Risk appetite continues to find some footing

Notes/Observations

- Brexit negotiations resume in Brussels; some optimism circulating that UK may be willing compromise with the EU

- German Chancellor Merkel said to seek compromise on a second stimulus package

- Equity markets higher in session with European stocks up for a 6th time in 7 days as optimism about economies reopening and stimulus measures outweighed worries over tensions between the US and China

 

Asia:

- RBA left policy unchanged (as expected). Kept Cash Rate Target unchanged at 0.25% and maintained Yield Target at 0.25%. Reiterated stance that accomodative to be maintained as long as needed and would to scale up bond purchases if needed. Reiterated yield target to remain in place until CPI and job targets reached

- South Korea Trade Ministry said to resume WTO compliant against Japan export curbs

- South Korea Q1 Final GDP Q/Q: -1.3% v -1.4%e; Y/Y: 1.4% v 1.3%e

- South Korea May CPI data registered its slowest annual pace since Sept (YoY: -0.3% v -0.2%e)

- Japan Fin Min Aso commented that he saw amajor impact if US ceased use of Hong Kong SWIFT settlement System (Insight: US cutting China off from US dollar payments system as a 'nuclear option' in response to Beijing's plan to impose a new security law in Hong Kong)

 

Europe:

- EU officials said to believe that Britain would signal compromise in fishing and level playing field if EU backed away from its maximalist demands on regional alignment and fishing access

- UK PM Johnson said to be warned by UK officials that Brexit negotiations should not drag into Autumn

 

Americas:

- President Trump: Mobilizing civilian and military resources to stop rioting; deploying 'thousands' of armed soldiers and military personnel to Washington D.C.; Recommended governors deploy national guard. Says he an ally of all peaceful protesters (Reminder: President Trump was said to be considering a move to invoke Insurrection Act which would allow deployment of active duty troops to respond to protests; would be first invocation of the Act since the 1992 Rodney King protests)

 

Mid-East/ Energy:

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +1.38% at 359.08, FTSE +0.79% at 6,215.15, DAX +3.30% at 11,969.25, CAC-40 +1.80% at 4,849.18, IBEX-35 +2.11% at 7,370.00, FTSE MIB +1.73% at 18,843.50, SMI +1.07% at 9,937.20, S&P 500 Futures +0.39%]

Market Focal Points/Key Themes: European indices open higher across the board and moved higher as the session progressed; financial sector leads best performers; healthcare sector the worst performer; Seadrill files to delist from NYSE; French FinMin sees economy contracting by 11% this year; upcoming earnings expected in the US session include Cracker Barrel and Dick’s Sporting Goods

 

Equities

- Consumer discretionary: Lufthansa [LHA,DE] +6% (bailout plans)

- Financials: Intu Properties [INTU.UK] +24% (cash projection)

- Industrials: Daimler [SAI.DE] % (Italy and France car registrations)

- Technology: Electrocomponents [ECM.UK] +6% (earnings), Xaar [XAR.UK] -3% (trading update)

 

Speakers

- France Fin Min Le Maire cut its 2020 GDP forecast from -8.0% to -11.0%. Reiterated stance that will not raise taxes on households or on savings accounts

- South Africa Central Bank (SARB) Gov Kganyago reiterated stance that prepared to deploy monetary policy. Could not embark on QE as ZAR (rand) was not a reserve currency

- Global Times tweet noted that Chinese firms continued to purchase US soybeans in line with market rules

- China Foreign Ministry spokesperson stated that it had no information on any halt in soybean purchases (**Reminder: On Jun 1st reports circulated that China had halted some US agricultural imports due to rising tensions between the countries)

- China city of Wuhan said to have found 300 asymptomatic cases of coronavirus in city-wide testing

- Russia said yet to decide its position regarding extension of OPEC+ cuts; expected to make decision on Tuesday, Jun 2nd (today)

 

Currencies/ Fixed Income

- USD continued to be on soft footing as risk appetite continued to find some footing.

- EUR/USD was higher by 0.3% by mid-session as reports circulated that German Chancellor Merkel's ruling coalition would hold talks on package to boost the economy for a 2nd stimulus package to help economy recover from the deep recession caused by the coronavirus

- GBP was on firmer footing on optimism over the upcoming Brexit talks. GBP/USD at 1-month highs above 1.2520 level on reports EU officials believed that Britain would signal compromise in fishing and level playing field if EU backed away from its maximalist demands on regional alignment and fishing access

 

Economic Data

- (UK) May Nationwide House Price Index M/M: -1.7% v -1.0%e; Y/Y: 1.82.8%e

- (CH) Swiss Mar Real Retail Sales Y/Y: -19.9% v -5.8% prior

- (FR) France Apr YTD Budget Balance: -€92.1B v -€52.5B prior

- (ES) Spain Apr Net Unemployment Change: +26.6K v +232.0Ke

- (NL) Netherlands May Manufacturing PMI: 40.5 v 43.9e (2nd straight contraction and lowest since Apr 2009)

- (HU) Hungary May Manufacturing PMI: 40.3 v 37.3e (3rd straight contraction)

- (CZ) Czech Q1 Preliminary GDP (2nd reading) Q/Q: -3.3% v -3.6%e; Y/Y: -2.0% v -2.2%e

- (HU) Hungary Mar PPI M/M: 0.4% v 0.5% prior; Y/Y: 3.7% v 4.3% prior

- (HU) Hungary Apr Final Trade Balance: €0.3B v €0.4B prelim

- (CH) Swiss May PMI Manufacturing: 42.1 v 42.0e (15th month of contraction)

- (CH) Swiss weekly Total Sight Deposits (CHF): 681.6B v 679.9B prior; Domestic Sight Deposits: 597.9B v 596.6B prior

- (NO) Norway May PMI Manufacturing: 45.9 v 45.5e (3rd straight contraction)

- (UK) Apr Net Consumer Credit: -£7.4B v -£4.5Be(weakest since Aug 2012); Net Lending: £0.3B v £1.1Be

- (UK) Apr Mortgage Approvals: 15.8K v 24.0Ke

- (UK) Apr M4 Money Supply M/M: 1.5% v 3.2% prior; Y/Y: 9.5% v 8.2% prior; M4 Ex IOFCs 3-month annualized: 21.6% v 16.4% prior

- (DK) Denmark Apr PMI Survey: 54.0 v 37.2 prior

 

Fixed Income Issuance

- Indonesia sold total IDR24.4T in bills and bonds

- (AT) Austria Debt Agency (AFFA) sold total €1.38B vs. €1.38B indicated in 2023 and 2030 RAGB bonds

- (UK) DMO sold £3.75B in new 0.125% Jan 2026 Gilts; Avg Yield: 0.048% v 0.037% prior; Bid-to-cover: 2.72x v 2.55x prior; Tail: 0.2bps v 0.4bps prior

 

Looking Ahead

- (RO) Romania May International Reserves: No est v $38.4B prior

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

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 05:30 (DE) Germany to sell €500M in 0.50% Apr 2030 inflation-linked bonds (Bundei)

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.5-2.5B in 6-month bills

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.8-2.2B in 3-month and 6-month bills

- 05:30 (ZA) South Africa to sell combined ZAR6.1B in 2030, 2035 and 2037 bonds

- 05:40 (UK) BOE weekly allotment in 6-month GBP-enhanced liquidity repo operation (ILTR)

- 06:00 (IL) Israel Apr Chain Store Sales Y/Y: No est v 4.4% prior

- 06:00 (IL) Israel Mar manufacturing Production M/M: No est v 1.7% prior

- 06:30 (EU) ECB allotment in weekly fixed-rate 1-month LTRO operation

- 06:30 (EU) ESM to sell €2.5B in 3-Month Bills

- 06:30 (UK) DMO to sell in £3.0B in new 0.375% Oct 2030 Gilts

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)

- 07:00 (MX) Mexico Apr Leading Indicators M/M: No est v -0.46 prior

- 07:45 (US) Goldman Economist Chain Store Sales

- 07:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (3-7 years)

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

- 08:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson

- 08:30 (CA) Canada Apr MLI Leading Indicator M/M: No est v -1.7% prior

- 08:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (7-20 years)

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

- 08:50 (FR) France Debt Agency (AFT) to sell €7.9-9.5B in 3-month, 6-month and 12-month bills (4 tranches)

- 09:00 (EU) Weekly ECB Forex Reserves

- 09:45 (UK) BOE to buy £1.5B in APF Gilt purchase operation (20+ years)

- 10:00 (MX) Mexico Weekly international reserve data

- 11:00 (DK) Denmark May Foreign Reserves (DKK): No est v 450.9B prior

- 16:30 (US) Weekly API Oil Inventories

- (AR) Argentina May Government Tax Revenues (ARS): No est v 443.6B prior

- 17:00 (KR) South Korea Apr Foreign Reserves: no est v $403.9B prior

- 19:00 (AU) Australia May Final PMI Services: No est v 25.5 prelim; PMI Composite: No est v 26.4 prelim

- 19:01 (UK) Apr BRC Shop Price Index Y/Y: No est v -1.7% prior

- 20:30 (HK) Hong Kong May PMI (whole economy): No est v 36.9 prior

- 20:30 (SG) Singapore May PMI (whole economy): No est v 28.1 prior

- 20:30 (JP) Japan May Final PMI Services: No est v 25.3 prelim; Composite PMI: No est v 27.4 prelim

- 21:00 (AU) Australia to sell A$2.0B in 2029 bond

- 21:30 (AU) Australia Q1 GDP Q/Q: -0.4%e v +0.5 % prior; Y/Y: 1.4%e 2.2% prior

- 21:30 (AU) Australia Mar Building Permit Approvals M/M: -10.8%e v -4.0% prior

- 21:45 (CN) China Apr Caixin PMI Services: 47.3e v 44.4 prior; PMI Composite: No est v 47.6 prior

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

- (US) Primaries for District of Columbia Primaries, Montana, New Jersey, New Mexico and South Dakota