Notes/Observations

- Ascension Day holiday in some European countries curbs participation (Overall saw markets closed in Japan, South Korea, Thailand, Indonesia, Scandinavia, Switzerland and Austria for holiday on Thursday; Public Holiday in Belgium, France, Germany, Netherlands with their markets open)

- Recent soft data from China questions the sustainability of countrys current debt-funded economic rebound

 

Overnight news

Asia:

- China Apr Caixin PMI Services fell to 51.8 from 52.2 prior

- Australia Mar Trade Deficit registered its smallest deficit in a year (-A$2.2B vs -A$2.9Be)

- Australia Mar Retail Sales registered a small beat to a 4-month high (0.4% vs 0.3%e)

Europe:

- Italy Treasury said to mull investment in the Atlante bank rescue fund which would through an investment vehicle (SGA) that it was set to buy from Intesa

Americas:

- Kasich withdrew from US Republican Nomination race; leaves Trump as the only candidate

Energy:

- WTI crude trades tests $45 as US production slides, fires cut Canadian output

 

Economic data

- (IE) Ireland Apr Services PMI: 59.8 v 62.8 prior, Composite PMI: 58.1 v 60.7 prior

- (UK) Apr Services PMI: 52.3 v 53.5e (40th month of expansion but lowest sin Feb 2013), Composite PMI: 51.9 v 53.2e

Fixed Income Issuance:

- (ES) Spain Debt Agency (Tesoro) sold total €2.024B vs. €1.5-2.5B indicated range in 2026, 2030 and 2040 SPGB Bonds

- Sold €489M in 1.95% Mar 2026 bono; Avg Yield: 1.592% v 1.496% prior; Bid-to-cover: 4.34x v 1.51x prior; Max Yield: % v % prior

- Sold €851M in 1.95% July 2030 bono; Avg Yield: 2.032% v 2.097% prior, bid-to-cover: 1.63x v 1.74x prior; Maximum Yield: x v 2.107% prior

- Sold €684M in 4.9% 2040 bono; Avg yield 2.64% v 2.720% prior, bid-to-cover 1.62x v 1.95x prior, Max Yield % v 2.739% prior

- (ES) Spain Debt Agency (Tesoro) sold €1.935B vs. 1.5-2.0B indicated range in 0.30% I/L Nov 2021 (SPGBei; Bonoei)bond; Real Yield: -0.108% v -0.096% prior; Bid-to-cover: 2.10x v 2.86x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.8% at 2,958, FTSE +0.5% at 6,142, DAX +0.7% at 9,900, CAC-40 +0.4% at 4,342, IBEX-35 +1.6% at 8,790, FTSE MIB +1.2% at 18,152, SMI closed, S&P 500 Futures +0.6%]

 

Equities

Market Focal Points/Key Themes: European equity indices are trading higher in the morning session aided by a rise in oil prices with WTI currently trading back above the $45/bbl handle; SMI market closed today for Ascension Day holiday; Shares of Centrica leading the losses in the FTSE 100 after announcing it is to place 350M shares (~7% of current issue) by way of a placing; shares of Inmarsat also trading notably lower after releasing Q1 results and cutting FY16 outlook, with Rolls-Royce trading lower after releasing a trading update; BT and Morrison leading the gains in the index after both releasing positive results; Commodity and mining stocks also trading positive on the back of rising oil prices; Financial stocks in the Eurostoxx overall trading mixed with SocGen and Deutsche Bank trading lower, but with BNP, Unicredit and BBVA trading higher.

A plethora of upcoming scheduled US earnings include Amerisource Bergen, Apache, Avon Products, Alibaba, Becton Dickinson & Co, Chesapeake Energy, Cablevision Systems, Huntington Ingalls Industries, Jacobs Engineering, Kellogg, Magna International, MGM Resorts, Merck & Co, NRG Energy, Occidental Petroleum, Quanta, Regeneron Pharmaceuticals, Resolute Forest Products, Time, and TELUS Corp (pre-market).

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Trinity Mirror TNI.UK +6.9% (trading update)]

- Consumer Staples: [WM Morrison MRW.UK +3.8% (Q1 sales)]

- Energy: [Repsol REP.ES +6.3% (Q1 results)]

- Financials: [Provident Financial PFG.UK -2.3% (Q1 trading update), Royal & Sun Alliance RSA.UK +1.9% (Q1 trading update)]

- Healthcare: [Smith and Nephew SN.UK -1.4% (Q1 sales)]

- Industrials: [Rolls Royce RR.UK -4.6% (trading update)]

- Technology: [Sage Group SGE.UK -1.5% (H1 results)]

- Telecom: [BT Group BT.UK +3.3% (Q4 results), Inmarsat ISAT.UK -4.7% (Q1 results, cuts outlook)]

 

Speakers

- ECB Economic Bulletin reiterated Council view that economic recovery in euro area was continuing but risks remained tilted to the downside. Broad financing conditions had improved. Crucial to avoid second-round effects on wages and prices

- ECB again lowers emergency liquidity assistance (ELA) cap for Greece banks to €69.1B from €69.4B prior

- Italy Stats Agency (ISTAT) Monthly Economic Report noted that growth was slowing down in the short-term

- Turkey Presidential advisor Ertem stated that he did not see possibility of early elections (Reminder: reports circulated that Turkey ruling AKP party would hold extraordinary congress in 15 days to elect a leader)

- Hungary Central Bank presented plan to increase small business (SME) lending which would ease capital rules for banks that increase SME loans

- Philip Lowe to replace Glenn Stevens as RBA Gov; effective Sept 18th (as speculated) (Note: Lowe currently serves as Dep Gov. Current RBA Gov Stevens retires in September after a decade at the helm)

- Philippines Central Bank Gov Tetangco stated that there was no strong need to change policy settings but mindful of market volatility and monitoring commodity costs

- Iran Dep Oil Min Javadi: May oil production to climb 0.1M bpd to 3.8M bpd. April current oil production output was 3.7M bpd and oil exports averaged 2.1M bpd. Reiterated they were ready for joint action with OPEC once production returned to pre-sanction levels

 

Currencies

- Quiet market conditions in session due to Ascension Day holiday in some European countries which curbed participation. The USD was slightly firmer against the major pairs but well contained within recent ranges

- EUR/USD tested below the mid-1.14 area as the pair remained soft for the 3rd straight session. Dealers noted that price action was simply positioning ahead of Fridays Non-Farm payroll report. ECB monthly bulletin showed that it would maintain appropriate degree of monetary accommodation and use all tools available within its mandate to guard price stability. Dealers noted that ECB likely to maintain a steady policy until September before reviewing measures.

- USD/JPY pair remained above the 107 level

- UK PMI data registered its 3rd miss of the week. Services PMI came in below expectations. GBP/USD moved off session below the 1.45 level as PMI remained in expansion territory

Fixed Income:

- Bund futures trade at 162.83, down 15 ticks in quiet trade as the majority of Europe observe Ascension day. Having traded to a high of 163.12 a break above targets 163.34 followed by 163.75 and continuation seeing a move towards 164.60 contract highs. Support remains at 162.36 initially followed by 161.84 then lows between 161.47-58.

- Gilt futures trade at 120.24 down 2 ticks trading off earlier highs despite a weaker Services PMI figure out of the UK. Today's range is narrow 15 ticks wide on light volume. Support moves 120.00 initially then 119.84 followed by 119.35 low continuation sees 119.09 then 118.93 contract lows. Resistance moves 120.47 high then 120.79 head and shoulder support a move above targets 120.86. Short Sterling futures continue to trade sideways with the curve continuing to trade in the upper portion of the recent range. Jun17Jun18 remains at 20/21.

- Thursday's liquidity report showed Wednesday's excess liquidity fell to €824.7B a fall of €5.0B from €829.7B prior. This was primarily due to AFs and MonPol portfolios rising to €425B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €240M from a prior €103M.

- Corporate issuance continued to see a steady flow with $5.7B coming to market via 6 names bringing week to date issuance to $12.6B ex SSA. Analysts expecting $20-30B to price this week, below the weekly average of $35B.

 

Looking Ahead

- (RO) Romania Central Bank (NBR) Interest Rate Decision; Expected to leave Interest Rate unchanged at 1.75%

- (IS) Israel Apr Foreign Currency Balance: No est v $94.8B prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12 Month Bills

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Floater Bonds

- 05:30 (UK) DMO to sell £2.5B in 1.50% July 2026 Gilts

- 06:30 (EU) ECBs Visco (Italy) at event in Florence

- 06:45 (US) Daily Libor Fixing

- 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision; Expected to leave Repurchase Rate unchanged at 0.05%and maintain EUR/CZK floor at 'around 27.00'

- 07:00 (ZA) South Africa Mar Electricity Consumption Y/Y: No est v 0.4% prior; Electricity Production Y/Y: No est v 2.8% prior

- 07:00 (IE) Ireland Apr Consumer Confidence: No est v 100.6 prior

- 07:30 (BR) Brazil Central Bank (BCB) COPOM Monetary Policy Meeting Minutes

- 07:30 (US) Apr Challenger Job Cuts Y/Y: No est v 48.2K prior; Y/Y: No est v 31.7% prior

- 07:30 (CL) Chile Mar Economic Activity (Monthly GDP) M/M: -0.1%e v +0.8% prior; Y/Y: 2.1%e v 2.8% prior

- 08:00 (CL) Chile Mar Nominal Wage M/M: +0.5%e v -0.2% prior; Y/Y: 5.15e v 5.4% prior

- 08:15 (US) Baltic Dry Bulk Index

- 08:15 (CZ) Czech Central Bank Gov Singer post Rate Decision press conference

- 08:30 (US) Initial Jobless Claims: 260Ke v 257K prior; Continuing Claims: 2.13Me v 2.130M prior

- 08:30 (CA) Canada Mar Building Permits M/M: -4.8%e v +15.5% prior

- 08:30 (US) Weekly Net Export Sales

- 09:00 (RU) Russia Apr CPI M/M: 0.6%e v 0.5% prior; Y/Y: 7.4%e v 7.3% prior; CPI YTD: 2.7%e v 2.1% prior

- 09:00 (RU) Russia Apr CPI Core M/M: 0.6%e v 0.6% prior; Y/Y: 7.8%e v 8.0% prior

- 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 29th: No est v $388.6B prior

- 09:00 (JP) Japan PM Abe press conference in London

- 09:15 (PT) ECBs Constancio (Portugal) on financial stability panel

- 10:20 (BR) Brazil Apr Vehicle Production: No est v 195.2K prior; Vehicle Sales: No est v 179.2K prior; Vehicle Exports: No est v 38.6K prior

- 10:30 (US) Weekly EIA Natural Gas Inventories

- 11:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds

- 11:00 (BR) Brazil to sell 2017, 2018 and 2020 Bills

- 11:50 (US) Feds Bullard (voter, hawkish)

- 12:30 (EU) EU President Tusk with Juncker and Italy PM Renzi on panel in Rome

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

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 3.75%

- 15:00 (CO) Colombia Feb Economic Activity Index (Monthly GDP) Y/Y: 3.3%e v 3.2% prior

- 18:00 (US) Feds Kaplan (moderate, non-voter)

- 19:30 (AU) Australia Apr AIG Performance of Construction Index: No est v 45.2 prior

- 19:50 (JP) Japan Apr Monetary Base Y/Y: No est v 28.5% prior; Monetary Base End of period: No est v ¥375.7T prior

- 20:00 (CO) Colombia Apr CPI M/M: 0.7%e v 0.9% prior; Y/Y: 8.1%e v 8.0% prior, CPI Core M/M: No est v 0.7% prior; Y/Y: No est v 6.2% prior

- 21:30 (AU) RBA Quarterly Statement on Monetary Policy

- 22:00 (JP) Japan Apr PMI Services: No est v 50.0 prior; Composite PMI: No est v 49.9 prior

- (UK) Elections for London Mayor and Assembly

- (UK) Elections for Scottish Parliament

- (UK) Elections for Welsh Assembly

- (UK) Elections for Northern Ireland Assembly


 

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