Syria risks offset trade truce

Notes/Observations

- Watching Middle East Developments with Syria in focus

- The March FOMC minutes and US CPI in tofday;s session should keep the future course of the US economy in focus

Asia:

- China Mar CPI Y/Y: 2.1% v 2.6%e; PPI Y/Y: 3.1% v 3.3%e

- China PBoC Gov Yi Gang: Will not allow CNY currency (yuan) to depreciate to retaliate against US (Reminder: On Apr 9th reports circulated that China would study a CNY currency (Yuan) devaluation as a tool in the trade spat)

Europe:

- ECB spokesperson: Nowotny's views are his own and did not represent the view of the Governing Council (Refers to Nowotny belief that when rate hikes did begin but could start the process with 20bps hike in Deposit Rate to -0.20%)

- France Finance Ministry commented on GDP growth and deficits which showed that the public deficit to GDP ratio would be reduced faster than previously expected. Forecasted 2018 GDP growth at 2% with the public deficit at 2.3% of GDP; saw 2019 GDP growth at 1.9% with the public deficit at 2.4% of GDP

- Russia vetoed US proposal at UN Security Council to establish an inquiry to establish who perpetrated the latest chemical weapon attack in Syria (Twelve council members voted in favor, while Bolivia joined Russia in voting no, and China abstained)

Americas:

- Fed proposed changes in bank capital requirements: would maintain or in a few cases increase large banks' capital requirements

Energy:

- Saudi Oil Minister Al Falih: 'Happy' with oil market at present; did not want oil prices to move to 'unreasonable' level (Reminder earlier reports circulated that Saudi Arabia signaled its ambition for oil price of $80/barrel)

- Weekly API Oil Inventories: Crude: +1.8M v -3.3M prior

- Pan-European air traffic control agency Eurocontrol said air-to-ground and/or cruise missiles could be used within the next 72 hours in Syria (Note: would be in response to the latest chemical weapon attack in Syria)

Economic Data:

- (SE) Sweden Mar PES Unemployment Rate: 3.8% v 3.9% prior

- (FR) Bank of France Mar Industrial Sentiment: 103 v 104e

- (TR) Turkey Feb Current Account: -$4.2B v -$4.3Be

- (ES) Spain Feb House transactions Y/Y: 16.2% v 23.1% prior

- (IT) Italy Feb Retail Sales M/M: 0.4% v 0.3%e; Y/Y: -0.6% v +0.6%e

- (UK) Feb Visible Trade Balance: -£10.2B v -£11.9Be, Overall Trade Balance: -£1.0B v -£2.6Be; Trade Balance Non EU: -£2.2B v -£4.0B prior

- (UK) Feb Industrial Production M/M: 0.1% v 0.4%e; Y/Y: 2.2% v 2.9%e

- (UK) Feb Manufacturing Production M/M: -0.2% v +0.2%e; Y/Y: 2.5% v 3.3%e

- (UK) Feb Construction Output M/M: -1.6% v +0.9%e; Y/Y: -3.0% v -2.5%e

Fixed Income Issuance:

- (PT) Portugal Debt Agency (IGCP) opened its book to sell EUR-denominated Apr 2034 OT bond; guidance seen +105bps to mid-swaps

- (IN) India sold total INR150B vs. INR150B indicated in 3-month, 6-month and 12-month bills

- (DK) Denmark sold total DKK500M in 3-month and 6-month Bills

- (IT) Italy Debt Agency (Tesoro) sold €6.0B vs. €6.0B indicated in 12-month Bills; Avg yield: -0.399% v -0.403% prior; Bid-to-cover: 1.52x v 1.54x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.2% at 377.6, FTSE -0.1% at 7261, DAX -0.3% at 12359, CAC-40 -0.3% at 5294, IBEX-35 +0.1% at 9777, FTSE MIB flat at 23182, SMI -0.2% at 8736, S&P 500 Futures -0.5%]

Market Focal Points/Key Themes:

Trade mostly lower across the board consolidating some of the recent gains, tracking US futures lower following a strong session yesterday.
On the earnings front UK retail giant Tesco reported strong results beating expectations, other positive earnings include Vedanta, while ASOS is a notable decliner after a slight miss on the top and bottom line, with Barry Callebaut and PageGroup other notable decliners. In the M&A space Deutsche Telekom outperforms after talks resurfaced between T-Mobile and Sprint, Aperam trades higher on the acquisition of VDM Metals, Hammerson trades lower after rejecting an improved proposal from Kleppiere.

 

Movers

-Consumer Discretionary [Tesco [TSCO.UK] +6.2% (Earnings), Asos [ASC.UK] -10.4% (Earnings), Pagegroup [PAGE.UK] -2.4% (Earnings), Barry Callebaut [BARN.CH] -2.8% (Earnings)]

-Consumer Staples [CHR Hansen [CHR.DK] -3.2% (Earnings)]

-Materials [Aparam [APAM.NL] +3.7% (Acquistion)]

-Industrials [Vedanta [VED.UK] +4.0% (Production update), Interserve [IRV.UK] -3.5% (Expects significant balance sheet right downs)]

-Telecom [Deutsche Telekom [DTE.DE] +4.1% (T-Mobile and Sprint reportedly reopening talks)]

-Healthcare [ Pixium Vision [PIX.FR] -15.5% (Capital raise)]

 

Speakers

- IMF chief Lagarde: HKD currency should remain pegged and was not seeing any depreciation in the CNY currency (**Reminder: Earlier in the week, the HKD hit a new 33-year low against the US dollar). The fund's global growth forecast that are due next week to show IMF continues to be optimistic and that global growth momentum remained but biggest risks were protectionism and rising debt

- Turkey Econ Min Zeybekci: FX development did not reflect the country's reality but added that one should not intervene in FX fluctuations. He saw Q1 GDP growth seen over 7%

- BOJ Gov Kuroda reiterated stance to continue with its powerful easing as still some distance to achieving the 2% inflation target. Inflation was gradually picking up and expected wage gains to accompany consumer price gains. Domestic economy was expanding modestly

- South Korea President Moon: US and North Korea sincerely preparing for potential summit; discussing time, place and agenda

- India said to consider $4B issuance via sovereign bonds during the current FY18-19. India Fin Min official later noted that such talks on sovereign issuance was at an early stage

- China FX Regulator SAFE said to study Qualified Domestic Institutional Investor (QDII) reform

- OPEC Sec Gen Barkindo reiterated view to monitor and evaluate market conditions. Partnership between OPEC and non-members was working but still had more work to do on reducing inventories. Joint technical committee to meet throughout 2018 to evaluate dat. Had not seen an increase in investment with market rebalancing

 

Currencies

- The USD remained on soft footing as several European Central bankers recently commented on rate outlook. BOE’s McCafferty noted the bank shouldn’t delay its next rate hike while ECB Nowotny stated that a good place to start on its normalization would a 20bps hike in the Discount Rate.

- EUR/USD trying to probe the 1.24 handle despite that ECB played down Nowotny hike comments. Pair at 1.2375 in mid-morning

- The GBP/USD moved off its best level of the day after Industrial and Manufacturing data missed expectations. The pair traded as high as 1.4223 before dipping back below the 1.42 level just ahead of the NY morning.

- EUR/CHF cross at its highest level since the SNB removed the 1.20 floor back in jan 2015. The cross traded above 1.1880 in the session.

- Safe haven talk making the round as participant watch to see if Middle East Developments regarding Syria escalated (reports of potential air-to-ground and/or cruise missiles attack on Syria could be used within the next 72 hours

 

Fixed Income

- Bund Futures trade 18 ticks higher at 159.33 as European stocks pullback. Upside targets 159.75, while a return lower targets the158.25 level.

- Gilt futures trade at 122.35 higher by 2 ticks after UK industrial and manufacturing production data misses across the board. Support continues stands at 121.25 then 120.85, with upside resistance at 123.35 then 123.85.

- Wednesday’s liquidity report showed Tuesday's excess liquidity fell to €1.858T from €1.864T prior. Use of the marginal lending facility fell from €404M to €53M.

- Corporate issuance saw 3 issuers raised $6.5B in the primary market

 

Looking Ahead

- 05:30 (DE) Germany to sell €1.5B in 2.5% 2046 Bunds

- 06:00 (PT) Portugal Mar Final CPI M/M: No est v 1.9% prelim; Y/Y: No est v 0.7% prelim

- 06:00 (PT) Portugal Mar Final CPI EU Harmonized M/M: No est v 2.2% prelim; Y/Y: 0.8%e v 0.8% prelim

- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%

- 06:45 (US) Daily Libor Fixing

- 07:00 (US) MBA Mortgage Applications w/e Apr 6th: No est v -3.3% prior

- 07:00 (UK) Mar NIESR GDP Estimate: 0.3%e v 0.3% prior

- 07:00 (BR) Brazil Apr IGP-M Inflation (1st Preview): 0.6%e v 0.6% prior

- 07:00 (EU) ECB’s Draghi in Frankfurt

- 08:00 (RO) Romania Central Bank (NBR) Apr Minutes

- 08:00 (HU) Hungary Central Bank Mar Minutes

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Mar CPI M/M: 0.0%e v 0.2% prior; Y/Y: 2.4%e v 2.2% prior

- 08:30 (US) Mar CPI Ex Food and Energy M/M: 0.2%e v 0.2% prior; Y/Y: 2.1%e v 1.8% prior

- 08:30 (US) Mar CPI Index NSA: 249.588e v 248.991 prior; CPI Core Index: 256.200e v 255.751 prior

- 08:30 (US) Mar Real Avg Weekly Earnings Y/Y: No est v 0.6% prior; Real Avg Hourly Earning Y/Y: No est v 0.4% prior

- 09:00 (RU) Russia Feb Trade Balance: $13.5Be v $17.0B prior; Exports: $32.3Be v $33.4B prior; Imports: $19.4Be v $16.4B prior

- 09:00 (MX) Mexico Feb Industrial Production M/M: 0.5%e v 0.0% prior; Y/Y: 1.2%e v 0.9% prior, Manufacturing Production Y/Y: 2.9%e v 1.7% prior

- 09:00 (FI) ECB's Hakkarainen (SSM member) in Brussels

- 09:45 (UK) BOE to buy £1.22B in in APF Gilt purchase operation (7-15-years)

- 10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference

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

- 10:30 (IT) ECB's Angeloni (SSM board member) in Brussels

- 12:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Kingsley

- 12:00 (IS) Iceland Mar International Reserves (ISK): No est v 667B prior

- 13:00 (US) Treasury to sell 10-Year Notes Reopening

- 14:00 (US) Mar Monthly Budget Statement: -$186.0Be v -$215.2B prior

- 14:00 (US) FOMC Minutes from Mar 21st Meeting