Dismal UK data as manufacturing production registers its largest monthly decline in over 5 years

Notes/Observations

- UK Manufacturing data misses expectations to register its largest monthly decline in over 5 years; trade deficit also larger than consensus

- Norway CPI lags forecasts; keeps finger on trigger for Norges on its 1st potential rate hike until after summer

- Kim Jong Un and Trump will discuss peace, denuclearization; look to manage expectations

Asia:

- China May CPI M/M: -0.2% v -0.2% prior; Y/Y: 1.8% v 1.8%e; PPI Y/Y: 4.1% v 3.9%e

Europe:

- Italy Econ Min Tria gives markets reassurance that govt had no intention of leaving the Euro

- Swiss voters reject Vollgeld Referendum (as expected). Reject motion to abolish traditional bank lending and allow only money to be created by the central bank. SNB responded to vote outcome: A "yes" vote would have made its work “considerably more difficult”.

- UK PM May expected to urge potential Tory rebels to get behind the party ahead of crucial votes on the EU Withdraw Bill. Wants to overturn a series of amendments made by the House of Lords but faces defeat if Conservative Remainders side with Labour

- PM May to hold Brexit talks with ministers at her country residence following the June EU summit and would finalize Brexit policy paper post June EU summit

- German Chancellor Merkel: EU has prepared counter measures against the US tariffs on steel and aluminum; We would not allow us being ripped off over and over again, we would also act then

Americas:

- G7 Official Communique (with support from all but the US): We acknowledge free, fair and mutually beneficial trade is key engine for growth and jobs; We strive to reduce tariffs

Economic Data:

- (NO) Norway May CPI M/M: 0.1% v 0.3%e; Y/Y: 2.3% v 2.5%e

- (NO) Norway May CPI Underlying M/M: 0.2% v 0.3%e; Y/Y: 1.2% v 1.4%e

- (NO) Norway May PPI (including Oil) M/M: 1.2% v 3.3% prior; Y/Y: 14.4% v 12.2% prior

- (DK) Denmark Apr Current Account (DKK): 1.4B v 11.7B prior; Trade Balance: 6.0B v 4.6B prior

- (DK) Denmark May CPI M/M: 0.2% v 0.2%e; Y/Y: 1.1% v 1.1%e

- (DK) Denmark May CPI EU Harmonized M/M: 0.2% v 0.3%e; Y/Y: 1.0% v 1.1%e

- (JP) Japan May Preliminary Machine Tool Orders Y/Y: 14.9% v 22.0% prior

- (FR) Bank of France (Industrial) Sentiment: 100 v 102e

- (SE) Sweden Jun SEB Housing Price Indicator: 7 v 11 prior

- (CZ) Czech May CPI M/M: 0.5% v 0.3%e; Y/Y: 2.2% v 2.0%e

- (TR) Turkey Apr Current Account Balance: -$5.4B v -$5.1Be

- (TR) Turkey Q1 GDP Q/Q: 2.0% v 0.8%e; Y/Y: 7.4% v 7.0%e

- (IT) Italy Apr Industrial Production M/M: -1.2% v -0.7%e; Y/Y: +6.7% v -1.1% prior; Industrial Production WDA Y/Y: 1.9% v 3.6%e

- (CH) SNB Total Sight Deposits for Week Ended Jun 8th (CHF): 576.3B v 576.5B prior

- (UK) Apr Visible Trade Balance: -£14.0B v -£11.4Be; Overall Trade Balance: -£5.3B v -£2.5Be; Trade Balance Non-EU: -£5.4B v -£3.2Be

- (UK) Apr Industrial Production M/M: -0.8% v 0.1%e; Y/Y: 1.8% v 2.7%e

- (UK) Apr Manufacturing Production M/M: -1.4% v +0.3%e (biggest monthly decline in 5 ½ years); Y/Y: 1.4% v 3.1%e

- (UK) Apr Construction Output M/M: 0.5% v 2.2%e; Y/Y: -3.3% v -1.4%e

Fixed Income Issuance:

- None seen

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 +0.6% at 3,465, FTSE +0.8% at 7,738, DAX +0.5% at 12,834, CAC-40 +0.2% at 5,460; IBEX-35 +0.6% at 9,806, FTSE MIB +2.0% at 21,784, SMI +0.9% at 8,590 , S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European indexes opened broadly higher and maintained trend as the session progressed; financials supported following assurances from Italy not interested in leaving Euro; Italy best performer; Portugal underperformer, dragged down by Altri correction; G7 controversy leaves markets largely unaffected; materials and energy sectors under pressure; risk sentiment supported on the back of less geopolitical concerns; focus on upcoming North Korea talks; Colombia closed for holiday; earnings expected during the US session include Optical Cable and RF Industries

Equities

- Consumer discretionary: BCA Marketplace BCA.UK +8.8% (rejects takeover offer), CD Projekt Red 7CD.DE -7.4% (title release), Ferguson FERG.UK +0.5% (share consolidation)

- Financials: Bollore BOL.FR -1.2% (analyst action), Intesa Sanpaolo ISP.IT +4.3% (talks with Blackrock)

- Industrials: Rolls Royce RR.UK -0.8% (Package B engines issue)

- Telecom: Eutelsate TEL.UK +2.1% (analyst action), Inmarsat ISAT.UK +12.9% (rejects takeover offer), SES SESG.FR +1% (analyst action)

Speakers

- Italy PM Conte: NATO and EU needed to cooperate more on immigration and security. Russia's role was key in regional crisis

- Spain's bad bank (SAREB) said to have placed €30B of planned asset sales on hold until it receives fresh approval from the new govt

- ESM's Regling stated that the Portuguese banking sector was now more resilient. Govt needed to keep up the reform momentum

Currencies

- EUR/USD moved back above the 1.18 level for a good portion of the session after Italy Econ Min Tria gave the markets more reassurances that the new govt had no intention of leaving the Euro. Italian 10-year BTP yield fell by almost 25bps as a result to trade around 2.85%. Pair still well contained in its 1.15-1.20 trading range. Key focus will be the ECB statement on Thursday for hints of when the QE bond buying program would end.

- GBP/USD saw its earlier gains slip away after disappointing trade and production data for April. GBP/USD slipped from 1.34 20 to test below 1.3375 after the data miss. Focus turning to the political front as PM May was expected to urge potential Tory rebels to get behind the party ahead of crucial votes on the EU Withdraw Bill this week.

- The NOK was softer after Norway CPI lagged forecasts. The data miss would likely to keep the central bank on hold until later this summer for its 1st potential rate hike

Fixed Income

- Bund Futures trade 24 ticks lower at 160.07 following the move lower in Treasuries. Upside targets 161.75 followed by 162.50, while a return lower targets the 159.25 level.

- Gilt futures trade at 121.72 lower by 105 ticks following disappointing production data. Support continues stands at 120.75 then 119.25, with upside resistance at 122.85 then 123.35.

- Monday’s liquidity report showed Friday’s excess liquidity rose from €1.924T to €1.924T. Use of the marginal lending facility decreased from €92M to €M.

- Corporate issuance saw 1 issuer raise $255M in the primary market

Looking Ahead

- (MX) Mexico May ANTAD SSS Y/Y: No est v -0.2% prior

- (IL) Israel Central Bank (BOI) May Minutes

- 05:30 (DE) Germany to sell €3.0B in 6-month Bubills

- 06:00 (IL) Israel May Consumer Confidence: No est v 124 prior

- 06:00 (RO) Romania to sell Bonds

- 06:00 (IL) Israel to sell Bonds - 06:45 (US) Daily Libor Fixing

- 07:00 (UK) May NIESR GDP Estimate: 0.3%e v 0.1% prior

- 07:00 (BR) Brazil Jun IGP-M Inflation (1st Preview): 1.5%e v 1.2% prior

- 07:00 (CZ) Czech Central Bank to comment on CPI data

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey

- 07:30 (TR) Turkey Jun Central bank TCMB Survey of Expectations

- 08:05 (UK) Baltic Dry Bulk Index

- 08:00 (ES) Spain Debt Agency (Tesoro) announces of upcoming issuance

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 08:55 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month BTF Bills

- 09:00 (MX) Mexico Apr Industrial Production M/M: No est v -2.4% prior; Y/Y: +3.6%e v -3.7% prior, Manufacturing Production Y/Y: +4.5%e v -2.4% prior

- 09:30 (EU) ECB announces Covered-Bond Purchases

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 11:00 (DE) German Chancellor Merkel with IMF chief Lagarde

- 11:30 (US) Treasury to sell 3-month and 6-month Bills

- 11:50 (RU) Russia Foreign Min Lavrov in Berlin on Ukraine

- 12:30 (DE) German Fin Min Scholz on panal in Berlin

- 13:00 (US) Treasury to sell 3-Year Notes

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

- 16:00 (US) Weekly Crop Progress Report

- 21:00 (SG) President Trump and North Korea Leader Kim hold Summit