Various European Q1 GDP data beats expectations

EU Mid-Market Update: Various European Q1 GDP data beats expectations; effects of BOJ and Fed resonate into month-end trading

 

Notes/Observations

- BoJ and Fed policy statements continue to resonate into month-end; highlights how difficult it will be for central banks to return to "normal" policies amid inadequate tool boxes

- Euro Zone GDP data registering some upside surprise in session (France, Spain and Euro Zone all beat expectations); unemployment improves in region for both Italy and Eurozone

 

Overnight news

Asia:

- China's Central Bank Yuan Fixing strongest since Apr 1st and biggest margin of increase since July 2005 (6.4589 vs. 6.4954 prior)

- Bank of Korea (BOK) quarterly report to Parliament: To keep monetary policy accommodative

Europe:

- Eurogroup could meet on Greece on Monday, May 9th

 

Economic data

- (FR) France Q1 Advance GDP (beat) Q/Q: 0.5% v 0.4%e; Y/Y: 1.3% v 1.0%e

- (DE) Germany Mar Retail Sales (miss) M/M: -1.1% v +0.4%e; Y/Y: 0.7% v 2.7%e

- (RU) Russia Apr PMI Manufacturing (miss): 48.0 v 48.9e (5th straight contraction)

- (FR) France Apr Preliminary CPI M/M: 0.1% v 0.1%e; Y/Y: -0.2% v -0.1%e

- (FR) France Apr Preliminary CPI EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: -0.1% v -0.1%e

- (FR) France Mar Consumer Spending (beat) M/M: +0.2% v -0.4%e; Y/Y: 2.7% v 2.1%e

- (ES) Spain Q1 Preliminary GDP (beat) Q/Q: 0.8% v 0.7%e; Y/Y: 3.4% v 3.3%e

- (AT) Austria Q1 GDP Q/Q: 0.6% v 0.2% prior; Y/Y: 1.3% v 1.0% prior

- (CH) Swiss Apr KOF Leading Indicator (beat) : 102.7 v 102.5e

- (TR) Turkey Mar Trade Balance: -$5.0B v -$5.0Be

- (IT) Italy Mar Preliminary Unemployment Rate (beat): 11.4% v 11.6%e (matches lowest reading since Dec 2012)

- (NO) Norway Apr Unemployment Rate: 3.1% v 3.3%e

- (UK) Mar Net Consumer Credit: 1.9B v £1.3Be; Net Lending: £7.4B v £3.7Be

- (UK) Mar Mortgage Approvals: 71.4K v 74.2Ke

- (EU) Euro Zone Mar Unemployment Rate (beat): 10.2% v 10.3%e (lowest since Sept 2011)

- (EU) Euro Zone Apr Advance CPI Estimate (miss) Y/Y: -0.2% v -0.1%e; CPI Core Y/Y: 0.8% v 0.9%e

- (EU) Euro Zone Q1 Advance GDP Q/Q: 0.6% v 0.4%e v 0.3% prior; Y/Y: 1.6% v 1.4%e

- (IT) Italy Apr Preliminary CPI (NIC incl. tobacco) M/M: 0.0% v 0.2%e; Y/Y: -0.4% v -0.2%e

- (IT) Italy Apr Preliminary CPI EU Harmonized M/M: 0.3% v 0.5%e; Y/Y: -0.3% v -0.1%e

Fixed Income Issuance:

- (IN) India sold total INR150B vs.l INR150B indicated in 2021, 2029, 2034 and 2055 bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)
Indices [Stoxx50 -1.3% at 3,081, FTSE -0.7% at 6,280, DAX -1.0% at 10,217, CAC-40 -1.4% at 4,495, IBEX-35 -1.3% at 9,145, FTSE MIB -0.3% at 18,914, SMI -1.1% at 8,008, S&P 500 Futures flat]

Market Focal Points/Key Themes: European equity indices opened sharply lower after the major US indices gave back all of yesterday's gains in the last hour of trade, with Asian equities also finishing down across the board; Commodity stocks providing some support in the FTSE 100 with WTI and Brent trading higher in the session; Shares of IAG and RBS leading the losses in the index after both releasing Q1 results; Financial stocks across Europe trading generally lower with BBVA continuing its losses in the Eurostoxx after its disappointing Q1 results were released yesterday; Shares of BASF and Engie currently the only stocks trading higher in the index after both releasing Q1 results.

A plethora of upcoming scheduled US earnings include Autoliv, Aon, Calpine, Chevron, Eaton, Host Hotels & Resorts, KBR, LifePoint Health, Moodys, Newell Brands, Public Service Enterprise, Phillips 66, Praxair, Royal Caribbean Cruises, Seagate Technology, Targa Resources, Tyco International, VF Corp, and Exxon Mobil (pre-market).

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Continental CON.DE +0.4% (Q1 results), International Consolidated Airlines IAG.UK -3.5% (Q1 results), Puma PUM.DE -3.0% (Q1 results)]

- Energy: [ENI ENI.IT +0.1% (Q1 results)]

- Financials: [Danske Bank DANSKE.DK +3.3% (Q1 results), Royal Bank of Scotland RBS.UK -2.2% (Q1 results), Swiss Re RUKN.CH -1.6% (Q1 results)]

- Healthcare: [Novo Nordisk NOVOB.DK -1.3% (Q1 results), Sanofi-Aventis SAN.FR -2.8% (Q1 results)]

- Industrials: [BASF BAS.DE +0.7% (Q1 results), Linde LIN.DE +1.9% (Q1 results), Porsche PAH3.DE -1.4% (final FY15 results)]

- Telecom: [Telefonica TEF.ES -1.8% (Q1 results)]

- Utilities: [Engie GSZ.FR +0.1% (Q1 results)]

 

Speakers

- ECB's Weidmann (Germany) reiterated ECB's monetary policy was appropriate with policy geared towards medium term. Risk of deflation in region was limited but warned of risk of fiscal dominanceSpeakers

- SNB's Jordan reiterated view that still had room to maneuver on policy despite negative interest rates and was keeping options open for more easing should it be necessary. Reiterated view to intervene in FX markets as necessary as CHF currency (Franc) remains overvalued

- Eurogroup chief Dijsselbloem: Satisfying IMF concerns on Greece is key issue; contingency measures remained a technical hurdle

- EU's Dombrovskis: Portugal needed to maintain fiscal discipline and continue with reforms. Says Greece upfront agreements had been reached and saw no deal breaker over debt measures

- Italy's Atlante rescue fund raised €4.25B from 67 institutions with ECB to monitor Quaestio governance ( Reminder: On Apr 12th Italy Atlante bank bailout fund capitalization was said to be between €3.0-6.0B (prior reports suggested a €5.0B fund)

- EU financial services Chief Hill: Creditors need to understand risks of bail-in and that the rules have changed

- Saudi Arabia oil production could rise to 10.5M bpd during the summer (Note: Saudi Arabia Feb oil production was 10.22M bps)

 

Currencies

- BoJ and Fed policy statements continue to resonate into month-end which strengthened the yen and kept the greenback soft. Overall The USD Index hit 8-month lows in the session.

- FX markets continue to focus on the JPY currency (Yen) pairs. USD/JPY tested 18-month lows during the European session and off approx. 4% since BOJ kept its policy steady on Thursday. Markets now believe Japan was moving back towards fiscal stimulus

- EUR/USD tested 1-week high just above the 1.14 level as regional GDP data registering some upside surprise (France, Spain and Euro Zone all beat expectations). ECB recent commentary seemed to have clarified that rate cuts were not on the agenda for now. The 1.15 neighborhood seen as next resistance

- China's Central Bank Yuan Fixing strongest since Apr 1st and biggest margin of increase since July 2005 (6.4589 vs. 6.4954 prior)

Fixed Income:

- Bund futures trade at 162.43, up 5 ticks on weaker inflation readings, which was offset by better GDP numbers for the Eurozone. Futures are rebounding from 162.79 double top, with the long end outperforming on month-end duration buying. Resistance moves to 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 remains at 162.14 which fills the gap with a move lower targeting recent lows at 161.46.

- Gilt futures trade at 119.74 up 10 ticks in a quiet narrow range day. Gap fill remains at 119.47 followed by 119.09 then 118.93 contract lows. Resistance moves to 120.05 recent high then 120.32 followed by 120.79 head and shoulder support. Short Sterling futures move higher,with a 2bp move higher across the curve. Jun17Jun18 continues to trade at 21/22.

- Friday's liquidity report showed Thursday's excess liquidity fell to €760.9B a fall of €15.2B from €776.1B prior. This was primarily due to AFs and MonPol portfolios rising to €361.1B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €167M from a prior €149M.

- Corporate issuance saw an expected $5.75B come to market via 5 names yesterday. This puts the week's issuance at $24.3B at the top end of forecasts. Looking forward potential issuers in the pipeline include Southern Co, Apple, and CVS Health. For the week ending April 28th Lipper US Fund flows reported IG Funds Net inflows of $3.1B bring the YTD inflows to $5.78B, with High Yield Funds reporting inflows of $296.3M bring YTD inflows at $9.66B.

 

Looking Ahead

- 06:00 (PT) Portugal Mar Retail Sales M/M: No est v 2.7% prior; Y/Y: No est v 3.5% prior

- 06:00 (PT) Portugal Mar Industrial Production M/M: No est v 0.1% prior; Y/Y: No est v 1.1% prior

- 06:00 (IT) Italy Mar PPI M/M: No est v -0.4% prior; Y/Y: No est v -3.5% prior

- 06:00 (UK) DMO to sell combined £3.5B in 1-month, 3-month and 6-month Bills (£0.5B, 1.5B and £2.0B respectively)

- 06:00 (CZ) Czech Republic to sell 2.4% 2025 Bonds

- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: Expected to leave 1-Week Auction Rate unchanged at 11.00%

- 06:30 (US) Fed's Kaplan (moderate, non-voter) in London

- 06:45 (US) Daily Libor Fixing

- 07:30 (IN) India Weekly Forex Reserves

- 07:45 (DE) German Chancellor Merkel with Latvia PM Kucinskis in Berlin

- 08:00 (ZA) South Africa Mar Budget Balance (ZAR): 4.8Be v 16.4B prior

- 08:00 (ZA) South Africa Mar Trade Balance (ZAR): -1.9Be v -1.1B prior

- 08:00 (PL) Poland Central Bank Apr CPI Expectations Survey: 0.2%e v 0.2% prior

- 08:00 (PL) Poland Apr Preliminary CPI M/M: 0.3%e v 0.1% prior; Y/Y: -1.0%e v -0.9% prior

- 08:00 (BR) Brazil Mar National Unemployment Rate: 10.7%e v 10.2% prior

- 08:00 (BR) Brazil Mar PPI Manufacturing M/M: No est v -0.6% prior; Y/Y: No est v 9.7% prior

- 08:00 (CL) Chile Mar Unemployment Rate: 6.0%e v 5.9% prior

- 08:00 (CL) Chile Mar Manufacturing Production Y/Y: 1.3%e v 1.3% prior; Industrial Production Y/Y: 1.4%e v 1.8% prior

- 08:00 (CL) Chile Mar Retail Sales Y/Y: 3.9%e v 7.4% prior

- 08:00 (CL) Chile Mar Total Copper Production: No est v 449.5K prior

- 08:00 (RU) Russia Central Bank (CBR) Gov Nabiullina to hold post rate decision press conference

- 08:00 (UK) BOEs Cunliffe in Brussels

- 08:00 (ES) Spain Debt Agency (Tesoro) announces specific SPGB bonds to be issued in next week auction

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Q1 Employment Cost Index: 0.6%e v 0.6% prior

- 08:30 (US) Mar Personal Income: 0.3%e v 0.2% prior; Personal Spending: 0.2%e v 0.1% prior, Personal Saving: No est v 5.4% prior, Real PCE: 0.1%e v 0.2% prior

- 08:30 (US) Mar PCE Deflator M/M: +0.1%e v -0.1% prior; Y/Y: 0.8%e v 1.0% prior

- 08:30 (US) Mar PCE Core M/M: 0.1%e v 0.1% prior; Y/Y: 1.5%e v 1.7% prior

- 08:30 (CA) Canada Feb GDP M/M: -0.2%e v +0.6% prior; Y/Y: 1.5%e v 1.5% prior

- 08:30 (CA) Canada Mar Industrial Product Price M/M: +0.5%e v -1.1% prior; Raw Materials Price Index M/M: +3.7%e v -2.6% prior

- 09:00 (US) Apr ISM Milwaukee: No est v 57.78 prior

- 09:00 (BE) Belgium Q1 Preliminary GDP Q/Q: No est v 0.3% prior; Y/Y: No est v 1.4% prior

- 09:00 (MX) Mexico Q1 Preliminary GDP Q/Q: 0.5%e v 0.5% prior; Y/Y: 2.3%e v 2.5% prior

- 09:30 (BR) Brazil Mar Nominal Budget Balance (BRL): -15.3Be v -52.8B prior; Primary Budget Balance (BRL): -11.0Be v -23.0B prior, Net Debt to GDP Ratio: 38.0%e v 36.8% prior

- 09:45 (US) Apr Chicago Purchasing Manager: 53.0e v 53.6 prior

- 10:00 (US) Apr Final University of Michigan Confidence: 90.0e v 89.7 prelim

- 10:00 (MX) Mexico Mar Net Outstanding Loans (MXN): No est v 3.154T prior

- 11:00 (CO) Colombia Mar National Unemployment Rate: No est v 10.0% prior; Urban Unemployment Rate: No est v 10.3% prior

- 11:00 (EU) Potenial sovereign ratings after European close (UK) United Kingdom Sovereign Debt to Be Rated by S&P; France Sovereign Debt to Be Rated by DBRS and Portugal Sovereign Debt to Be Rated by DBRS

- 13:00 (US) Weekly Baker Hughes Rig Count

- 15:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to raise Overnight Lending Rate by 25bps to 6.75%

- 23:00 (MX) Mexico Mar YTD Budget Balance: No est v -70.1B prior

- (BR) Brazil CNI Consumer Confidence: No est v 97.6% prior