Global markets decline on reports that China expresses no interest in continuing trade talks

Notes/Observations

Asia:

-China stocks plummet as China State Media reported China may have no interest in continuing trade talks with the US for now; sees little "sincerity" in Pres Trump's approach

-China NDRC: Reiterates trade friction's impact on the Chinese economy is 'under control', domestic CPI and PPI growth to stay stable in future; Pork prices stabilized and declined m/m in April

Europe/Mideast:

-Brexit talks between Labour and the Conservatives are said to close without an agreement; will now move to a second phase aimed at agreeing on a process for parliamentary votes designed to find a consensus

-Reportedly Labour Party sees no point in Brexit deal with a Government which is about to collapse

-White House issues notice on Turkey metal tariffs: Confirms US is terminating Turkey preferential treatment under GSP, effective on Friday (as expected); US to impose 25% ad valorem tariff on Turkey steel imports, down from 50% prior -German Business Association DIHK estimates that further U.S. tariffs of 25% on cars, car parts would cost German economy €6B per year

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.60% at 380.58, FTSE -0.38% at 7,325.83, DAX -0.85% at 12,206.31, CAC-40 -0.56% at 5,417.52, IBEX-35 -0.39% at 9,268.00, FTSE MIB -0.49% at 21,047.50, SMI -0.48% at 9,614.00, S&P 500 Futures -0.53%]

Market Focal Points/Key Themes: Equities European Indices trade lower across the board after weak Asian session as trade tensions weighs after China State media commentary on weakening interest in trade talks and . U.S. futures also trade lower about half a percent. On the earnings front, Swiss-based Richemont trades 1.5% lower after missing on margins. Industrial companies Porsche and Duerr trade lower as well following worse than expected earnings releases. In the U.K. EasyJet airlines stock trades higher about 3% on increase in revenue figures. On the corporate front, stock of major European food delivery firms trade sharply lower after Amazon confirms investment in their privately-held rival Deliveroo. ThyssenKrupp falls another 3% after interest indicated in one of its units. In other news, Thomas Cook fell over 30% following edgy analyst price cut action. Looking ahead, notable earners include Cae and Dr. Reddy's Laboratories .

- Consumer discretionary: Richemont [CFR.CH] -1.5% (earnings; raises dividend), Delivery Hero [DHER.DE] -5%, Takeaway.com [TKWY.NL] -2.5%, Just Eat {JE.UK] -8% (Amazon confirms leading round in rival Deliveroo financing), EasyJet [EZJ.UK] +3% (earnings; outlook cut), Staffline Group [STAF.UK] -52% (trading update), Thomas Cook [TCG.UK] -30% (analyst action), Zalando [ZAL.DE] -5% (analyst action)

- Healthcare: Morphosys [MOR.DE] +1% (study data)

- Financials: Metro Bank [MTRO.UK] +21% (placement)

- Industrials: Porsche [PAH3.DE] -1.5% (earnings), Vallourec [VK.FR] +8% (earnings), Fiskars [FSKRS.FI] -3.5% (profit warning citing tariffs), Sage Group [SGE.UK] -2% (earnings), ThyssenKrupp [TKA.DE] -3% (unit interest), Duerr [DUE.DE] -4% (earnings)

 

Speakers

- (CN) China Foreign Min Spokesman Lu Kang: No information on Trump-Xi meeting at G-20; China has always wanted to resolve all disputes via talks

(JP) Japan Cabinet Secretary Suga: Japan's economic fundamentals are strong

(JP) Japan Chief Government Spokesperson: Possible for PM Abe to dissolve lower house if opposition submits a motion of no confidence

(CN) China Global Times Editor-in-chief Hu Xijin: More The US Commerce Department put Huawei on its Entity List, making trade war more like a real 'war'. Trade talks have been stuck in deep shock. The Chinese are more convinced concessions won't bring peace. The only way for China is to strengthen independent research & development.

 

Currencies/Fixed Income

Trade frictions continue to be the main topic of discussion today with additional media outlets saying China may have no interest in continuing trade talks with the US for now, whereas Trump is saying that they need to make a deal now as it will not receive a better deal in the future. The PBOC also said that they would support their currency by not letting the CNY weaken against the dollar abve the 7.00 handle. This saw a slight sell off in the CNY.

-EUR/USD Traded lower yesterday while comments from the Italian dep PM say that Italy needs a Trump-like shock. The euro then sold off 50 pips breaking and closing below the 1.12 handle. These comments also saw the BTP future sell off hard for 40 tics, only to turn around and make a new high on the day pushing yields higher

-GBP/USD Traded lower breaking the 1.28 handle with little support being seen in the currency. Comments continue to go nowhere as it looks like the UK may have to be involved in the EU elections unless they manage to put together a deal. The cable is currently trading near its 1.2770 level a low set back in February this year.

 

Economic Data

(EU) EURO ZONE APR CPI Y/Y: 1.7% V 1.7%E ; CPI CORE Y/Y: 1.3% V 1.2%E; CPI M/M: 0.7% V 0.7%E

(EU) Euro Zone Mar Construction Output M/M: -0.3% v 3.0% prior; Y/Y: 6.3% v 7.6% prior

(HK) Hong Kong Q1 Final GDP Q/Q: 1.3% v 1.2% prelim; Y/Y: 0.6% v 0.5% prelim

(EU) Euro Zone Apr EU27 New Car Registrations: -1.0% v -3.9% prior

(AT) Austria Apr CPI M/M: 0.1% v 0.9% prior; Y/Y: 1.7% v 1.8% prior

(RU) Russia Narrow Money Supply Narrow w/e May 10th (RUB): 10.35T v 10.28T prior

(HK) Hong Kong Q1 Final GDP Q/Q: 1.3% v 1.2% prelim; Y/Y: 0.6% v 0.5% prelim

**Fixed Income Issuance**

Trade frictions continue to be the main topic of discussion today with additional media outlets saying China may have no interest in continuing trade talks with the US for now, whereas Trump is saying that they need to make a deal now as it will not receive a better deal in the future. The PBOC also said that they would support their currency by not letting the CNY weaken against the dollar abve the 7.00 handle. This saw a slight sell off in the CNY.

-EUR/USD Traded lower yesterday while comments from the Italian dep PM say that Italy needs a Trump-like shock. The euro then sold off 50 pips breaking and closing below the 1.12 handle.

-GBP/USD Traded lower breaking the 1.28 handle with little support being seen in the currency. Comments continue to go nowhere as it looks like the UK may have to be involved in the EU elections unless they manage to put together a deal. The cable is currently trading near its 1.2770 level a low set back in February this year.

 

Looking Ahead

- 07:30 (IN) India Weekly Forex Reserves w/e May 10th: No est v $418.7B prior

- 08:10 (UK) Baltic Dry Bulk Index

- 09:00 (RU) Russia Mar Trade Balance: $16.0Be v $15.7B prior; Exports: $37.8Be v $34.0B prior; Imports: $21.8Be v $34.0B prior

- 10:00 (US) Apr Leading Index: 0.2%e v 0.4% prior

- 10:00 (US) University of Michigan Confidence: 97.5e v 97.2 prior

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