EU PMI services data showing optimism on growth as economies gradually reopen

Notes/Observations

- Euro Area PMI Services continue improving trend as regional economies gradually reopen (Beats: Euro Zone, UK, Spain, Italy; In-line: France, Germany).

- Tapering fears eased after recent FED and ECB verbal interventions.

Asia:

- China May Caixin PMI Services: 55.1 V 56.2E (13th consecutive expansion).

- Australia May Final PMI Services: 58.0 v 58.2 prelim (confirms 9th month of expansion).

- Japan May Final PMI Services: 46.5 v 45.7 prelim (confirms 16th month of contraction).

- Japan PM Suga said to likely to call for a snap election in the fall following the Olympics and could compile a new stimulus package before the election.

Europe:

- ECB chief Lagarde stressed that strong policy support would provide a bridge over the pandemic and well into the economic recovery.

- Chancellor of the Exchequer Sunak (Fin Min) noted that the US proposals on global tax reform appeared to meet UK's objectives.

- Post-Brexit Australian trade deal to be signed ‘in weeks’ (*Note: This would be the UK's first fully-fledged, post-Brexit trade deal).

Mid-East:

- Israel opposition leader Yair Lapid notified the President that he had formed a coalition with Naftali Bennett for a govt. The move would oust PM Netanyahu after 12 years in power.

Americas:

- US President Biden expected to amend the blacklist of China's military-linked companies soon.

- Fed Beige Book noted that overall price pressures increased further since the last report. Wage growth was moderate while factory output increased further.

- Fed stated that it would begin winding down Corporate bond holdings acquired through its emergency lending facility.

- White House noted that President Biden’s talk with GOP infrastructure point person Senator Capito was "constructive and frank." They will "reconnect on Friday.".

- US Sen Capito: Encouraged that infrastructure talks have continued, she will speak further with Pres Biden on Fri.

Energy:

- Weekly API Crude Oil Inventories: -5.4M v -0.4M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -0.13% at 450.76, FTSE -0.66% at 7,061.32, DAX -0.13% at 15,581.80, CAC-40 -0.11% at 6,514.06, IBEX-35 -0.12% at 9,170.00, FTSE MIB -0.05% at 25,366.56, SMI +0.04% at 11,475.05, S&P 500 Futures -0.12%].

Market Focal Points/Key Themes:

Equities

European indices open slightly lower across the board and stayed in the red as the session progressed despite strong PMI Services releases; underperforming sectors lead by industrial and telecoms; Remy Cointreau in Paris trading down 2% on final earnings release and buyback announcement; UK telecom giant BT Group also slip 3% after an analyst downgrade. German-listed AMC shares trade as much as 20% higher as the Reddit saga continues. earnings expected in the upcoming US session include another Reddit stock Express with CrowdStrike, DocuSign, and lululemon after the close.

- Consumer discretionary: AMC Entertainment Holdings [AH9.DE] +12% (momentum), Remy Cointreau [RCO.FR] -2% (earnings; buyback).

- Industrials: Vallourec [VK.FR] -5% (capital raise).

- Utilities: Pennon Group [PNN.UK] +2% (earnings; acquisition).

- Telecom: BT Group [BT.A.UK] -3% (analyst action).

Speakers

- IMF raised Italy's 2021 GDP growth forecast from 4.25% to 4.3% and saw 2022 GDP growth at 4.0%.

- EU to sanction Belarus this week over recent diversion of Ryanair flight and the arrest of a journalist.

- Germany Econ Min Altmaier stated that he was in favor of extending pandemic State aid to companies until the end of 2021.

- Russia Central Bank (CBR) Gov Nabiullina stated that much of the inflation increase had been due to lasting factors. Higher inflation expectations created added risks. No need for additional demand stimulus at this time.

- Russia Dep PM Novak stated that OPEC+ to consider all factors in making balanced decisions. Some Iranian oil could be available on the market this summer but that was not guaranteed. Oil market to return to pre-crisis level in 2022.

- Indonesia Central Bank Dep Gov Waluyo reiterated the stance that BI's monetary policy will remain accommodative.

- China Commerce Ministry (MOFCOM) spokesperson Gao Feng stated that it had begun normal communications with the US and would work together to solve some specific issues for producers and consumers in the next step.

- China Foreign Ministry spokesperson Wang Wenbin reiterated the view that the US blacklist of Chinese firms undermined normal market rules.

Currencies/Fixed Income

- USD was slightly firmer ahead of some key US economic data that could set the tone at FOMC meetings later this month. ADP and claims data to be released later today and Non-farm payrolls out on Friday.

- EUR/USD was holding below the 1.22 level despite better EU data. Dealers noted that tapering fears of the PEPP have eased after verbal interventions from numerous ECB officials this week. Market looking towards next week’s ECB meeting and expect a solid debate about the future pace of the Pandemic Emergency Purchase Program.

- GBP moved off its 1-week lows following better PMI Services data to test 1.4180.

Economic data

- (RU) Russia May PMI Services: 57.5 v 55.1e (5th straight expansion); PMI Composite: 51.2 v 54.0 prior.

- (UK) May Official Reserves Changes: $1.5BB v $1.6B prior.

- (SE) Sweden Apr PMI Services: 71.7 v 66.6 (12th month of expansion).

- (TR) Turkey May CPI M/M: 0.9% v 1.3%e; Y/Y: 16.6% v % v 17.3%e; CPI Core Index Y/Y: 17.0% v 18.2%e.

- (TR) Turkey May PPI M/M: 3.9% v 3.3%e; Y/Y: 38.3% v 37.0%e.

- (ES) Spain May Services PMI: 59.4 v 57.7e (2nd month of expansion and the highest reading since Aug 2015); Composite PMI: 59.2 v 58.0e.

- (ZA) South Africa May PMI (whole economy): 53.2 v 52.5e (8th straight expansion).

- (IT) Italy May Services PMI: 53.1 v 52.3e(1st expansion in 10 months); Composite PMI: 55.7 v 56.1e.

- (FR) France May Final PMI Services: 56.6 v 56.6e(confirmed 2nd straight expansion); PMI Composite: 57.0 v 57.0e.

- (DE) Germany May Final PMI Services: 52.8 v 52.8e(confirmed move back into expansion and highest reading since July); PMI Composite: 56.2 v 56.2e.

- (EU) Euro Zone May Final PMI Services: 55.2 v 55.1e (confirmed 2nd straight expansion); PMI Composite: 57.1 v 56.9e.

- (UK) May Final PMI Services: 62.9 v 61.8e(confirms 3rd month of expansion and highest reading since May 1997); PMI Composite: 62.9 v 62.0e.

Fixed income Issuance

- (ES) Spain Debt Agency (Tesoro) sold total €4.963B vs. €4.5-5.5B indicated range in 2026, 2027, 2040 bonds.

- Sold €1.826B in 0.0% Jan 2026 SPGB bonds; Avg Yield: -0.247% v -0.240% prior; bid-to-cover: 1.60x v 2.08x prior (May 6th 2021).

- Sold €1.550B in 1.45% Oct 2027 SPGB; Avg yield: -0.025% v +1.525% prior; Bid-to-cover: 1.76x v 1.76x prior (Jan 4th 2018).

- Sold €1.587B in 1.20% Oct 2040 SPGB bonds; Avg Yield: 1.144% v 0.619% prior, bid-to-cover: 1.68x v 1.82x prior.

- (ES) Spain Debt Agency (Tesoro) sold €M vs €250-750M indicated range in 0.65% Nov 2027 Inflation-linked bonds (SPGBei); Real Yield: % v -1.135% prior; Bid-to-cover: x v 1.92x prior.

- (FR) France Debt Agency (AFT) sold total €10.99B vs. €10.0-11.0B indicated range in 2031, 2044, 2055 and 2072 bonds.

- Sold €6.27B in 0.0% Nov 2031 Oat; Avg Yield: 0.16% v 0.13% prior; Bid-to-cover: 1.98x v 1.73x prior (May 6th 2021).

- Sold €1.803B in 0.50% Jun 2044 Oat; Avg Yield: 0.74%; bid-to-cover: 1.79x (no history).

- Sold €1.612B in 4.00% Apr 2055 Oat; Avg Yield: 0.95% v 0.32% prior; Bid-to-cover: 2.07x v 1.77x prior (Nov 5th 2020).

- Sold €1.308B in 0.50% Jun 2072 Oat; Avg Yield: 1.11%; bid-to-cover: 1.88x (no history).

Looking Ahead

- (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.

- 05:30 (IN) India to sell combined INR320B in 2026, 2033, 2035 and 2050 bonds.

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

- 06:45 (US) Daily Libor Fixing.

- 07:00 (MX) Mexico May Consumer Confidence: No est v 42.4 prior.

- 07:00 (ZA) South Africa Apr Electricity Production Y/Y: No est v 1.8% prior; Electricity Consumption Y/Y: No est v 3.0% prior.

- 07:30 (US) May Challenger Job Cuts: No est v -22.9K prior; Y/Y: No est v -96.6% prior.

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

- 08:15 (US) May ADP Employment Change: +650Ke v +742K prior.

- 08:30 (US) Q1 Final Nonfarm Productivity: 5.5%e v 5.4% prelim; Unit Labor Costs: -0.4%e v -0.3% prelim.

- 08:30 (US) Initial Jobless Claims: 388Ke v 406K prior; Continuing Claims: 3.62Me v 3.642M prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 28th: No est v $600.9B prior.

- 09:45 (US) May Final Markit PMI Services: 70.1e v 70.1 prelim; PMI Composite: No est v 68.1 prelim.

- 09:45 (NL) ECB’s Elderson (Netherlands, SSM).

- 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (7-20 years).

- 10:00 (US) May ISM Services Index: 63.0e v 62.7 prior.

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

- 11:00 (US) Weekly DOE Oil Inventories.

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

- 12:00 (CA) Canada to sell 5-year notes.

- 12:00 (UK) BOE Gov Bailey speech.

- 12:30 (US) Fed’s Bostic.

- 13:50 (US) Fed’s Harker.

- 15:05 (US) Fed’s Quarles at SIFMA Conference.

- 18:45 (NZ) New Zealand Q1 Volume of All Buildings Q/Q: +3.0%e v -1.5% prior.

- 19:30 (JP) Japan Apr Household Spending Y/Y: 8.7%e v 6.2% prior.

- 21:00 (PH) Philippines May CPI M/M: No est v 1.4% prior; Y/Y: 4.5%e v 4.5% prior.

- 23:30 (TH) Thailand May CPI M/M: -0.8%e v +1.4% prior; Y/Y: 3.4%e v 3.4% prior; CPI Core Y/Y: 0.5%e v 0.3% prior.