Russia confirms gas flow halted to Poland due to payment issues

EU Mid-Market Update: Russia confirms gas flow halted to Poland due to payment issues; German GFK confidence at a record low.

Notes/Observations

- German GFK Confidence hits a record low.

- Russia Gazprom confirms halt to gas supplies to Poland and Bulgaria over RUB payment demands.

- Australia’s Hot Inflation Builds Case for Election Rate Hike.

Asia

- Australia Q1 CPI Q/Q: 2.1% v 1.7%e; Y/Y: 5.1% v 4.6%e . Trimmed mean level rose to its highest annualized pace since 2009 and above RBA target level.

- Shanghai Officials noted that lockdowns would be eased in districts with zero virus community spread,to allow limited movements in restricted areas in these district (Note: Shanghai reported 13,562 coronavirus cases v 16,980 prior, 48 deaths v 52 prior).

- China Military said to have followed a US Destroyer that passed through the Taiwan Straight, timing not reported. China Military: Remaining on high alert to defend sovereignty; US navy sailing through the Taiwan Strait is deliberately harming peace and stability.

Russia/Ukraine

- President Putin: Russia is not refusing to negotiate with Ukrainians; I hope talks with Ukraine will yield positive result. He added that claim that Russians were responsible for a supposed massacre in Bucha had killed the hope of a diplomatic peace solution.

Europe

- German Fin Min Lindner Economic Adviser: See a very high risk of feedback loop between inflation and higher wages.

- UK Chancellor of the Exchequer (Fin Min) Sunak said to be under pressure to cut tax to reduce the burden on consumer after UK treasury recently released figures showing record high tax receipts.

Energy

- Weekly API Crude Oil Inventories: +4.8M v -4.5M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.41% at 442.92, FTSE +0.37% at 7,413.40, DAX +0.26% at 13,792.76, CAC-40 +0.53% at 6,448.32, IBEX-35 +0.06% at 8,444.74, FTSE MIB +0.45% at 23,789.00, SMI +0.53% at 11,996.90, S&P 500 Futures +0.88%].

Market Focal Points/Key Themes: European indices tracked downward at the open, but later recovered to trade generally higher; geopolitics seen as driver of whipsawing risk sentiment; better performing sectors include technology and industrials; sectors trending to the downside include utilities and materials; utilities sector dragged down by Russia suspending gas supplies to Poland and Bulgaria; Ted Baker issues update on sales process; earnings expected during the upcoming US session include Bunge, Cenovus, Owens Corning and Boston Scientific.

Equities

- Financials: Deutsche Bank [DBK.DE] -5% (earnings), Commerzbank [CBK.DE] +3% (prelim earnings), Credit Suisse [CSGN.CH] -0.5% (earnings).

- Healthcare: GlaxoSmithKline [GSK.UK] +0.5% (earnings).

- Industrials: Mercedes-Benz [MBG.DE] +3.5% (earnings), Schneider Electric [SU.FR] -1% (earnings; to sell Russian unit), Persimmon [PSN.UK] -1.5% (earnings).

- Technology: STMicroelectronics [STM.FR] +1.5% (earnings), Darktrace [DARK.UK] -1.5% (secondary offering).

Speakers

- ECB’s Muller (hawk, Estonia) stated that the chance of recession in region was low.

- EU Commission President Von der Leyen stated that Gazprom action to halt gas is unjustified and unacceptable; EU was working to ensure alternative deliveries of gas supplies.

- Germany Economic Ministry: Concerned about Russia gas halt to Poland and Bulgaria.

- Poland Central Bank official Kochalski reiterated stance that saw room for more rate hikes and cannot rule out another 100bps increase.

- Austria Chancellor Nehammer stated that to continue to pay for Russian gas in Euros (**Note: Report circulated that four European gas buyers have already paid for gas supplies in RUB currency).

- Slovakia PM Heger: stated that would pay for Russian gas in euros and prepared to face gas disruptions like Poland.

- RBI member Goyal stated that monetary policy would remain accommodative even if borrowing costs start rising this year. Banking system was awash with liquidity and positive real rates were still a long way away.

- Russian energy firm Gazprom confirmed it acted on its warning and cuts its gas supply to Poland and Bulgaria for non-payment.

- Russia Parliament speaker (Duma) Volodin stated that the govt should make other unfriendly countries pay for gas in RUB currency (ruble) and cut supplies if they refuse to do so.

- Russia Economic Ministry saw 2022 oil production falling to 475.3M tons under baseline scenario compared to 524.0M tons in 2021.

- Russia Economic Ministry on economic outlook which saw 2022 CPI between 20.7-22.6% range and 2023 CPI between 6.2-10.6% range. It also saw 2022 GDP -8.8% (base case scenario) and -12.4% under conservative scenario).

- Polish gas firm PGNIG reiterated view that Russian gas supply halt was a breach of Yamal contract.

- India Central Bank (RBI) Varma reiterated stance that inflation itself is becoming a threat to economic growth.

- China's Changchun region said to lift pandemic controls gradually from Thurs, Apr 28th (**Note: Changchun is the largest automobile manufacturing, research and development center in China).

Currencies/Fixed income

- USD maintained its firm tone in the session as risk aversion sentiment percolated towards safe havens. Central bank divergence views also aiding the greenback as the Fed was expected to raise interest rates aggressively in the coming meetings to combat inflation.

- EUR/USD at 5-year lows over concerns for growth and threats to energy supplies from Russia. Pair has lost approx. 4% thus far in April.

- AUD/USD was firmer in the session after Australian inflation data brought forward RBA rate hike expectations with liftoff possible as soon as next week.

Economic data

- (FI) Finland Apr Consumer Confidence: -11.7 v -10.5 prior; Business Confidence: 15 v 15 prior.

- (DE) Germany May GfK Consumer Confidence: -26.5 v -16.0e (6th straight negative reading).

- (SE) Sweden Mar Unemployment 8.2% v 7.7% prior; Unemployment Rate (seasonally adj): 7.6% v 7.4%e; Unemployment Rate Trend: 7.6% v 7.7% prior.

- (SE) Sweden Mar PPI M/M: 5.5% v 1.2% prior; Y/Y: 24.5% v 19.3% prior.

- (SE) Sweden Mar Trade Balance (SEK): 4.7B v 1.5B prior.

- (FR) France Apr Consumer Confidence: 88 v 92e.

- (ES) Spain Feb Total Mortgage Lending Y/Y: 23.3% v 35.1% prior; Mortgage Approvals Y/Y: 14.6% v 29.4% prior.

- (CH) Swiss Apr Expectations Survey: -51.6 v -27.8 prior.

- (AT) Austria Apr Manufacturing PMI: 57.9 v 59.3 prior(22nd straight expansion).

- (TW) Taiwan Mar Monitoring Indicator: 31 v 34 prior.

Fixed income issuance

- (GR) Greece Debt Agency (PDMA) opened book to sell EUR-denominated 2.0% Apr 2027 bond via syndicate; guidance seen +115bps to mid-swaps.

- (UK) DMO opened its book to sell 0.125% 2073 inflation-linked Gilt (UKTi) via syndicate; guidance seen -5.75bps to -5.25bps to Gilts.

- (IT) Italy Debt Agency (Tesoro) sold €5.0B vs. €5.0B indicated in 6-month bills; Avg Yield: -0.308% v -0.488% prior; Bid-to-cover: 1.49x v 1.47x prior.

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 3-month Bills; Avg Yield: -0.0292% v -0.1985% prior; Bid-to-cover: 1.76x v 1.91x prior.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 2.125% May 2032 Bonds; Avg Yield: 2.71% v 2.77% prior; bid-to-cover: 2.44x v 1.16x prior.

- (IN) India sold total INR330B vs. INR330B indicated in 3-month, 6-month and 12-month bills.

Looking ahead

- (IL) Israel Apr 12-month CPI Forecast: No est v 2.9% prior.

- (RO) Romania Mar M3 Money Supply Y/Y: No est v 14.8% prior.

- (CO) Colombia Mar Retail Confidence: No est v37.4 prior; Industrial Confidence: No est v 15.5prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell €2.0B in new 0% May 2038 bunds.

- 05:30 (GR) Greece Debt Agency (PDMA) to sell €625M in 26-week Bills.

- 05:30 (EU) ECB allotment in 3-month LTRO tender.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (UK) Apr CBI Retailing Reported Sales: 11e v 9 prior; Total Distribution Reported Sales: -5e v 20 prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (US) MBA Mortgage Applications w/e Apr 22nd: No est v -5.0% prior.

- 07:00 (MX) Mexico Mar Trade Balance: -$0.1Be v +1.3B prior.

- 07:00 (UK) Weekly PM Question time in House.

- 07:30 (EU) ECB chief Lagarde.

- 08:00 (BR) Brazil mid-Apr IBGE Inflation IPCA-15 M/M: 1.8%e v 1.0% prior; Y/Y: 12.1%e v 10.8% prior.

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

- 08:30 (US) Mar Advance Goods Trade Balance: -$105.0Be v -$106.3B prior (revised from -$106.6B).

- 08:30 (US) Mar Preliminary Wholesale Inventories M/M: 1.5%e v 2.5% prior; Retail Inventories M/M: 1.6%e v 1.1% prior.

- 10:00 (US) Mar Pending Home Sales M/M: -1.0%e v -4.1% prior; Y/Y: -8.1%e v 5.4% prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 12:00 (RU) Russia Mar Unemployment Rate: 4.5%e v 4.1% prior.

- 12:00 (RU) Russia Feb Real Wages Y/Y: 0.5%e v 1.9% prior.

- 12:00 (RU) Russia Mar Real Retail Sales Y/Y: 0.7%e v 5.9% prior.

- 12:00 (RU) Russia Mar Industrial Production Y/Y: -1.7%e v +6.3% prior.

- 13:00 (US) Treasury to sell 2-Year FRN.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 13:30 (BR) Brazil Mar Total Federal Debt (BRL): No est v 5.730T prior.

- 17:00 (KR) South Korea May Business Manufacturing Survey: No est v 85 prior; Non-Manufacturing Survey: No est v 82 prior.

- 18:45 (NZ) New Zealand Mar Trade Balance (NZD): No est v -0.4B prior.

- 19:50 (JP) Japan Mar Retail Sales M/M: +1.0%e v -0.9% prior (revised from -0.8%); Y/Y: +0.3%e v -0.9% prior (revised from -0.8%).

- 19:50 (JP) Japan Mar Dept. Store, Supermarket Sales Y/Y: No est v 0.1% prior.

- 19:50 (JP) Japan Mar Preliminary Industrial Production M/M: 0.5%e v 2.0% prior; Y/Y: -1.3%e v +0.5% prior.

- 21:00 (NZ) New Zealand Apr Business Confidence: No est v -41.9 prior; Activity Outlook: No est v 3.3 prior.

- 21:30 (AU) Australia Q1 Import Price Index Q/Q: 7.0%e v 5.8% prior; Export Price Index Q/Q: 11.0%e v 3.5% prior.

- 22:00 (KR) South Korea Mar Department Store Sales Y/Y: No est v 9.3% prior; Discount Store Sales Y/Y: No est v -24.0% prior.

- (JP) BOJ Interest Rate and Policy Decision: Expected in session (no set time). Expected to leave Interest Rate on Excess Reserves (IOER) unchanged at -0.10%; Expected to maintain its policy framework of "QQE with Yield Control" around 0.00% with float +/-25bp.

- (JP) BOJ Quarterly Outlook for Economic Activity and Prices.