German ZEW expectation survey hits a 20-year high

Notes/Observations

- Germany's ZEW beats consensus and registered a 21-year high as slowing down of the 3rd wave of the pandemic provides some optimism.

- Uncertainty continues over the Covid-19 pandemic in Far East.

- Inflation fears haunting markets as Inflation in emerging Europe puts focus on potential rate hikes in region.

- UK government will set out its legislative agenda for the new parliamentary session in the Queen's Speech today.

Asia

- China Apr CPI Y/Y: 0.9% v 1.0%e; PPI Y/Y: 6.8% v 6.5%e.

- China releases 2020 census put its total population 1.412B v 1.4005B y/y; Total population increased 5.38% from 2010-2020 compare0d to 5.84% from 2000-2010 period.

- Japan Mar Household Spending 7.2% v 2.4% prior; Y/Y: 6.2% v 1.6%e.

- BOJ Summary of Opinions from April: noted that Japan could see huge pent up demand in services once pandemic subsidies as households accumulate savings, deposits. Domestic economy was picking up but risks from resurgence in COVID continued to warrant attention.

Coronavirus

- Japan Governors notes that a Nationwide state of emergency should not be ruled out.

Europe

- ECB's Schnabel (Germany) stated that German inflation could exceed 3% this year but reiterated stance that ECB will look through such fluctuations.

- UK Apr BRC Sales LFL Y/Y: 39.6% v 20.3% prior; UK consumer spending rises above pre-pandemic levels for first time in 2021.

Americas

- President Biden stated that country was moving in the right direction on economic growth and would see fastest growth US has seen for 40 years.

- Fed's Kaplan (non-voter; hawkish) stated that the economic effect of Colonial pipeline shutdown would depend on the length of the shutdown; for now it was minimal.

- Fed's Daly (non-voter, dove) stated that was not 'disappointed' with April jobs report because had expected there would be volatility. Have dug a deep hole regarding joblessness. Saw stock market valuations that are pretty high.

- Sen Maj Leader Schumer (D-NY) stated that talks were continuing on infrastructure, guns, and policing. Moving forward on a voting bill in committee this week.

- Senate Republicans said to be signaling they could raise the price tag on their infrastructure offer to President Biden but the bill must be limited to physical infrastructure.

Energy

- Colonial pipeline down for 4th day.

- Pres Biden stated that we are ready to take additional steps on the pipeline.

- US coast guard ship fired almost 3 dozen warning shots as more than a dozen Iranian boats charged at US navy vessels in a narrow shipping lane in the Gulf.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -1.88% at 437.02, FTSE -1.98% at 6,982.30, DAX -1.95% at 15,099.35, CAC-40 -1.85% at 6,267.89, IBEX-35 -1.41% at 9,014.00, FTSE MIB -1.47% at 24,438.50, SMI -1.34% at 10,975.00, S&P 500 Futures -0.67%].

Market Focal Points/Key Themes: European indices open lower across the board and fell further as the session wore on; all sectors start the day in the red, but the less negative sectors include utilities and real estate; sectors leading to the downside include materials and technology; focus later in the day on Queen’s speech and Merkel’s conference with business associations on economic policy; earnings expected in the upcoming US session include MedioBanca, Hanesbrands, Hochtief and Perrigo.

Equities

- Consumer discretionary: Joules Group [JOUL.UK] +3% (trading update), Revolution Bars [RBG.UK] +10% (reopening update), CECONOMY [CEC.DE] -12% (earnings).

- Industrials: Thyssenkrupp [TKA.DE] -5% (earnings), Alstom [ALO.FR] -3% (earnings), Jenoptik [JEN.DE] -7% (earnings).

- Utilities: E.ON [EOAN.DE] -1% (earnings).

Speakers

- ECB's Villeroy (France) noted that any talk of tapering PEPP was purely speculative. Reiterated Council stance that to continue Pandemic Bond Buying at least through march 2022.

- Upcoming EU Commission spring forecasts said to raise Italy 2021 GDP growth from 3.4% to 4.0%.

- German Health Min Spahn: Country has cause for optimism regarding the pandemic.

Currencies/ Fixed Income

- European yields were higher as dealers noted that ECB purchases under the Pandemic Emergency Purchase Program declined to €16.3B in the week ending May 7th (prior week saw €19B). The spread between yields Italian and German 10-year bonds widened as a result of the debate over the future pace of bond purchases under the ECB Emergency Purchase Program.

- Inflation in emerging Europe puts focus on potential rate hikes in region as Hungary and Czech inflation paced quickened in April.

- EUR/USD trading at 1.2160 area as German ZEW Sentiment saw some optimism despite ongoing restrictions that were entering their sixth month amid a third wave of the virus.

- GBP was hovering near 3-year highs ahead of the Queen's Speech where the UK government will set out its legislative agenda for the new parliamentary session. GBP/USD at 1.4140 by mid-session.

Economic data

- (NL) Netherlands Apr CPI M/M: 0.5% v 0.3% prior; Y/Y: 1.9% v 1.9% prior.

- (NL) Netherlands Apr CPI EU Harmonized M/M: 0.8% v 0.3% prior; Y/Y: 1.7% v 1.9% prior.

- (DE) Germany Apr Wholesale Price Index M/M: 1.1% v 1.7% prior; Y/Y: 7.2% v 4.4% prior.

- (CZ) Czech Apr CPI M/M: 0.5% v 0.2%e; Y/Y: 3.1% v 2.7%e.

- (CZ) Czech Export Price Index Y/Y: 2.5% v 4.5% prior; Import Price Index Y/Y: 1.6% v 2.1% prior.

- (TR) Turkey Mar Current Account: -$3.3B v -$3.8Be.

- (TR) Turkey Mar Industrial Production M/M: +0.7% v -0.5%e; Y/Y: 16.6% v 14.1%e.

- (HU) Hungary Apr CPI M/M: 0.8% v 0.5%e; Y/Y: 5.1% v 4.8%e (moved above target range).

- (IT) Italy Mar Industrial Production M/M: -0.1% v +0.5%e; Y/Y: 37.7% v 37.1%e; Industrial Production NSA (unadj) Y/Y: +40.9% v -1.5% prior.

- (DE) Germany May ZEW Current Situation Survey: -40.1 v -41.6e; Expectations Survey: 84.4 v 72.0e.

- (EU) Euro Zone May ZEW Expectations Survey: 84.0 v 66.3 prior.

Fixed income issuance

- (DE) Germany opened its book to sell 30-year green Bund via syndicate; guidance seen -1bps to Bunds.

- (EU) European Investment Bank (EIB) to sell EUR-denominated 7-year bond; guidance seen -10bps to mid-swaps.

- (NL) Netherlands Debt Agency (DSTA) sold €2.35B vs. €1.5-2.5B indicated range in 0% July 2031 DSL Bonds; Avg Yield: -0.027% v -0.316% syndicate.

- (ES) Spain Debt Agency (Tesoro) sold total €1.4B vs. €1.0-2.0B indicated range in 3-month and 9-month bills.

- (SE) Sweden sold total SEK17.5B vs. SEK17.5B indicated in 3-month and 9-month Bills.

- (UK) DMO sold £3.0B in 0.375% Oct 2026 Gilts; Avg Yield: 0.457% v 0.468% prior; bid-to-cover: 2.57x v 2.56x prior; Tail: 0.2bps v 0.3bps prior.

Looking Ahead

- (AU) Australia Budget.

- (UK) Queen's Speech.

- OPEC Monthly Oil Report.

- 05:20 (EU) Daily ECB Liquidity Stats.

- 05:15 (CH) Switzerland to sell 3-month Bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

-05:30 (BE) Belgium Debt Agency (BDA) to sell 3-month and 12-month bills.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €M with # bids recd).

- 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2026, 2035 and 2048 bonds.

- 06:00 (US) Apr NFIB Small Business Optimism Index: 100.8e 98.2 prior.

- 06:00 (IL) Israel Apr Consumer Confidence: No est v 125 prior.

- 06:30 (UK) DMO to sell £1.5B in 0.5% Oct 2061 Gilts.

- 06:30 (EU) ESM to sell 12-Month Bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (TR) Turkey to sell bonds.

- 07:00 (MX) Mexico Feb Gross Fixed Investment: -6.0%e v -10.6% prior.

- 07:00 (ZA) South Africa Mar Manufacturing Production M/M: +0.8%e v -1.2% prior; Y/Y: +0.7%e v -2.1% prior.

- 07:00 (CZ) Czech Central Bank comments on CPI data.

- 08:00 (BR) Brazil Apr IBGE Inflation IPCA M/M: 0.3%e v 0.6% prior; Y/Y: 6.7%e v 6.2% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (RU) Russia Apr Official Reserve Assets: $585.0Be v $573.3B prior.

- 09:00 (EU) Weekly ECB Forex Reserves.

- 09:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (over 20-years).

- 10:00 (US) Mar JOLTS Job Openings: 7.500Me v 7.367M prior

- 10:00 (MX) Mexico Weekly International Reserve data.

- 10:30 (UK) BOE Gov Bailey on Libor.

- 12:00 (US) Fed’s Brainard.

- 13:00 (US) Fed’s Daly.

- 13:00 (US) Treasury to sell 3-year notes.

- (MX) Mexico Apr ANTAD Same-Store Sales Y/Y: No est v 6.5% prior.

- 16:30 (US) Weekly API Oil Inventories.

- 19:00 (KR) South Korea Apr Unemployment Rate: 3.9%e v 3.9% prior.

- 23:00 (KR) South Korea Apr Total Bank Lending to Household (KRW): No est v 1009.5T prior.

- 23:00 (CN) China to sell 3-year and 7-year Bonds.