European inflation data continues to improve

Notes/Observations

- European inflation data continues to improve (France, Italy and Euro Zone all improved from month-ago levels and above market expectations

- Italy President Mattarella said to be willing to wait for the League and Five Star Movement to make another attempt at forming a government (Note: League’s leader Salvini has shown less flexibility this time around)

Asia:

- China PMIs rise m/m, manufacturing index hits the highest since Sept 2017 (51.9 v 51.4)

- Japan Apr Preliminary Industrial Production M/M: 0.3% v 1.4%e; Y/Y: 2.5% v 3.6%e

- China Commerce Ministry (MOFCOM) reiterated that was not willing to see escalation in China/US trade frictions. Saw huge potential in cooperation opportunities with the US. To reduce curbs for foreign firms in areas related to energy, infrastructure and transportation. Confirmed to issue foreign investment 'negative list' before June 30th

Europe:

- Italy President Mattarella and PM-designate Cottarelli agreed not to rush situation in order to see if political govt could be formed

- Italy's League leader Salvini: hopes a govt can be formed but we can't swap ministers around

- Italy Five Star leader di Maio stated that would propose Savona still have role in govt, just not be Fin Min

- UK Chancellor of the Exchequer Hammond (Fin Min) said the UK to keep new EU privacy rules post-Brexit

- UK May GfK Consumer Confidence: -7 v -8e (matched highest level since May 2017)

Americas:

- Federal Reserve Beige Book: Economic activity rose at a moderate pace or better in all 12 Fed districts

- Fed governors and other banking regulators issue proposal to streamline Volcker rule

- US President Trump speculated to proceed with metals tariffs on the EU, Canada and Mexico as he is said to be frustrated by the failure of trading partners to agree to a range of demands (Note: current exemptions expire on May 31st)

Energy:

- Weekly API Oil Inventories: Crude: +1.0M v -1.3M prior

Economic Data:

- (CH) Swiss Q1 GDP Q/Q: 0.6% v 0.5%e; Y/Y: 2.2% v 2.3%e

- (UK) May Nationwide House Price Index M/M: -0.2% v +0.2%e; Y/Y: 2.4% v 3.0%e

- (NO) Norway Apr Credit Indicator Growth Y/Y: 6.3% v 6.3%e

- (FI) Finland Q1 GDP Q/Q: 1.2% v 0.9% prior; Y/Y: 3.1% v 2.6% prior

- (FI) Finland Mar Final Trade Balance: -€0.2B v -€0.2B prelim

- (DK) Denmark Q1 Preliminary GDP Q/Q: 0.4% v 0.9% prior; Y/Y: -0.5% v +1.3% prior

- (DK) Denmark Apr Gross Unemployment Rate: 4.0% v 4.1%e; Unemployment Rate (Seasonally Adj): 3.3% v 3.3% prior

- (FR) France May Preliminary CPI M/M: 0.4% v 0.3%e v 0.2% prior; Y/Y: 2.0% v 1.9%e

- (FR) France May Preliminary CPI EU Harmonized M/M: 0.4% v 0.3%e; Y/Y: 2.3% v 2.1%e

- (FR) France Apr PPI M/M: -0.7% v +0.4% prior; Y/Y: 2.3% v 2.6% prior

- (ES) Spain Q1 Final GDP Q/Q: 0.7% v 0.7%e; Y/Y: 3.0% v 2.9%e

- (ES) Spain Mar House Mortgage Approvals Y/Y: -5.2% v +13.8% prior, Total Mortgage Lending Y/Y: -4.7% v -2.5% prior

- (HU) Hungary Apr PPI M/M: -0.3% v 0.0% prior; Y/Y: 2.7% v 3.5% prior

- (TR) Turkey Apr Trade Balance: -$6.7B v -$6.7Be

- (CH) Swiss Apr Real Retail Sales Y/Y: +2.2% v -1.1% prior

- (TH) Thailand Apr Current Account: $1.4B v $2.8Be; Overall Balance of Payments (BOP): $B v $3.0B prior; Trade Account Balance: $0.2B v $3.0B prior; Exports Y/Y: 14.6% v 6.3% prior; Imports Y/Y: 22.7% v 6.7% prior

- (IT) Italy Apr Unemployment Rate: 11.2% v 10.9%e

- (ES) Spain Mar Current Account: +€0.9B v -€0.5B prior

- (CZ) Czech Apr M2 Money Supply Y/Y: 4.4% v 5.6% prior

- (NO) Norway Central Bank (Norges) Jun Daily FX Purchases (NOK): -750M v -800Me

- (UK) Apr Mortgage Approvals: 62.5K v 63.5Ke

- (UK) Apr Net Consumer Credit: £1.8B v £1.3Be; Net Lending: £3.9B v £3.9Be

- (UK) Apr M4 Money Supply M/M: +0.2% v -1.4% prior; Y/Y: 1.1% v 2.2% prior; M4 ex-IOFC 3-month Annualized: -0.7% v 1.1% prior

- (HK) Hong Kong Apr Retail Sales Value Y/Y: 12.3% v 12.2%e; Retail Sales Volume Y/Y: 11.1% v 10.5%e

- (EU) Euro Zone Apr Unemployment Rate: 8.5% v 8.4%e (lowest level since Dec 2008)

- (EU) Euro Zone May Advance CPI Estimate Y/Y: 1.9% v 1.6%e; CPI Core Y/Y: 1.1% v 1.0%e

- (IT) Italy May Preliminary CPI (includes tobacco) M/M: 0.4% v 0.2%e; Y/Y: 1.1% v 0.8%e

- (IT) Italy May Preliminary CPI EU Harmonized M/M: 0.4% v 0.2%e; Y/Y: 1.1% v 0.9%e

- (GR) Greece Mar Retail Sales Value Y/Y: 1.5% v -0.4% prior; Retail Sales Volume Y/Y: 1.2% v -0.9% prior

- (BE) Belgium Apr Unemployment Rate: 6.3% v 6.3% prior

Fixed Income Issuance:

- None seen

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.1% at 386.0, FTSE +0.2% at 7704, DAX -0.3% at 12748, CAC-40 +0.2% at 5439, IBEX-35 +0.6% at 9617, FTSE MIB +1.1% at 22036, SMI +0.4% at 8607, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

European Indices trade mostly higher led by the Italian FTSE MIB, with developments on the Italian Political front continuing to be in focus. On the corporate front First Group trades sharply lower in the UK after a decline in profits and the resignation of its CEO. Elsewhere Card Factory also falls after results, while Dalrup and Sohne and Dotikon rising after earnings. NeuroSearch gains after a takeover offer from NTG holdings.

Looking ahead retail earnings continue to be in focus with Dollar General, Dollar tree and American Eagle some of the names to report.

 

Movers

- Consumer Discretionary First Group [FGP.UK] -13% (Earnings, CEO resigns), Card Factory [CARD.UK] -3.7% (trading update), Bang & Olufson [BO.UK] +2.2% (CFO departs)

- Industrials Daimler [DAI.DE] -0.8% (Trump comments)

- Materials Dotikon [DESN.CH] +2.5% (earnings)

- Healthcare NeuroSearch [NEUR.DK] +16% (Takeover offer), Mithra Pharma [MITRA.BE] -6% (Private placement)

 

Speakers

- SNB Vice President Zurbruegg: Current monetary policy stance took into account the fragility of the currency market

- EU Parliament member Ciocca said to be the possible pick for Fin Min in a potential League/Five Star coalition Govt

- Former 5-Star/League PM Designate Conti: Euro exit was never raised in talks

- Spain Parliament began its no-confidence debate (as expected). Spain PSOE party (Socialists) official stated that their game plan was for a no-confidence vote, then stability and then elections

- PM Rajoy: Reasons for no-confidence motion were an exaggeration

- Spain PSOE party (Socialists) leader Sanchez: Rajoy's time was up; Party would seek a consensus program to govern the country, would honor budget discipline

- Ireland Dep PM Coveney (also foreign Min): Brexit talks were at a critical point; set for a very difficult summer if there was not sufficient progress on Irish border issue

- EU mission chief Costello: Greece was on track for a successful conclusion to its bailout program; its market access remained fragile. Expect ed a deal on Greece debt at the next Eurogroup and stressed that it was important for Greece to keep up its reform efforts

- China FX Regulator SAFE reiterated its view to avert risks in cross border flows and ensure forex market stability. To promote trade and investment liberalization. To optimize the structure and currencies of its FX Reserves

- Thailand Central Bank Gov Veerathai: Not concerned on capital outflows as have sufficient reserves to cover capital flows

- India PM aide Kumar: RBI should keep its policy steady in Jun

- Taiwan Central Bank: Risks in bond investment yields are worth watching as it saw higher risk of emerging market outflows

- North Korea leader Kim: Situation was shifting towards talks with the US swiftly

 

Currencies

- The continued improvement in risk sentiment weighed upon the USD. Some analysts note that they saw further signals that the USD rally was coming to completion and should begin to weaken in the coming weeks.

- The EUR/USD continued its rebound from recent 10-month lows to recapture the 1.17 level. The European inflation data continued to improve (as anticipated by the ECB). Italy President Mattarella said to be willing to wait for the League and Five Star Movement to make another attempt at forming a government. The Italian 10-year yield continued to move away from the recent multi-year high (3.40%) to test below 2.60% in the session.

 

Fixed Income

- Bund Futures trade 63 ticks lower at 161.20 with little reaction from hotter than expected Euro Zone advance inflation reading. Upside targets 164.75 followed by 165.50, while a return lower targets the 162.25 level.

- Gilt futures trade at 123.85 lower by 28 ticks as the pound rises and Italian panic subsides. Support continues stands at 123.75 then 123.25, with upside resistance at 125.85 then 127.35.

- Thursday’s liquidity report showed Wednesday’s excess liquidity rose from €1.898T to €1.845T. Use of the marginal lending facility decreased from €258M to €120M.

- Corporate issuance saw 3 issuers raise $2.8B

 

Looking Ahead

- (CA) Canada May CFIB Business Barometer: No est v 56.6 prior

- (SE) Sweden Central Bank (Riksbank) Dep Gov Skingley in Kiev

- 05:30 (ZA) South Africa Apr PPI M/M: +0.7%e v-0.2 % prior; Y/Y: 4.2%e v 3.7% prior

- 05:30 (SL) Sri Lanka May CPI Y/Y: No est v 3.8% prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills

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

- 05:45 (DE) German and China Foreign Ministers meet

- 06:00 (US) Fed’s Bullard (dove, non-voter)

- 06:00 (IL) Israel Apr Unemployment Rate: No est v 3.6% prior

- 06:00 (CZ) Czech Republic to sell Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (ZA) South Africa Apr Electricity Consumption Y/Y: No est v -0.1% prior; Electricity Production Y/Y: No est v 1.2% prior

- 07:30 (US) May Challenger Job Cuts Y/Y: No est v -1.4% prior

- 08:00 (IN) India Q1 GDP Y/Y: 7.1%e v 7.2% prior, GVA Y/Y: 7.1%e v 6.7% prior; Overall 2018 GDP Annual Estimate Y/Y: 6.7%e v 6.6% prior

- 08:00 (IN) India Apr Eight Infrastructure (key industries) Y/Y: No est v 4.1% prior

- 08:00 (ZA) South Africa Apr Trade Balance (ZAR): 4.7Be v 9.5B prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Initial Jobless Claims: 228Ke v 234 K prior; Continuing Claims: 1.73Me v 1.741 M prior

- 08:30 (US) Apr Personal Income: 0.3%e v 0.3% prior; Personal Spending: 0.4%e v 0.4% prior, Real Personal Spending (PCE): 0.2%e v 0.4% prior

- 08:30 (US) Apr PCE Core M/M: 0.1%e v 0.2% prior; Y/Y: 1.8%e v 1.9% prior

- 08:30 (US) Apr PCE Deflator M/M: 0.2%e v 0.0% prior; Y/Y: 2.0%e v 2.0% prior

- 08:30 (CA) Canada Mar GDP M/M: 0.2%e v 0.4% prior; Y/Y: 2.9%e v 3.0% prior, Quarterly GDP Annualized: 1.8%e v 1.7% prior

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 25th: No est v $456.3B prior

- 09:00 (CL) Chile Apr Industrial Production Y/Y: 8.1%e v 8.7% prior; Manufacturing Production Y/Y: +8.5%e v -2.4% prior; Total Copper Production: No est v 496M tons prior

- 09:00 (CL) Chile Apr Unemployment Rate: 7.0%e v 6.9% prior

- 09:45 (US) May Chicago Purchasing Manager: 58.3e v 57.6 prior

- 10:00 (US) Apr Pending Home Sales M/M: 0.5%e v 0.4% prior; Y/Y: No est v -4.4% prior

- 10:00 (MX) Mexico Apr Net Outstanding Loans (MXN): No est v 4.077T prior

- 10:00 (MX) Mexico Central Bank (Banxico) May Minutes

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

- 11:00 (US) Weekly DOE Crude Oil Inventories

- 11:00 (CO) Colombia Apr National Unemployment Rate: No est v 9.4% prior; Urban Unemployment Rate: 10.5%e v 10.6% prior

- 12:30 (US) Fed’s Bostic (voter, dove)

- 15:00 (AR) Argentina Apr Industrial Production Y/Y: 3.0%e v 1.2% prior