China trade balance and FX reserves disappoint and continue to build Gold reserves

EU mid-market update: China trade balance and FX reserves disappoint and continue to build gold reserves; TRY (lira) at record lows.

Notes/observations

- Little catalysts seen in session as market looks beyond to next weeks Fed and ECB rate decisions next Wed (Jun 14th), including US CPI just one day before FOMC decision.

- European retail sector outperforms following strong results from world's largest retailer, Inditex.

-Fluttering's of potential banking stress seen after ECB's overnight borrowing facility came in 6-year high, as well as China's overnight repos hitting a record CNY7.9T, both on Tues.

- Continue to monitor developments in Ukraine following dam bursting yesterday, IAEA to visit Zaporizhzhia nuclear plant as planned next week given concern of recent events.

- China's May trade balance and foreign exchange reserves disappointed and missed estimates.

- Turkish Lira (TRY) continued to weaken. USD/TRY at record levels, last trading at 23.1.

- Asia closed mixed with Nikkei225 underperforming at -1.8%. EU indices are -0.5% to +0.3%. US futures are -0.2%. Gold -0.1%, DXY -0.1%; Commodity: Brent +0.1%, WTI +0.1%, TTF +0.8%; Crypto: BTC +4.3%, ETH +3.1%.

Asia

- China May Trade Balance: $65.8B v $95.5Be; Exports Y/Y: -7.5% v -1.8%e; Imports Y/Y: -4.5% v -8.0%e.

- Australia Q1 GDP Q/Q: 0.2% v 0.3%e; Y/Y: 2.3% v 2.4%e.

- Australia Treasurer Chalmers: Growth momentum is moderating as expected; rise in interest rates is clearly biting.

- RBA Gov Lowe reiterated stance that was too early to declare victory over inflation and that some further tightening of monetary policy might be required. Decisions to be data dependent. Path back to 2.0-3.0% inflation was likely to involve a couple of years of relatively slow growth in the economy.

- China Overnight Repo trades hit a record CNY7.9T. Market expectations for more PBOC easing said to be fueling trades. Onshore financial institutions take advantage of ample liquidity to boost borrowing.

Europe

UK PM Sunak said to call for the US and the UK to raise their economic alliance to a par with their defensive one during his US visit this week.

Americas

- Secretary of State Blinken said to be headed to China in coming weeks (**Reminder: Back in early Feb Blinken confirmed he was s postponing trip to China due to a spy balloon incident which the US viewed as a violation of its sovereignty).

- Former Fed Vice Chair Clarida stated that the Fed would likely raise rates again this cycle; Unlikely to start cutting rates until 2024.

Energy

- Weekly API Crude Oil Inventories: -1.7M v +5.2M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.16% at 460.94, FTSE -0.02% at 7,626.70, DAX -0.40% at 15,928.25, CAC-40 -0.37% at 7,182.38, IBEX-35 +0.34% at 9,342.40, FTSE MIB -0.81% at 26,819.00, SMI -0.55% at 11,405.20, S&P 500 Futures -0.11%].

Market focal points/key themes: European indices opened generally lower and continued to trend into the red as the session wore on; better performing sectors include consumer discretionary and financials; sectors leading the way lower include industrials and materials; reportedly Vodafone to announce finalizing merger with Hutchison as soon as Friday; focus on release of US trade data later in the day; earnings expected in the upcoming US session include Campbell’s Soup, Brown-Forman and GameStop.

Equities

- Consumer discretionary: Inditex [ITX.ES] +5.0% (Q1 beat, affirms FY23 guidance; recent sales data), Hugo Boss [BOSS.DE] +3.0% (analyst action - initiated with Buy at UBS), Finnair [FIA1S.FI] +0.5% (May operating metrics).

- Financials: Danske Bank [DANSKE.DK] +5.0% (provides FY26 targets).

- Healthcare: GSK [GSK.UK] +0.5% (European Commission authorises GSK's Arexvy).

- Industrials: Croda International [CRDA.UK] -3.0% (analyst action).

- Technology: Atos SE [ATO.FR] -1.0% (provides FY26 targets).

- Materials: Voestalpine [VOE.AT] +0.5% (FY22/23 beat).

Speakers

- ECB's Schnabel (Germany) stated in a recent press interview that ECB still had more ground to cover as core inflation remained sticky, Reiterated ECB council stance that future decision to be data dependent; Costs of doing too little continue to be greater than the costs of doing too much.

- ECB’s Knot (Netherlands, SSM member) reiterated view that further interest rate hikes would be necessary; Not convinced current tightening was sufficient. He noted that a prolonged monetary tightening might still lead to stress in financial market.

- OECD updated its economic outlook which raised the 2023 global GDP growth forecast from 2.6% to 2.7% while maintaining the 2024 global GDP growth forecast at 2.9%.

- Japan PM Kishida stated that govt to finalize its fiscal policy plan in middle of June.

- IEA's Birol noted that the OPEC+ production cut might put upward pressure on oil prices; Saw a tight H2 for oil market. China economy is the most important factor for oil market.

Currencies/fixed income

- USD held onto its recent gains. Markets continue to believe that the Fed would keep rates on hold at its policy meeting next week but keep the option open of another rate hike later this year.

- EUR/USD staying below the 1.07 level despite continued rhetoric from ECB officials that more rate hikes are needed. Inflation in the region has surprised on the downside in May but it still remains too high for the European Central Bank to pause from its current tightening cycle.

- Turkish lira weakened over 3.5% against US dollar, rising above 22.50 level to new record low. Markets said to grow increasingly concerned about the outlook for monetary policy after the recent re-election of Erdogan as Turkey's president.

Economic data

- (NL) Netherlands Apr Consumer Spending Y/Y: 0.3% v 0.8% prior.

- (CH) Swiss May Unemployment Rate: 1.9% v 1.9%e; Unemployment Rate (seasonally adj): 2.0% v 1.9%e.

- (DE) Germany Apr Industrial Production M/M: 0.3% v 0.6%e; Y/Y: 1.6% v 1.5%e.

- (UK) May Halifax House Price Index M/M: 0.0% v -0.3% prior; Y/Y: -1.0% v 0.1% prior (1st annual decline since Dec 2012).

- (NO) Norway Apr Industrial Production M/M: 0.8% v 2.3% prior; Y/Y: -4.7% v -5.4% prior.

- (NO) Norway Apr Manufacturing Production M/M: -0.4% v -0.3% prior; Y/Y: -2.4% v -0.3% prior.

- (DK) Denmark Apr Industrial Production M/M: 1.3% v 1.1% prior.

- (ZA) South Africa May Gross Reserves: $61.3B v $61.7B prior; Net Reserves: $55.1B v $55.2Be.

- (HU) Hungary Apr Industrial Production M/M: -2.5% v -1.6%e; Y/Y: -5.8% v -1.1%e.

- (AU) Australia May Foreign Reserves: A$88.9B v A$92.4B prior.

- (FR) France Apr Trade Balance: -€9.7B v -€7.7Be; Current Account Balance: -0.1€B v €0.3B prior.

- (ES) Spain Q1 INE House Price Index Q/Q: +0.6% v -0.8% prior; Y/Y: 3.5% v 5.5% prior.

- (CH) Swiss May Foreign Currency Reserves (CHF): 734.1B v 732.2B prior.

- (AT) Austria May Wholesale Price Index M/M: -1.9% v -0.7% prior; Y/Y: -4.7% v -1.9% prior.

- (CZ) Czech Apr Retail Sales (ex-auto) Y/Y: -7.7% v -6.1%e.

- (IT) Italy Apr Retail Sales M/M: 0.2% v 0.3%e; Y/Y: 3.2% v 5.8% prior.

- (CZ) Czech May International Reserves: $136.7B v $139.6B prior.

- (TW) Taiwan May Trade Balance: $4.9B v $4.9Be; Exports Y/Y: -14.1% v -14.2%e; Imports Y/Y: -21.7% v -21.3%e.

- (CN) China May Foreign Exchange Reserves: $3.117T v $3.188Te; gold portion rise for 7th straight month.

- (GR) Greece Q1 GDP Q/Q: -0.1% v +0.2%e; Y/Y: 2.1% v 4.8% prior; GDP NSA (unadj) Y/Y: 5.2% v 4.5% prior.

- (IS) Iceland May Preliminary Trade Balance (ISK): Bv -20.6B prior.

- (SG) Singapore May Foreign Reserves: $325.7B v $312.0B prior.

Fixed income issuance

- (VN) Vietnam Finance Ministry sold total VND2.0T vs. VNM3.0T indicated in 5-year, 10-year, 15-year and 20-year bonds.

- (FR) France Debt Agency (AFT) opened its book to sell EUR-denominated inflation-linked Mar 2039 bonds (Oatei) via syndicate; guidace seen +14bps.

- (ES) Spain Debt Agency (Tesoro) opened its book to sell EUR-denominated 10-year SPGB bond via syndicate; guidance seen +12bps to 3.15% Apr 2033 SPGB.

- (IN) India sold total INR320B vs. INR320B indicated in 3-month, 6-month and 12-month bills.

- (DK) Denmark sold total DKK1.97B in 2025 and 2033 DGB Bonds.

- (SE) Sweden sold total SEK2.0B vs. SEK2.0B indicated in 2028 and 2033 Bonds.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3.0% 2033 Bonds; Avg Yield: 3.49% v 3.37% prior; bid-to-cover: 2.37x v 1.98x prior.

- (UK) DMO sold £4.0B in 3.5% Oct 2025 Gilts; Avg Yield: 4.874% v 4.121% prior; Bid-to-cover: x v 2.56x; Tail: 0.6bps v 0.7bps prior.

- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indicated in 12-month bills; Avg Yield: 3.84% v 3.75% prior; Bid-to- cover: 1.51x v 1.91x.

Looking ahead

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

- 05:30 (DE) Germany to sell €1.0B in 0.0% Oct green 2025 BOBL.

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

- 06:00 (IE) Ireland Apr Industrial Production M/M: No est v -26.4% prior; Y/Y: No est v -22.8% prior.

- 06:00 (EU) EU Commission to sell combined €2.5B in 3-month and 6-month bills.

- 07:00 (RU) Russia to sell OFZ Bonds (3 tranches).

- 07:00 (US) MBA Mortgage Applications w/e Jun 2nd: No est v -3.7% prior.

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

- 08:00 (PL) Poland May Official Reserves: No est v $178.0B prior.

- 08:00 (HU) Hungary Central Bank (MNB) May Minutes.

- 08:00 (BR) Brazil May IBGE Inflation IPCA M/M: 0.3%e v 0.6% prior; Y/Y: 4.0%e v 4.2% prior.

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

- 08:00 (EU) ECB’s Vujcic (Croatia).

- 08:30 (US) Apr Trade Balance: -$75.8Be v -$64.2B prior.

- 08:30 (CA) Canada Apr Int'l Merchandise Trade (CAD): 0.5Be v 1.0B prior.

- 08:30 (CA) Canada Q1 Labor Productivity Q/Q: No est v -0.5% prior.

- 08:30 (CL) Chile May Trade Balance: $1.5Be v $1.1B prior; Exports: No est v $7.6B prior; Imports: No est v $6.5B prior; Copper Exports: No est v $3.5B prior.

- 08:30 (CL) Chile May International Reserves: No est v $39.8B prior.

- 09:00 (RU) Russia May Official Reserve Assets: No est v $595.8B prior.

- 09:00 (CL) Chile Apr Nominal Wage Y/Y: No est v 11.2% prior.

- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.

- 10:00 (CA) Bank of Canada (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 4.50%.

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

- 10:30 (TR) Turkey May Cash Budget Balance (TRY): No est v -159.1B prior.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 15:00 (US) Apr Consumer Credit: $22.0Be v $26.5B prior.

- 18:00 (NZ)) New Zealand Government 10-Month Financial Statements.

- 18:45 (NZ) New Zealand Q1 Manufacturing Activity Q/Q: No est v -0.4% prior; Manufacturing Volume Y/Y: No est v -4.7% prior.

- 19:00 (CO) Colombia May CPI M/M: 0.6%e v 0.8% prior; Y/Y: 12.6%e v 12.8% prior.

- 19:00 (CO) Colombia May CPI Core M/M: No est v 1.0% prior; Y/Y: No est v 11.5% prior.

- 19:01 (UK) May RICS House Price Balance: No est v -39% prior.

- 19:50 (JP) Japan Q1 Final GDP Q/Q: 0.5%e v 0.4% prelim; GDP Annualized Q/Q: 1.9%e v 1.6% prelim; GDP Nominal Q/Q: 1.8%e v 1.7% prelim.

- 19:50 (JP) Japan Q1 Final Private Consumption Q/Q: 0.6%e v 0.6% prelim; Business Spending Q/Q: 1.3%e v 0.9% prelim; Inventory contribution to GDP Q/Q: 0.1%e v 0.1% prelim; Net External demand contribution to GDP: -0.3%e v -0.3% prelim.

- 19:50 (JP) Japan Apr Current Account Balance: ¥1.650Te v ¥2.28T prior; Adjusted Current Account Balance: ¥1.384Te v ¥1.01T prior; Trade Balance (BOP basis): -¥287.9Be v -¥454B prior.

- 19:50 (JP) Japan May Bank Lending Y/Y: No est v 3.2% prior; Bank Lending (ex-trusts) Y/Y: No est v 3.5% prior.

- 21:30 (AU) Australia Apr Trade Balance (A$): 13.7Be v 15.3B prior; Exports M/M: No est v 4% prior; Imports M/M: No est v 2% prior.

- 22:00 (JP) Japan May Tokyo Avg Office Vacancies: No est v 6.1% prior.

- 23:00 (KR) South Korea May Total Bank Lending to Household (KRW): No est v 1.052T prior.

- 23:00 (TH) Thailand May Consumer Confidence: No est v 55.0 prior; Economic Confidence: No est v 49.4 prior.

- 23:30 (JP) Japan to sell 6-Month Bills.