USD continues to hold onto gains as yields rise

Notes/Observations

- Despite recent slowdown in EU growth and inflation; difficult to see a dovish Draghi on Thursday

Asia:

- Japan LDP Official: Dissolving lower house was an option if a motion of no confidence against the cabinet was submitted

- China officials said to be drafting guidelines on promoting imports as part of bid to balance foreign trade and would focus on certain consumer goods like food, clothing and medicine

- China PBOC: Previously announced RRR cut to be effective today (Wed) and would offset impact of maturity MLF loans

- China SOE official saw 'big room' for future RRR cut with 600-800 bps in such cuts in the coming 3 years. Believed the normal levels of banks’ reserve requirements should be 6-8% vs the current 14-16%. RRR cut did not mean a significant loosening of monetary policy

Europe:

- Italy 5-Star Party leader Di Maio: talks with the Northern League had ended; idea of a coalition govt with the center-right had passed. Saw the possibility for a coalition govt with PD (center-left). If talks with PD failed, then the only alternative would be a new election

- EU said to be prepared to offer Britain a better trade deal if the UK decides to stay inside the customs union after Brexit

- France President Macron: had frank discussions with Trump about Iran; want to work on a new nuclear deal with Iran. New deal should ban nuclear activities by Iran beyond 2025 (the current end date in the JCPOA). Did not know how President. Trump will decide on Iran Nuclear Deal; Nuclear issue is not the only issue with Iran as ballistic missiles also pose a problem

Americas:

- President Trump confirmed that Treasury Sec Mnuchin to visit China

- Canada Foreign Min Freeland: NAFTA negotiations to continue tomorrow (Wed, Apr 25th); prepared to respond to new proposals. US had presented some creative ideas on auto rules that have been helpful in moving talks forward

Energy:

Weekly API Oil Inventories: Crude: +1.1M v -1.0M prior

Economic Data:

- (FR) France Apr Consumer Confidence: 101 v 100e

- (ES) Spain Mar PPI M/M: -0.9% v +0.1% prior; Y/Y: No est v 1.3% prior

- (AT) Austria Feb Industrial Production M/M: +0.3% v -0.7% prior; Y/Y: 5.1% v 7.3% prior

- (CH) Swiss Apr Credit Suisse Expectations Survey: 7.2 v 16.7 prior

- (PL) Poland Mar Unemployment Rate: 6.6% v 6.5%e

- (ZA) South Africa Q1 BER Consumer Confidence: +26 v -8 prior

Fixed Income Issuance:

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

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.80% at 379.9, FTSE -0.5% at 7387, DAX -1.5% at 12353, CAC-40 -0.5 at 5419, IBEX-35 -0.7% at 9813, FTSE MIB -0.8% at 23854, SMI -0.6% at 8748, S&P 500 Futures -0.4%]

Market Focal Points/Key Themes:
European Indices trade lower across the board following on from a sharp drop on Wallstreet and Asia and weaker futures this morning.
Earnings remained the dominent theme with positive earnings from Credit Suisse, St Micro, Kering and Boohoo helping the shares buck the overall trend. Notable decliners include Osram Licht which trades lower after cutting guidance, while Tullow Oil and Antofagasta trade lower after production updates.
Shire shares trade little changed after Takeda raised their offer again to £49/shr from £47 prior.

Looking ahead notable earners include Anthem, Comcast, Twitter and Dow component Boeing.

 

Movers

-Consumer Discretionary [Kering [KER.FR] +6.4% (Earnings), Boohoo [BOO.UK] +13% (Earnings)]

-Financial [ Credit Suisse [CSGN.CH] +3.8% (Earnings)]

-Industrials [Bonava [BONAV.SE] -11% (Earnings), Antofagasta [ANTO.UK] -4.3% Production update), Kloeckner [KCO.DE] -9% (Earnings)]

-Technology [STMicro [STM.FR] +3.7% (Earnings), Osram Licht [OSR.DE] -10.4% (Prelim results, cuts outlook) ]

-Energy [ Statoil [STL.NO] -2.2% (Earnings), Tullow Oil [TKW.UK] -3.7% (Trading update)]

-Real Estate [Persimmon [PSN.UK] +0.8% (Trading update)]

 

Speakers

- ECB's Mersch (Luxembourg): Confidence on inflation has recently risen

- ECB's Vasiliauskas (Lithuania): More confident that it was time to transition from QE; closure of bond buying should not be abrupt

- Brexit Min Davis: Motion on Brexit agreement will be amendable. If Parliament rejected the deal then negotiation would fall. Bare-bones agreement was more likely than no deal

- China Ministry official welcomed the US to visit the country to negotiate trade issues and also urged the US to provide evidence of WTO rule violations

- China said to have raised the amount domestic funds could invest overseas

- China PBoC reiterated its prudent, neutral policy stance; recent RRR cut was to improve liquidity structure

 

Currencies

- The US 10-year yield moved above the 3% level and continued to help support the USD currency

- EUR/USD remained below the 1.22 level with dealers noting of key resistance at the 1.20/1.21 area. Focus turning the Thursday’s ECB meeting. Analyst saw no changed in policy this time around but the recent deterioration in Euro Zone economic growth and inflation indicators pondered whether the General Council would dare change its language. Market participant have dialed back expectations that the ECB would wind up the QE program in September when the asset purchases currently are slated to end and no longer pricing in a summer 2019 rate rise, but rather looking toward the end of next year for the first hike.

- GBP/USD was dealing in the mid-1.39 area ahead of Thursday House of Commons debate on the EU Withdrawal Bill. The Pound Sterling had little reaction of reports that EU was prepared to offer Britain a better trade deal if the UK decided to stay inside the customs union after Brexit.

- USD/JPY was higher for the 6th day to 2 ½ month high and was firmly established above the 109 level.

 

Fixed Income

- Bund Futures trade 22 ticks lower at 157.68 as European markets eye Thursday’s ECB meeting. Upside targets 159.75, while a return lower targets the158.25 level.

- Gilt futures trade at 120.95 lower by 26 ticks, tentatively breaking below the 121 handle. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.

- Wednesday’s liquidity report showed Tuesday's excess liquidity rose to €1.850T from €1.846T prior. Use of the marginal lending facility fell from €85M to €40M.

- Corporate issuance saw 10 issuers raise $13B in the primary market

 

Looking Ahead

- (DE) Germany govt updates its economic forecasts

- 06:00 (IL) Israel Mar Trade Balance: No est v -$2.3B prior

- 06:00 (FR) France Q1 jobseeekers Report

- 06:00 (CZ) Czech Republic to sell Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (RU) Russia to sell combined RUB30.1B in OFZ bonds (2 tranches)

- 07:00 (US) MBA Mortgage Applications w/e Apr 20th: No est v +4.9% prior

- 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: Expected to leave Benchmark Repurchase Rate unchanged at 8.00% (expected to hike the Late Liquidity rate 50 bps to 13.25% with range between 25-100)

- 07:00 (BR) Brazil Apr FGV Construction Costs M/M: 0.4%e v 0.2% prior

- 08:15 (UK) Baltic Dry Bulk Index

- 09:00 (MX) Mexico Feb Retail Sales M/M: +0.4%e v -0.2% prior; Y/Y: 0.4%e v 0.5% prior

- 09:30 (BR) Brazil Mar Current Account Balance: -$0.1Be v +$0.3B prior; Foreign Direct Investment(FDI): $4.5Be v $4.7B prior

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

- 11:30 (US) Treasury to sell $17B in 2-Year Floating Rate Notes

- 13:00 (US) Treasury to sell $35B in 5-Year Notes .

- 13:30 (BR) Brazil Mar Central Govt Budget Balance (BRL): -16.2Be v -19.3B prior

- (BR) Brazil Apr CNI Consumer Confidence: No est v 101.9 prior

- (CO) Colombia Mar Retail Confidence: No est v 20.5 prior; Industrial Confidence: No est v 1.9 prior