Berkshire Hathaway's new Chubb stake lifts EU insurance sector

EU mid-market update: Berkshire Hathaway's new Chubb stake lifts EU insurance sector; GME unwinds; Putin meets Xi.

Notes/observations

- Wake of soft US CPI and retail sales carried the risk on momentum to Asian session but lost steam as Europe opened, with EU indices mostly in the red, insurance sector leads (likely read across from Berkshire’s announced of Chubb investment) as automobiles lags behind. Similar story with US dollar which weakened after US data and since steadied. Metals continue rise with platinum +0.7%.

- For speculative plays, crypto is bidding with Bitcoin up +7%, while GME drops -16% in premarket as hype unwinds.

- European bond market is muted so far, with only the short end of UK Gilts seeing movement, as 3-month bill yield rises 5bps.

- In geopolitics, Russia Pres Putin met with China Pres Xi in Beijing. However, with no change to standard rhetoric, there is no market impact at this time.

- EU Earnings Recap: Siemens Q2 saw reduction in margins and orders, while maintaining FY guidance; Deutsche Telekom's affirmed FY guidance but EBITDA missed estimates and US mobile and broadband net adds declined YoY. EasyJet H1 figures stronger than expected, with encouraging metrics and predicted demand for summer, although changing CEO weighs on stock; BT FY figures were little disappointing below estimates, but fresh FY guidance helping stock, as well as 30% gain in 5G connections.

- Asia closed higher with ASX200 outperforming +1.7%. EU indices are -0.5% to +0.2%. US futures are +0.1-0.3%. Gold +0.1%, DXY +0.1%; Commodity: Brent -0.1%, WTI -0.1%; Crypto: BTC +6.7%, ETH +3.5%.

Asia

- Japan Q1 Preliminary GDP Q/Q: -0.5% v -0.3%e; Annualized GDP Q/Q: -2.0% v -1.2%e.

- Australia Apr Employment Change: +38.5K v +23.7Ke; Unemployment Rate: 4.1% v 3.9%e.

- Japan Economy Min Shindo reiterated need to pay close attention to risks related to FX fluctuations that would push up domestic prices.

- RBA’s Hunter (Chief Economist) stated that there was no quick fix to Australia's housing shortage.

- China Pres Xi: China-Russia relations should be cherished and cared for by both sides.

Americas

- US Mar Net Long-term TIC Flows: $100.5B v $62.9B prior; Total Net TIC Flows: $102.1B v $42.0B prior.

- Fed's Goolsbee (non-voter for 2024) noted that if the housing inflation decrease seen in April CPI data continued, that would be great; Still optimistic and saw evidence that house price inflation would come down substantially. Still room for improvement on inflation after April CPI data.

- Fed's Kashkari (non-voter) stated that remained focused on underlying demand in the economy to get inflation down.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.17% at 523.82, FTSE -0.45% at 8,408.17, DAX -0.23% at 18,832.85, CAC-40 -0.51% at 8,198.02, IBEX-35 -0.25% at 11,334.88, FTSE MIB +0.01% at 35,368.00, SMI +0.29% at 11,938.60, S&P 500 Futures +0.07%].

Market focal points/key themes: European indices open generally lower and trended lower through the early part of the session; among sectors holding on to the green are technology and financials; sectors leading the way lower include industrials and telecom; Siemens to sell Innometrics unit to KPS'; John Wood Group rejects improved offer from Sitara; earnings expected in the upcoming US session include Walmart, JD, Baidu, Applied Materials, Deere and Nice.

Equities

- Consumer discretionary: Watches Of Switzerland [WOSG.UK] +14.5% (saw a significant improvement in jewellery performance; US sales remained strong), EasyJet [EZJ.UK] -7.5% (H1 results, CEO change, positive summer demand).

- Financials: Swiss Re [RUKN.CH] +3.5% (earnings beat, affirms guidance), Zurich Insurance [ZURN.CH] +2.5% (earnings, on track to meet or exceed guidance) - Healthcare: Roche [ROG.CH] +4.0% (positive phase 1 for dual GLP-1/GIP receptor agonist CT-388 in people with obesity) - Industrials: Siemens [SIE.DE] -2.5% (earnings, affirms guidance but Rev at lower-end, confirms to sell Innomotics unit).

- Telecom: Deutsche Telekom [DTE.DE] -0.5% (earnings, affirms guidance), BT Group [BT.UK] +9.5% (earnings and initial FY25 guidance).

Speakers

- ECB bi-annual Financial Stability Review noted that the risk of recession had eased but geopolitical risks linger; Overall threats to financial stability hadreceded.

- Sweden Central Bank (Riksbank) Dep Gov Floden commented that all domestic inflation components were heading in the right direction.

- Bank of Spain said to expect to raise the countercyclical buffer (CCyB) from 0.0% to 0.5% in Q4.

- Russia President Putin commented that Russia and China discussed all issues and developing logistical corridors.

- Thailand Fin Min Chunhavajira met with the BOT gov and noted that deciding policy rate to focus on inflation target. Govt concerned about financial access problems more than interest rate level. Govt would not touch interest rates.

- Philippines Central Bank Policy Statement noted that it was necessary to keep policy settings tight until inflation settled down. Reiterated ready to adjust policy as necessary . Inflationary expectations were anchored but balance of inflation risks tilted to the upside.

- China govt said to be planning to discuss property aid with banks and regulators on Fri, May 17th.

Currencies/fixed income

- USD consolidated its losses following the soft retail sales data and recent CPI reading showing a continued decelerating trend put a potential Fed rate cut back on the radar for later this year. Currently money markets priced in 50 basis points of cumulative rate cuts by the Fed in 2024. Dealers will continue to scour economic data and its policy implications.

- EUR/USD at 1.0880 area with 1.08-1.10 seen as the new trading range.

- USD/JPY at 154.30 as the yen softened after Japan Q1 GDP data contracted. The 160 resistance area getting some distance on the back of overall USD weakness. Dealers noted that weak growth put a dent into any expectations BOJ could hike in June or July.

Economic data

- (NL) Netherlands Apr Unemployment Rate: 3.7% v 3.6% prior.

- (NO) Norway Q1 Overall GDP Q/Q: 0.2% v 1.6% prior; Mainland GDP Q/Q: 0.2% v 0.2%e.

- (NO) Norway Mar Overall GDP M/M: +0.6% v -1.0% prior; Mainland GDP M/M: -0.2% v 0.0%e.

- (ES) Spain Mar Home Sales Y/Y: -19.3% v +5.8% prior.

- (PH) Philippines Central Bank (BSP) left the Overnight Borrowing Rate unchanged at 6.50% (as expected).

- (IT) Italy Apr Final CPI M/M: 0.1% v 0.2% prelim; Y/Y: 0.8% v 0.9% prelim; CPI (ex-tobacco index): 119.3 v 119.4 prior.

- (IT) Italy Apr Final CPI EU Harmonized M/M: 0.5% v 0.6% prelim; Y/Y: 0.9% v 1.0% prelim.

- (IT) Italy Mar Total Trade Balance: €4.3B v €6.0B prior; EU Trade Balance: -€1.4Bv -€0.9.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.497B vs. €4.5-5.5B indicated range in 2027. 2029 and 2042 SPGB bonds.

- Sold €1.85B in 2.50% May 2027 SPGB bonds; Avg Yield: 2.959% v 2.986% prior; bid-to-cover: 2.25x v 2.52x prior.

- Sold €1.75B in 3.50% May 2029 SPGB bonds; Avg Yield: 2.877% v 2.974% prior; Bid-to-cover: 2.37x v 1.58x prior.

- Sold €1.90B in 1.00% July 2042 green SPGB bond; Avg Yield: 3.562% v 4.479% prior; Bid-to-cover: 1.42x v 1.55x prior.

- (FR) France Debt Agency (AFT) sold total €11.998B vs. €10.5-12.0B indicated range in 2027, 2029 and 2030 bonds.

- Sold €4.209B in 2.50% Sept 2027 Oat; Avg Yield: 2.84% v 2.83% prior; Bid-to-cover: 2.47x v 2.43x prior.

- Sold €2.757B in 2.75% Feb 2029 Oat; Avg Yield: 2.76% v 2.64% prior; Bid-to-cover: 2.70x v 2.13x prior.

- Sold €3.190B in 2.75% Feb 2030 Oat; Avg Yield: 2.77% v 2.79% prior; Bid-to-cover: 2.70x v 2.08x prior.

- Sold €1.842B in 2.5% May 2030 Oat; Avg Yield: 2.73% v 3.30% prior; Bid-to-cover: 2.85x v 2.59x prior.

- (SE) Sweden sold total SEK500M vs. SEK500M indicated in 2030 and 2039 I/L Bonds.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 ((UK) BOE 7-day short-term repo operation.

- 05:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0B in inflation-linked 2028, 2029, 2032 and 2052 Bonds (Oatei).

- 06:00 (IE) Ireland Mar Trade Balance: No est v €7.2B prior.

- 06:00 (IL) Israel Q1 Advance GDP Y/Y: +14.7%e v -21.0% prior.

- 06:00 (IL) Israel Mar Chain Store Sales M/M: No est v -2.1% prior.

- 06:00 (RO) Romania to sell RON300M in 12-month bills.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 3-month bills.

- 07:00 (BR) Brazil May FGV Inflation IGP-10 M/M: +1.0%e v -0.3% prior.

- 07:00 (UK) BOE’s Greene.

- 07:30 (DE) ECB’s Nagel (Germany).

- 08:00 (PL) Poland Apr CPI Core M/M: 0.7%e v 0.5% prior; Y/Y: 4.1%e v 4.6% prior.

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

- 08:15 (FR) ECB’s Villeroy (France).

- 08:30 (US) May Philadelphia Fed Business Outlook: 8.0e v 15.5 prior.

- 08:30 (US) May New York Fed Services Business Activity: No est v -0.6 prior.

- 08:30 (US) Apr Housing Starts: 1.421Me v 1.321M prior; Building Permits: 1.489Me v 1.467M prior (revised from 1.458M); Housing Starts M/M: +7.6%e v -14.7% prior; Building Permits M/M: +0.9%e v -3.7% prior.

- 08:30 (US) Apr Import Price Index M/M: 0.3%e v 0.4% prior; Y/Y: 0.4%e v 0.4% prior; Index Price Index (ex-petroleum) M/M: 0.1%e v 0.0% prior.

- 08:30 (US) Apr Exports Price Index M/M: 0.2%e v 0.3% prior; Y/Y: -1.1%e v -1.4% prior.

- 08:30 (US) Initial Jobless Claims: 220Ke v231 K prior; Continuing Claims: 1.78Me v 1.785M prior.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 10th: No est v $641.6B prior.

- 09:15 (US) Apr Industrial Production M/M: 0.1%e v 0.4% prior; Capacity Utilization: 78.4%e v 78.4% prior; Manufacturing Production: 0.1%e v 0.5% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 10:30 (US) Fed’s Harker.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) Fed’s Mester.

- 16:00 (US) Fed's Bostic Fireside Chat.

- 18:45 (NZ) New Zealand Q1 PPI Input Q/Q: No est v 0.9% prior; Output Q/Q: No est v 0.7% prior.

- 19:00 (KR) South Korea Apr Unemployment Rate: 2.8%e v 2.8% prior.

- 20:30 (SG) Singapore Apr Non-Oil Domestic Exports M/M: +9.2%e v -8.4% prior; Y/Y: -8.9%e v -20.7% prior; Electronic Exports Y/Y: No est v -9.4% prior.

- 21:10 (JP) BOJ bond buying operation.

- 21:30 (CN) China Apr New Home Prices M/M: No est v -0.3% prior; Used Home Prices M/M: No est v -0.5% prior.

- 22:00 (CN) China Apr Industrial Production Y/Y: 5.5%e v 4.5% prior; Industrial Production YTD Y/Y: 5.9%e v 6.1% prior.

- 22:00 (CN) China Apr Retail Sales Y/Y: 3.7%e v 3.1% prior; Retail Sales YTD Y/Y: 4.6%e v 4.7% prior.

- 22:00 (CN) China Apr YTD Fixed Urban Assets Y/Y: No est v 4.5% prior.

- 22:00 (CN) China Apr YTD Property Investment Y/Y: -9.6%e v -9.5% prior; Residential Property Sales Y/Y: No est v -30.7% prior.

- 22:00 (CN) China Apr Surveyed Jobless Rate: 5.2%e v 5.2% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.