIE.DE +1.0% (Q2 results)]

- Telecom: [Deutsche Telekom DTE.DE -1.5% (Q1 results)]

- Utilities: [Veolia VIE.FR -3.3% (Q1 results)]

 

Speakers

- Spain interim PM Rajoy reiterated would narrow budget deficit to GDP ratio below 3% in 2017; would not raise taxes if he won upcoming June election

- Swiss Fin Min Maurer: More reforms in corporate tax expected

- Sweden Central Bank (Riksbank) urged not to devalue SEK currency (Krona) by key pension fund

- Sweden Central Bank (Riksbank) Apr Minutes noted that upturn in inflation was uneven and reiterated view of having a high level of preparedness; members noted that inflation was low

- Riksbank Gov Ingves: Board was unanimous in having high preparedness. Important that Riksbank was not afterwards forced to react to monetary policy abroad, becoming more expansionary

- Member Jansson: Inflation has surprised on the upside for the past three months; expectations developing favorablybut policy needed to be proactive. Natural to consider broadening list of QE securities

- Member Floden: End QE would be an unnecessary risk; raising Repo Rate at this time would send strange signal

- Member Ohlsson: Inflation shouldn't only come from a weaker SEK currency (krona)

- Member AC Jocknick: SEK currency (Krona) development is important for inflation

- Member Skingsley: Scope for wait-and-see was greater now

- Spain Podemos Party official Iglesias reiterated desire to form an alliance with United left for the June 26th election

- Turkey Central Bank assessment of April CPI data noted that the decline in annual core inflation remained limited. Slowdown in raw food prices determined CPI while TRY currency (Lira) stability limited commodity impact

 

Currencies

- Dealers noted that USD had developed a key reversal formation, a technical signal suggesting a near-term trend change and USD strength. The greenback moved off multi-month lows in trading on Tuesday.

- In USD majors, USD/JPY spiked toward 107.50 in early Asia before consolidating back below 107.00

- GBP/USD was softer and moved below the 1.45 level after testing 1.4760 on Tuesday. The Apr Manufacturing PMI move into contraction territory recent three-week run high had been looking overcooked given the BoE is starting to look more likely to consider easing policy rather than tighten

- Post-RBA AUD/USD selling ebbed below $0.7470 and the pair retraced to around $0.75 level.

- NZD/USD came under initial pressure after Q1 jobless rate rose higher than expected

Fixed Income:

- Bund futures trade at 162.99, down 4 ticks making back earlier losses as Equities resume the downtrend. Resistance moves to 163.09-17 region with a break above seeing 163.75 and continuation seeing a move towards 164.60 contract highs. Support moves to 162.36 initially followed by 161.84 then lows between 161.47-58.

- Gilt futures trade at 120.20 down 6 ticks with little reaction following weaker construction PMI data out of the UK. Having traded in a narrow range for much of the morning, futures have no broken out closing the gap within touching distance of 120.38 high. Support lies at 119.84 followed by 119.35 low continuation sees 119.09 then 118.93 contract lows. Resistance moves to 120.38 high then 120.79 head and shoulder support. Short Sterling futures trade flat consolidating gains made yesterday. Jun17Jun18 remains at 20/21.

- Wednesday's liquidity report showed Tuesday's use of the marginal lending facility fell to €103M from a prior €141M.

- Corporate issuance saw $4.35B come to market headlined by AT&T $4B 5 part offering. Issuance is expected to pick up over the coming days as YTD volume crosses the $600B threshold. Analysts expecting $20-30B to price this week, below the weekly average of $35B.

Political/In the Papers:

- (US) Treasury said to debate bond swap which would involve retiring older Treasury debt and replacing it with new benchmark securities. Overhaul would be designed to improve trading conditions as yields on older issues had risen more than those for recently sold debt, suggesting a deterioration in liquidity

 

Looking Ahead

- (RU) Russia Apr Sovereign Wealth Fund Balances: Reserve Fund: No est v 50.6B prior; Wellbeing Fund: No est v $73.2B prior

- (PT) Bank of Portugal Releases May Economic Bulletin

- 05:30 (UK) Weekly John Lewis Partnership LFL sales

- 05:30 (DE) Germany to sell €4.0B in 0% 5-year 2021 BOBL

- 05:30 (UK) DMO to sell £2.75B in 1.5% Jan 2021 Gilts

- 06:00 (IE) Ireland Mar Industrial Production M/M: No est v -10.5% prior; Y/Y: No est v -1.3% prior

- 06:00 (IE) Ireland Apr Unemployment Rate: No est v 8.6% prior

- 06:00 (TR) EU progress report on Turkey visa waiver

- 06:15 (DE) ECBs Weidmann (Germany) at ADB meeting in Frankfurt

- 06:45 (US) Daily Libor Fixing

- 07:00 (NL) Netherlands Debt Agency (DSTA) announces upcoming DSL bond auction for Tuesday, May 10th

- 07:00 (US) MBA Mortgage Applications w/e Apr 29th: No est v -4.1% prior

- 08:00 (PT) Portugal May Economic Bulletin

- 08:15 (US) Apr ADP Employment Change: +195Ke v +200.0K prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Mar Trade Balance: -$41.2e v -$47.1B prior

- 08:30 (US) Q1 Preliminary Nonfarm Productivity: -1.3%e v -2.2% prior; Unit Labor Costs: 3.0%e v 3.3% prior

- 08:30 (CA) Canada Mar Int'l Merchandise Trade: -C$1.4Be v -C$1.9B prior

- 09:00 (BR) Brazil Apr PMI Services: No est v 38.6 prior, PMI Composite: No est v 40.8 prior

- 09:00 (MX) Mexico Feb Gross Fixed Investment: 4.2%e v 0.1% prior

- 09:00 (MX) Mexico Mar Leading Indicators M/M: No est v -0.17 prior

- 09:00 (DE) German Fin Min Schaeuble present s tax revenue forecasts

- 09:45 (US) Apr Final Markit Services PMI: 52.1e v 52.1 prelim, Composite PMI: No est v 51.7 prelim

- 10:00 (US) Apr ISM Non-Manufacturing Composite: 54.7e v 54.5 prior

- 10:00 (US) Mar Factory Orders: +0.6%e v -1.7% prior, Factory Orders (Ex-Transportation): No est v -0.8% prior

- 10:00 (US) Mar Final Durable Goods Orders: 0.8%e v 0.8 prelim; Durables Ex Transportation: -0.1%e v -0.2% prelim; Capital Goods Orders (Non-defense ex aircraft): No est v 0.0% prelim, Capital Goods Shipments (Non-defense/ex-aircraft): No est v 0.3% prelim; Durables Ex-Defense: No est v -1.0% prelim

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

- 11:00 (US) Treasury announces upcoming 3-year, 10-year and 30-year bonds for auction during week of May 9th

- 12:00 (CA) Canada to sell 2-Year Bonds

- 12:30 (DE) German Chancellor Merkel with Japan PM Abe on G7 agenda in Berlin

- 15:00 (CO) Colombia Apr PPI Domestic M/M: No est v -0.4% prior; Total PPI M/M: No est v 0.4% prior

- 18:30 (US) Feds Kashkari in MN

- 19:01 (UK) Apr BRC Shop Price Index Y/Y: -1.7%e v -1.7% prior

- 20:30 (TW) Taiwan Apr CPI Y/Y: 1.6%e v 2.0% prior; WPI Y/Y: -4.2%e v -4.9% prior

- 21:00 (PH) Philippines Apr CPI M/M: 0.2%e v 0.1% prior; Y/Y: 1.2%e v 1.1% prior, CPI Core Y/Y: 1.6%e v 1.5% prior

- 21:30 (AU) Australia Mar Trade Balance (A$): -2.9Be v -3.4B prior

- 21:30 (AU) Australia Mar Retail Sales M/M: 0.3%e v 0.0% prior, Q1 Retail Sales (Ex Inflation) Q/Q: 0.7%e v 0.6% prior

- 21:45 (CN) China Apr Caixin PMI Services: No est v 52.2 prior, Composite: No est v 51.3 prior

- 22:30 (HK) Hong Kong Apr PMI Services: No est v 45.5 prior

- 23:00 (SG) Singapore Apr PMI Composite: No est v 52.0 prior