Risk aversion sentiment continues to muster momentum

Notes/Observations

- Trade and Brexit uncertainty continues to fuel risk aversion appetite; China has yet to name any specific retaliatory measures to US tariffs

Asia:

- China reiterated that the door for talks with US on trade was always open and that trade and economic cooperation between the two countries was the best choice. Reiterated stance that there were no winners in a trade war, China did not want a fight but was not afraid of one

Europe/Mideast:

- UK PM May said to be promising to reopen Brexit talks with EU to take the UK out of the bloc by summer in order to keep cross party negotiations with labour alive. PM to explore with the EU this week how to rewrite outline political agreement on future customs ties

- UK PM May said to be under pressure from Cabinet ministers to drop cross party talks in favor of more indicative votes in the Commons. To use cabinet meeting on Tuesday, May 14th to urge the prime minister to set a timetable for indicative votes by MPs after the European elections

- UK Shadow Brexit Sec Starmer: Cross party deal will not get through parliament unless it's subject to a confirmatory vote. Without a new referendum ,up to 150 labour MPs would vote against any deal

- ECB's Nowotny (Austria): ECB did not mean to tell markets easy policy would be prolonged when Draghi said it would consider steps to mitigate impact of negative rates on banks; Next policy steps would depend on data. Added that was premature to talk about what to do if growth slowed further

Americas:

- US President Trump tweeted on China: "Deal would become far worse for them if it had to be negotiated in my second term. I think that China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky & have a Democrat win

- White House Economic adviser Kudlow: China had invited Trade Rep Lighthizer and Treasury Sec Mnuchin to China to continue trade talks but plans were not firmed up yet. President Trump and Chinese President Xi Jinping were likely to talk directly at a G-20 meeting in Japan at the end of next month

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.63% at 375.14, FTSE -0.05% at 7,199.89, DAX -0.78% at 11,966.36, CAC-40 -0.51% at 5,300.30, IBEX-35 -0.27% at 9,092.44, FTSE MIB -0.77% at 20,714.50, SMI -0.64% at 9,412.50, S&P 500 Futures -1.23%]

Market Focal Points/Key Themes: European Indices trade lower across the board tracking sharply lower US Indices and weaker Asian Indices as trade tensions continue. On the corporate front shares of Dax heavyweight EON trades higher after earnings and affirmed outlook; Centrica rises in the UK as the company confirmed their full year targets while Paragon, KPS and Hypoport were among other notable risers after earnings. Meanwhile Dignity declines following earnings with, Victrex, QSC and Global Ports Holdings among other names declining on earnings. In other news Ambu declines sharply again, after sharp declines on Friday following multi analyst downgrades, while ThyssenKrupp pulls back from the strong gains seen last week with commentary from the CEO pushing for more focus on the steel division. Elsewhere EssilorLuxottica gains following a settlement with Delfin, while Medivir rises sharply after results from Remetinostat Phase II study in Basal Cell Carcinoma Patients. Looking ahead notable earners include National Energy Services and Navios Maritime Acquisitions.

 

Equities

- Consumer discretionary: Dignity [DTY.UK] -7% (earnings), Casino Guichard-Perrachon [CO.FR] -4.5% (analyst action)

- Utilities: E.ON [EOAN.DE] -0.5% (earnings)

- Energy: Centrica [CNA.UK] +2% (trading update)

- Financials: Hypoport [HYQ.DE] +2% (earnings), Euronext [ENX.FR] +1.5% (Norwegian Ministry of Finance approves Nasdaq as suitable owner of Oslo Børs VPS)

- Healthcare: Ambu [AMBUB.DK] -5.5% (analyst action), Medivir [MVIRB.SE] +12.5% (data)

- Industrials: ThyssenKrupp {TKA.DE] -7.5% (momentum; CEO comments), Diploma [DPLM.UK] -1.5% (earnings), Hochtief [HOT.DE] -0.5% (earnings), MTU Aero Engines [MTX.DE] -1.5% (analyst action)

- Technology: Paragon [PGN.DE] +4.5% (earnings), KPS [KSC.DE] +4% (earnings)

- Telecom: Vodafone [VOD.UK] -3.5% (to cut dividend to finance 5G)

 

Speakers

- UK Brexit Sec Barclay: Country at risk of sleepwalking into staying in the EU

- UK Labour party Dep leader Watson: Hard to achieve Brexit without a 2nd referendum

- China Foreign Ministry spokesperson Geng Shuang: Details of trade retaliatory measures to be released at some point. Reiterated that China would never give in to foreign pressure. Reiterated stance to meet US half-way on trade issues; tariffs was not the way to resolve disputes

- Reports circulate that recent China/US trade talks stalled over 3 areas including whether to remove all increased US tariffs. Also disagreement over targets set for US imports were seen as unrealistic by China and that both sides could not agree to the wording of the text of the trade agreement

 

Currencies/Fixed Income

- A new trading week brought little clarity on outstanding issues of US-China trade and UK cross-party talks on a path forward for Breixt which provided risk aversion sentiment to peculate.

- EUR/USD continue to hover within a tight range around 1.12 level

- GBP/USD was steady just above the 1.30 level with focus on the Tuesday UK Cabinet meeting. PM May said to be under pressure from her ministers to set a timetable for indicative votes by MPs after the European elections. To date cross-party talks between Tory and Labour have yet to yield any fruit.

- USD/JPY was lower by 0.3% as the JPY currency (Yen) remained the safe-haven currency of choice.

- Emerging market currencies were broadly lower with ZAR and TRY both lower by 1% in the session.

- Core bond yields were lower led by the US Treasury with the 10-year yield lower by 5bps to test below 2.42% area

 

Economic Data

- (RO) Romania Apr CPI M/M: 0.6% v 0.4%e; Y/Y: 4.1% v 3.9%e

- (NO) Norway Q1 GDP Q/Q: -0.1% v +0.2%e; GDP Mainland Q/Q: 0.3% v 0.4%e

- (NO) Norway Mar GDP M/M: +0.2% v -0.4% prior; GDP Mainland M/M: +0.3% v -0.2% prior

- (FR) Bank of France Apr Industrial (Business) Sentiment: 99 v 100e

- (SE) Sweden SEB Swedish Housing-Price Indicator: 27 v 13 prior

- (CZ) Czech Apr CPI M/M: 0.1% v 0.3%e; Y/Y: 2.8% v 3.0%e

- (CZ) Czech Mar Export Price Index Y/Y: 2.6% v3.4% prior; Import Price Index Y/Y: 2.8% v 3.3% prior

- (TR) Turkey Mar Current Account Balance: -$0.6B v -$1.0Be

- (CH) Swiss Weekly Total Sight Deposits (CHF): 578.1B v 577.7B prior; Domestic Sight Deposits: 484.3B v 480.8B prior

**Fixed Income Issuance**

- None seen

 

Looking Ahead

- (RU) Russia Apr Light Vehicle Car Sales Y/Y: 1%e v 2% prior

- 05:30 (DE) Germany to sell €2.0B in 6-month Bubills

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)

-06:00 (PT) Portugal Apr Final CPI M/M: No est v 0.6% prelim; Y/Y: No est v 0.8% prelim

-06:00 (PT) Portugal Apr Final CPI EU Harmonized M/M: No est v 1.0% prelim; Y/Y: No est v 0.9% prelim

- 06:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson

- 06:00 (IL) Israel to sell bonds

- 06:00 (TR) Turkey to sell 2020 and 2024 Bonds

- 06:00 (RO) Romania to sell Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (CZ) Czech Central Bank to comment on CPI data

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 08:00 (IN) India Apr CPI Y/Y: 3.0%e v 2.9% prior

- 08:00 (UK) Baltic Dry Bulk Index

- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.3-4.5B in 3-month, 6-month and 12-month Bills

- 09:05 (US) Fed members Rosengren and Clarida at event

-11:00 (CO) Colombia Mar Trade Balance: -$0.8Be v -$0.6B prior; Total Imports: $4.3Be v $4.0B prior

- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills

-15:00 (AR) Argentina Mar Capacity Utilization: No est v 58.5% prior

-16:00 (US) Crop Progress