Risk aversion theme continues to peculate; Norges remains hawkish on rate guidance

Notes/Observations

- Risk aversion theme still mustering momentum as US/China trade and Brexit talks looked increasingly more vulnerable

- Norway Central Bank gives a hawkish hold in key rate decision as it brings forward the guidance on the next potential hike to Jun (from prior H2 2019)

- North Korea fires another projectile for the 2nd time this month after a 2-year pause

Asia:

- China Commerce Ministry indicated it may take countermeasures against new US tariffs

- China Apr New Yuan Loans (CNY): 1.020T v 1.200Te

- China Apr CPI at a 6-month high (YoY: 2.5% v 2.5%e)

- New Zealand Central Bank (RBNZ) Gov Orr stated that was too early to tell if another rate cut is needed as the recent rate cut got the central bank ahead of the curve

Europe/Mideast:

- UK 1922 Committee of Conservative MPs (back benchers) reportedly did not make change in party leadership rules

- UK 1922 Committee Chair Brady: PM May was aiming for a Brexit bill vote on Withdrawal Agreement before the May 23rd EU elections

- UK Cabinet Office Minister Lidington (de facto Dep PM): Brexit talks with Labour had been difficult at times

- DMO Chief Stheeman : loss of AA status for UK sovereign could lead reserve mangers to reassess

Americas:

- US President Trump: China "broke the deal" in trade talks; confirmed China Vice Premier was coming to US for trade talks; Don't worry on China it will all work out

- US 10-year Note auction saw the weakest bid-to-cover ratio in a decade at 2.17x

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.75% at 379.60, FTSE -0.28% at 7,250.65, DAX -0.65% at 12,100.96, CAC-40 -1.16% at 5,354.87, IBEX-35 -0.56% at 9,175.00, FTSE MIB -0.74% at 21,047.50, SMI -0.75% at 9,549.50, S&P 500 Futures -0.78%]

Market Focal Points/Key Themes: European Indices trade lower across the board tracking sharply lower Asian Indices once again and lower US Index futures as trade tensions and Brexit talks continue to weigh on markets. On the corporate front shares of Arcelor Mittal decline sharply after sharp decline in profits; Metro reverses earlier gains in the week after Q2 earnings loss narrows, while Lehto Group, SLM Solutions, Jenoptik, Genmab, Continental and Schmolz + Bickenbach among other names declining on earnings. Meanwhile shares of Rhinemetall rise on earnings with Hapag Lloyd, ALK Abello and HeidelbergCement also bucking the overall trend. In other news Ocado gains following an update on its partnership with Morrisons, while StoreBrand, DWS Group and Ontex Group all lower on analyst downgrades. Looking ahead notable earners include Tapestry, Dr Pepper Keurig, Harsco, Care.com and Duke Energy among others.

 

Equities

- Consumer discretionary: METRO [B4B.DE] -1.5% (earnings), Superdry plc [SDRY.UK] +2% (trading update), Oriflame [ORI.SE] -11% (earnings)

- Financials: Unicredit [UCG.IT] -1.5% (earnings), Lehto Group [LEHTO.FI] -19% (profit warning)

- Telecom: Deutsche Telekom [DTE.DE] n/c (earnings)

- Industrials: Continental [CON.DE] -3% (final Q1 earnings), Jenoptik [JEN.DE] -6% (earnings), Hapag-Lloyd [HLAG.DE] +2.5% (earnings), SLM Solutions [AM3D.DE] -9% (earnings), BAE Systems [BA.UK] n/c (trading update), Barratt Developments [BDEV.UK] +0.5% (trading update)

- Technology: Dialog Semiconductor [DLG.DE] +0.5% (earnings), NNIT [NNIT.DK] -11% (profit warning), OHB AG [OHB.DE] +5.5% (earnings)

- Materials: ArcelorMittal [MT.NL] -4.5% (earnings), Rheinmetall [RHM.DE] +3.5% (earnings), HeidelbergCement [HEI.DE] +1.5% (earnings)

 

Speakers

- BOE's Saunders: Brexit uncertainty is a big drag on investment

- Norway Central Bank (Norges) Policy Statement noted that the decision to keep policy steady was unanimous. The outlook and balance of risks suggested that the policy rate would be raised in Jun 2019 (prior view was in H2 2019). Information overall indicated that the outlook for policy rate in period ahead was little changed since March report

- Italy Fin Min Tria stated that he did not believe that EU Commission would demand additional budget measures

- UK Justice Min Gauke: Timing of Brexit bill to depend on cross-party talks with labour; Govt want to bring the vote asap. Reiterated that Govt looking to leave the EU in a sensible manner. PM May exit would not change the Parliamentary arithmetic

- Philippines Central Bank policy Statement reiterates that inflation to remain within the target range for both 2019 and 2020 and that CPI risks were broadly balanced

- Philippines Central Bank (BSP) Gov Diokno: To discuss Reserve Requirement Ratio (RRR) during week of May 13th

- China Commerce Ministry (MOFCOM) spokesperson Geo Feng reiterated that hoped the US would meet China halfway on trade. Stressed that if US implemented tariffs then China would take necessary countermeasures. China would not succumb to pressure. Reiterated that dialogue was needed to resolve trade issues; no winners in any trade war

- North Korea said to fire an unidentified projectile (**Note: 2nd test this month after a 2-year pause)

 

Currencies/Fixed Income

- Risk aversion theme remained intacted in the session as US/China trade and Brexit talks looked increasingly more vulnerable

- USD/JPY tested 3-month lows below 109.60 as the Yen currency benefited from its traditional safe-haven status on market turmoil.

- GBP/USD tested below the 1.30 level as continued speculation that PM may's cross-party talks might not yield the positive results.

- Norway Central Bank gives a hawkish hold in key rate decision as it brought its forward the guidance on the next potential hike to Jun (from prior H2 2019). EUR/NOK tested be;ow 9.78 level in the aftermath of the revised guidance

 

Economic Data

- (SE) Sweden Maklarstatistik Housing Prices Y/Y: 1% v 0% prior; Apartments Y/Y: 1 v 0% prior

- (DK) Denmark Mar Current Account (DKK): 11.1B v 12.8B prior; Trade Balance: 4.3B v 6.3B prior

- (ZA) South Africa Apr Gross Reserves: $49.5B v $48.8Be; Net Reserves: $43.3B v $43.4Be

- (ES) Spain Mar Industrial Output NSA Y/Y: -0.1% v +0.1% prior; Industrial Output SA Y/Y: -3.1% v -1.2%e; Industrial Production M/M: -1.2% v +0.3%e

- (HU) Hungary Apr CPI M/M: 0.9% v 0.8%e; Y/Y: 3.9% v 3.9%e

- (HU) Hungary Mar Preliminary Trade Balance: €0.7B v €0.8B prior

- (CZ) Czech Mar National Trade Balance (CZK): 21.8B v 15.3Be

- (CZ) Czech Mar Industrial Output Y/Y: 0.1% v 0.8%e; Construction Output Y/Y: 11.6% v 5.8% prior

- (SE) Sweden Apr Average House Prices (SEK) 3.060M v 3.110M prior

- (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 1.00% (as expected) but brings forward the next potential hike to Jun

- Philippines Central Bank (BSP) cuts Overnight Borrowing Rate by 25bps to 4.50% (as expecyed) for its 1st cur in 3 years

- FAO Apr World Food Price Index: 171.1 v 167.0 prior; M/M: 2.7% v 0.1% prior

- (GR) Greece Feb Unemployment Rate: 18.5% v 18.6% prior

**Fixed Income Issuance**

- (IE) Ireland Debt Agency (NTMA) opened its book to sell 2050 IGB bond; guidance seen +50bps to mid-swaps

- (PH) Philippines to sell EUR-denominate 8-year note; guidance seen +90-100bps to mid-swaps

- (ES) Spain Debt Agency (Tesoro) sold total €3.6B vs. €3.0-4.0B indicated range in 2024, 2029 and 2048 bonds

- Sold €1.02B in July 0.25% 2024 SPGB bond; Avg yield: 0.089% v 0.171% prior; Bid-to-cover: 2.91x (highest since Aug) v 2.24x prior

- Sold €1.78B in 1.45% Apr 2029 SPGB; Avg Yield: 0.936% v 1.121% prior, bid-to-cover: 1.40x v 1.35x prior

- Sold €800M in 2.7% Oct 2048 SPGB; Avg Yield: 2.119% v 2.362% prior; Bid-to-cover: 2.31x v 1.50x prior

- (ES) Spain Debt Agency (Tesoro) sold €482M vs. €250-750M indicated range in inflation-linked 0.7% Nov 2033 bond; Real

 

Looking Ahead

- (EU) EU leaders hold Informal Summit in Sibiu, Romania

- 05:30 (ZA) South Africa Mar Total Mining Production M/M: -1.3%e v -1.5% prior; Y/Y: -7.0%e v -7.5% prior; Gold Production Y/Y: No est v -20.6% prior; Platinum Production Y/Y: No est v 17.8% prior

- 05:00 (EU) Daily Euribor Fixing

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)

- 05:30 (PL) Poland to sell Bonds

- 05:30 (UK) DMO to sell £3.0B in 1.00% May 2024 Gilts

- 06:00 (IE) Ireland Apr CPI M/M: No est v 0.8% prior; Y/Y: No est v 1.1% prior

- 06:00 (IE) Ireland Apr CPI EU Harmonized M/M: No est v 0.8% prior; Y/Y: No est v 1.1% prior

- 06:00 (RO) Romania to sell Bonds

- 06:00 (RO) Romania to sell Bills

- 06:45 (US) Daily Libor Fixing

- 07:00 (ZA) South Africa Mar Manufacturing Production M/M: -0.6%e v -1.8% prior; Y/Y: -0.2%e v +0.6% prior

- 08:00 (BR) Brazil Mar IBGE Services Sector Volume Y/Y: 2.9%e v 3.8% prior

- 08:00 (BR) Brazil Mar Retail Sales M/M: 0.9%e v 0.0% prior; Y/Y: -2.3%e v +3.9% prior

- 08:00 (BR) Brazil Mar Broad Retail Sales M/M: +1.6%e v -0.8% prior; Y/Y: -1.9%e v +7.7% prior

- 08:00 (BR) Brazil CONAB Soybean Production Report

- 08:00 (UK) Baltic Bulk Index

- 08:30 (US) Apr PPI Final Demand M/M: 0.3%e v 0.6% prior; Y/Y: 2.3%e v 2.2% prior

- 08:30 (US) Apr PPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: 2.5%e v 2.4% prior

- 08:30 (US) Apr PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.0% prior; Y/Y: No est v 2.0% prior

- 08:30 (US) Initial Jobless Claims: 220Ke v 230K prior; Continuing Claims: 1.67Me v 1.671M prior

- 08:30 (US) Mar Trade Balance: -$50.2Be v -$49.4B prior

- 08:30 (CA) Canada Mar Int'l Merchandise Trade (CAD): -2.4Be v -2.9B prior

- 08:30 (CA) Canada Mar New Housing Price Index M/M: 0.0%e v 0.0% prior; Y/Y: 0.1%e v 0.1% prior

- 08:30 (US) Weekly USDA Net Export Sales

- 08:30 (US) Fed Chair Powell at conference

- 09:00 (MX) Mexico Apr CPI M/M: 0.1%e v 0.4% prior; Y/Y: 4.4%e v 4.0% prior; CPI Core M/M: 0.5%e v 0.3% prior

- 09:45 (US) Fed's Bostic (dove, non-voter) on Economic Outlook

- 10:00 (US) Mar Final Wholesale Inventories M/M: 0.0%e v 0.0% prelim; Wholesale Trade Sales M/M: 0.6%e v 0.3% prior Wholesale Inventories

- 11:30 (US) Treasury to sell 4-week and 8-week bills

- 12:00 (CA) Canada to sell 2-year bonds

- 13:00 (US) Treasury to sell 30-Year Bonds

- 13:15 (US) Fed's Evans (dove, voter) at Conference

- (IT) Italy Debt Agency (Tesoro) announces details for upcoming BTP auctions for Tuesday, May 14th

- 18:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: expected to leave Overnight Rate Target unchanged at 3.00%