EU confidence data improving as vaccination rates rise

Notes/Observations

- EU confidence data improving as vaccinations seen allowing the reopening of the economies in the region (Germany, Sweden, and Italy during the session).

- USTR Tai held 1st call on trade issues with her Chinese counterpart, Vice Premier Liu He; expected further discussions.

- US PCE deflator to be more closely watched to reinforce expectations that maybe the Fed was on track to introduce tapering later this year.

Asia:

- Bank of Korea (BOK) kept its policy steady via a unanimous decision. Reiterated to maintain accomodative policy stance. Raised its 2021 growth and inflation forecast. Needed to adjust extraordinary measures in line with economy. Whether or not a rate hike occurs this year depended on growth; normalization should not be too fast or too late

- China Vice Premier Liu He Liu confirmed to have held candid, constructive talks with US Counterpart, agreed to continue talks. Parties agreed that bilateral trade was important (Insight: Liu He seen as China President Xi Jinping's right hand on the economy. His conversation with USTR Tai shows that the Chinese leadership was signaling the continued importance of the economic relationship to Beijing.

Europe:

- France Fin Min Le Maire noted that the Govt would present to parliament an additional €15B COVID stimulus package.

- Swiss Government decided not to sign EU framework agreement, preferred to continue with existing deals.

Americas:

- Trade Rep Tai: US-China phase 1 trade deal was very important, but only a part of the overall relationship with Beijing. US still faced very large challenges and a complex relationships with China.

- President Biden said to be prepared to extend infrastructure talks. Preparing to wind down talks within two weeks’ time. Look then to begin shifting their focus to what it will take to pass bill on a party-line vote.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +0.11% at 445.70, FTSE -0.02% at 7,025.85, DAX -0.40% at 15,388.85, CAC-40 +0.37% at 6,415.53, IBEX-35 +0.16% at 9,212.00, FTSE MIB +0.24% at 24,837.50, SMI +0.12% at 11,362.28, S&P 500 Futures -0.28%].

Market Focal Points/Key Themes: European indices open mixed and failed to gain direction as the session advanced; sectors among the better performers are industrials and real estate; while to the downside are health care and financials sectors; Airbus raises production targets; Augean receives preliminary takeover approach; Kering cuts stake in Puma; Sulzer spins off Applicator Systems; Bayer lower after US court rejects Roundup settlement; BW sells shares in BW LPG; Fraser to not make offers for Hugo Boss; earnings expected in the upcoming US session include Medtronic, Best Buy and Sanderson Farms.

Equities

- Consumer discretionary: Norwegian Air [NAS.NO] -55% (new Chairman).

- Consumer staples: Tate & Lyle [TATE.UK] -5% (earnings).

- Energy: BW LPG [BWLPG.NO] -7% (placement).

- Financials: Augean [AUG.UK] +17% (possible offer), Aviva [AV.UK] +3% (trading update).

- Healthcare: Bayer [BAYN.DE] -4% (plan to effectively address potential future Roundup claims), Sanofi [SAN.FR] -1%, GSK [GSK.UK] -1% (Sanofi and GSK initiate global Phase 3 clinical efficacy study of COVID-19 vaccine candidate).

- Industrials: Airbus [AIR.FR] +6% (production update).

Speakers

- ECB's De Cos (Spain) reiterates Council's stance that rise in EU inflation seen as transitory.

- France Fin Min Le Maire stated the gov to maintain its 2021 GDP growth forecast at 5.0%; pandemic was behind us but must remain cautious.

- Sweden Central Bank (Riksbank) Skingsley noted that Price pressures remained weak; have begun cautiously approaching exit. Was closely watching commercial property risks; rising home prices were due to structural problems. Tax and housing policy reforms were needed.

- Russia Central Bank (CBR) Gov Nabiullina: Growth may return to pre-pandemic levels by mid-2021.

- China Commerce Ministry (MOFCOM) spokesperson Geo Feng noted that it had nothing more to say regarding the recent US-China trade talks. China and US should create conditions for Phase 1 implementation.

- China Foreign Ministry spokesperson Zhao Lijian: Decline to provide any specific to US-China phone conversation on trade. US should create conditions for the implementation of the phase-1 agreement. Reiterated stance that US was trying to scapegoat China on the coronavirus.

Currencies/Fixed Income

- USD was softer in dull trading but contained with tight ranges in the session. Dealers were looking at the US PCE deflator data later today to perhaps reinforce expectations that maybe the Fed was on track to introduce tapering later this year.

- EUR/USD initially moved back above the 1.22 level as EU confidence data was improving as vaccinations seen allowing the reopening of the economies in the region. Comments from ECB’s de Cos took some wind out of the Euro as he reiterated that inflation was seen as transitory.

- GBP/USD at 1.4125 as data was said to point to vaccines blunting threat of Covid summer wave in UK.

- CNY currency (Yuan) tested its highest since March 2016 against a basket of currencies.

Economic data

- (FI) Finland May Consumer Confidence: 2.7 v 3.8 prior; Business Confidence: 13 v 10 prior.

- (DE) Germany Jun GfK Consumer Confidence: -7.0 v -5.2e(15th straight negative reading).

- (CH) Swiss Apr Trade Balance (CHF): 3.3B v 5.8B prior; Real Exports M/M: 0.1 v 5.1% prior; Real Imports M/M: 2.2 v 3.7% prior; Watch Exports Y/Y: 446.1% v 37.4% prior.

- (ES) Spain Mar Total Mortgage Lending Y/Y: +25.4% v -33.1% prior; House Mortgage Approvals Y/Y: +35.1% v -13.8% prior.

- (SE) Sweden May Consumer Confidence: 112.3 v 103.5 prior; Manufacturing Confidence: 126.0 v 120.7 prior; Economic Tendency Survey: 119.3 v 114.8e.

- (HU) Hungary Apr Unemployment Rate: 4.4% v 4.0%e.

- (SE) Sweden Apr Trade Balance (SEK): 1.8B v 2.9B prior.

- (IT) Italy May Consumer Confidence Index: 110.6 v 104.0e; Manufacturing Confidence: 110.2 v 106.0e; Economic Sentiment: 106.7 v 97.9 prior.

- (AT) Austria May Manufacturing PMI: 66.4 v 64.7 prior (11th straight expansion and record high).

- (TW) Taiwan Apr Monitoring Indicator: 41 v 40 prior.

- (HK) Hong Kong Apr Trade Balance (HKD): -31.8B v -19.4Be; Exports Y/Y: 24.4% v 25.9%e; Imports Y/Y: 25.2% v 24.4%e.

- (IS) Iceland May CPI M/M: 0.4% v 0.7% prior; Y/Y: 4.4% v 4.6% prior.

Fixed income Issuance

- (SE) Sweden sold total SEK1.25B in I/L 2030 and 2032 Bonds.

- (IT) Italy Debt Agency (Tesoro) sold €6.0B in 6-month Bills; Avg Yield: -0.504% v -0.481% prior; Bid-to-cover: 1.34x v 1.34x prior.

Looking Ahead

- (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa Apr PPI M/M: 0.9%e v 1.3% prior; Y/Y: 6.7%e v 5.2% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell HUF in 12-month Bills; Avg Yield: % v 0.69% prior; bid-to-cover: x v 2.04x prior.

- 05:45 (ES) ECB’s De Guindos (Spain).

- 05:50 (HU) Hungary Central Bank One-Week Deposit Rate Tender.

- 06:00 (CA) Canada May CFIB Business Barometer: No est v 63.4 prior.

- 06:00 (NL) ECB's Elderson (Netherlands; SSM member).

- 06:00 (RO) Romania to sell RON600M in 2.5% 2027 Bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (MX) Mexico Apr Unemployment Rate NSA (unadj): 4.2%e v 3.9% prior.

- 07:00 (UK) BOE’s Vlieghe.

- 08:00 (BR) Brazil Mar National Unemployment Rate: 14.6%e v 14.4% prior.

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

- 08:30 (US) Q1 Preliminary GDP Annualized (2nd reading) Q/Q: 6.5%e v 6.4% advance; Personal Consumption: 11.0%e v 10.7% prior.

- 08:30 (US) Q1 Preliminary GDP Price Index: 4.1%e v 4.1% advance; Core PCE Q/Q: 2.3%e v 2.3% advance.

- 08:30 (US) Apr Preliminary Durable Goods Orders: 0.8%e v 0.8% prior; Durables (ex-transportation): 0.8%e v 1.9% prior; Capital Goods Orders (non-defense/ex-aircraft): 1.0%e v 1.2% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.8%e v 1.6% prior.

- 08:30 (US) Initial Jobless Claims: 425Ke v 444K prior; Continuing Claims: 3.68Me v 3.751M prior.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 21st: No est v $593.9B prior.

- 09:00 (DE) ECB’s Schnabel (Germany) at forum.

- 10:00 (US) Apr Pending Home Sales M/M: 0.5%e v 1.9% prior; Y/Y: No est v 25.3% prior.

- 10:00 (MX) Mexico Central Bank (Banxico) May Minutes.

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

- 11:00 (US) May Kansas City Fed Manufacturing Activity Index: 30e v 31 prior.

- 11:00 (DE) ECB’s Schnabel (Germany) at global solutions summit.

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

- 13:00 (US) Treasury to sell 7-Year Notes.

- 13:30 (BR) Brazil Apr Central Govt Budget Balance (BRL): 9.4Be v 2.1B prior.

- (AR) Argentina May Consumer Confidence Index: No est v 35.3 prior.

- 18:00 (NZ) New Zealand May Consumer Confidence Index: No est v 115.4 prior.

- 19:01 (UK) May Lloyds Business Barometer: No est v 29 prior.

- 19:30 (JP) Japan Apr Jobless Rate: 2.7%e v 2.6% prior; Job-To-Applicant Ratio: 1.10x v 1.10x prior.

- 19:30 (JP) Japan May Tokyo CPI Y/Y: -0.5%e v -0.6% prior; CPI (ex-fresh food) Y/Y: -0.2%e v -0.2% prior; CPI (ex-fresh food/energy) Y/Y: -0.1%e v 0.0% prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years; 5~10 Years maturities.

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