Europe continues to suffer from disappointing data

Notes/Observations

- Euro Zone Apr advance CPI data misses expectations and heightens recent ECB caution on outlook

- UK Apr PMI Services missed expectations and continued to fuel speculation that the Q1 GDP miss was due to more than just weather

- Norway Central Bank statement less dovish than expected after recent spat of weak data; still sees its 1st potential rate hike after summer

Asia:

- PBOC announced rules on overseas securities investments by domestic companies: Overseas FX purchase were not allowed under RQDII scheme

- Australia Mar Trade Balance registered its 3rd straight surplus (A$1.5B v0.8Be)

Europe:

- ECB's Weidmann (Germany): ECB should not unnecessarily delay its exit from stimulus. ECB hasn't corrected or committed to market expectation for first rate hike before end of reinvestment; reiterated view that market expectation for first rate hike around mid-2019 was not unrealistic

- House of Lords voted in support of power to prevent a hard border in Ireland. Vote was 309-242 to ensure no hard border, defying PM May's position. This is the 10th vote to go against the govt on proposed amendments to the EU Withdrawal Bill

- PM May said to have conceded that her plans for a customs partnership with the EU were “dead” after senior Cabinet ministers turned on her during a crunch Brexit meeting

Americas:

- FOMC left its Target Rate Range unchanged at 1.50-1.75% (as expected); inflation near goal; risks to the outlook appear roughly balanced, removing a prior reference to “near-term risks”

- Venezuela said to be poised to miss a May 8th deadline for a $275M debt installment; Brazil govt could be on the hook due to its guarantee. President Temer canceled a trip to Asia this week to supervise the episode - White House spokesperson Walters: President Trump said to be considering re-imposing steel, aluminum tariffs on Brazil

 

Economic Data:

- (IE) Ireland Apr Services PMI: 58.4 v 56.5 prior, Composite PMI: 57.6 v 53.7 prior

- (RU) Russia Apr Manufacturing PMI: 51.3 v 50.5e (21st month of expansion)

- (TR) Turkey Apr CPI M/M: 1.9% v 1.5%e; Y/Y: 10.9% v 10.5%e; CPI Core Index Y/Y: 12.2% v 11.5%e

- (TR) Turkey Apr PPI M/M: 2.6%e v 1.5% prior; Y/Y: 16.4% v 14.3% prior

- (HU) Hungary Mar PPI M/M: 0.0% v 0.8% prior; Y/Y: 3.5% v 3.9% prior

- (HU) Hungary Feb Final Trade Balance: €0.8B v €0.8B prelim

- (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 0.50%; as expected

- (BR) Brazil Apr FIPE CPI (Sao Paulo): 0.0% v 0.0%e

- (UK) Apr Services PMI: 52.8 v 53.5e, Composite PMI: 53.2 v 53.7e

- (HK) Hong Kong Mar Retail Sales Value Y/Y: 11.4% v 10.9%e; Retail Sales Volume Y/Y: 10.0% v 8.6%e

- (EU) Euro Zone Apr Advance CPI Estimate Y/Y: 1.2% v 1.3%e; CPI Core Y/Y: 0.7% v 0.9%e

- (EU) Euro Zone Mar PPI M/M: 0.1% v 0.1%e; Y/Y: 2.1% v 2.1%e

Fixed Income Issuance:

- (ES) Spain Debt Agency (Tesoro) sold total €3.81B vs. €3.5-4.5B indicated range in 2021, 2028 and 2066 Bonds

- Sold €1.39B in 0.05% Jan 2021 SPGB; Avg yield: -0.145% v -0.232% prior, Bid-to-cover: 2.66x v 3.08x prior

- Sold €1.32B in 1.40% Apr 2028 SPGB; Avg yield: 1.288% v 1.235% prior, Bid-to-cover: 2.01x v 1.30x prior

- Sold €1.10B in 3.45% July 2066 SPGB; Yield: 2.664% v 3.192% prior; Bid-to-cover: 2.09x v 1.54x prior

- (ES) Spain Debt Agency (Tesoro) sold €690M vs. €0.5-1.0B indicated range in 0.30% Nov I/L 2021 bonds (SPGBei;Bonoei); Real Yield: -1.578% v -1.183% prior; Bid-to-cover: x v 2.67x prior (Dec 7th 2017)

- (FR) France Debt Agency (AFT) sold total €8.488B vs. €7.5-8.5B indicated range in 2026, 2028, 2034 and 2048 Oats

- Sold €2.071B in 0.50% May 2026 Oat; Avg Yield: 0.53% v 0.61% prior; Bid-to-cover: 1.89x v 1.78x prior

- Sold €3.611B in 0.75% May 2028 Oat; Avg Yield: 0.81% v 0.74% prior; Bid-to-cover: 1.88x v 1.94x prior

- Sold €955M in 1.25% May 2034 Oat; Avg Yield: 1.22% v 1.14% prior; Bid-to-cover: 2.11x v 1.80x prior

- Sold €1.851B in 2.00% May 2048 Oat; Avg Yield: 1.65% v 1.58% prior, Bid-to-cover: 1.35x v 1.85x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 -0.1% at 387.1, FTSE +0.1% at 7550, DAX +0.1% at 12792, CAC-40 -0.1% at 5523, IBEX-35 +0.1% at 10093, FTSE MIB -0.3% at 24206, SMI +0.1% at 8922, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European Indices trade mixed following weakness in the US overnight, but positive futures this morning on busy morning for corporate earnings. Major German Dax components Bayer, Adidas and Infineon reported this morning with Bayer trading little changed following mixed result, affirming currency adjusted forecast, Adidas lower after a revenue miss and Infineon trades higher after a profit beat. In France Veolia trades up after a beat on the top and bottom line, Thales also trades higher after a Revenue beat. In other movers Smith and Nephew trades lower after guidance cut, with Fingerpint Cards, Fresenius Medical and Trinity Mirror also lower after earnings.

 

Movers

-Consumer Discretionary [Trinity Mirror [TNI.UK] -0.9% (Trading update), Adidas [ADS.DE] -0.9% (Earnings)]

-Industrials [Rolls Royce [RR.UK] -0.9% (AGM Statement), Thales [HO.FR] +2.2% (Earnings), Gerberit [GEBN.CH] +3.1% (Earnings)]

-Technology [Infineon [IFX.DE] +0.9% (Earnings), Fingerprint Cards [FINGB.SE] -11% (Earnings)]

-Financials [ Victoria Park [VICP.SE] +9% (To be acquired) ]

-Healthcare [Fresenius Medical [FME.DE] -1.8% (Earnings), Solvay [SOLB.BE] -2.0% (Earnings), Smith and Nephew [SN.UK] -6.5% (Earnings, outlook)]

 

Speakers

- ECB's Villeroy (France) Not surprised by slower Q1 GDP growth in France. French corporate debt levels required vigilance

- ECB’s Hansson (Estonia): Latest Euro Area developments were positive and had allowed a moderate exit from loose policies

- ECB's Constancio (Portugal), term expires in May): Euro Zone wasting the benefits of currency union

- Norway Central Bank (Norges) policy statement noted that the decision was unanimous to keep policy steady. The overall outlook was unchanged compared the March meeting. Underlying inflation was low, but rising capacity utilization was expected to push up price and wage inflation further out . Reiterated view that interest rates would most likely to be raised after summer

- Sweden Central Bank (Riksbank) Gov Ingves: Rate path was a forecast not a promise. Needed to be vigilant and keep inflation expectations high

- Sweden Central Bank (Riksbank) Dep Gov Skingsley: Not at the point where rate hike could begin. Did not want to risk what has been achieved

- EU's Moscovici: Inflation should increase slowly in Europe

- UK Brexit Min Davis: No surprise that it take time to decide on future customs arrangement with the EU. Reiterates govt stance that the that UK had to leave the customs union. Both options on the table had drawbacks

- Taiwan Central Bank (CBC) Mar Minutes: MPC notes the domestic economy faced uncertainty. One member noted that a rate hike would boost the TWD currency. TWD currency appreciation would affect company investment plans

- China State Chancellor Wang stated that the Chinese govt supported the end of war on the Korean Peninsula

 

Currencies

- USD saw similar price action to Wed’s session as it saw initial gains evaporate then recover in early US trade.

- EUR/USD was back below the 1.20 level ahead of the US morning. after soft advance CPI data.. The data reinforced recent ECB cautiousness on the moderation in growth and inflation.

- GBP/USD initially moved back above the pivotal 1.36 level before another disappoint ingdata release. Apr PMI Services missed expectations and continued to fuel speculation that the Q1 GDP miss was due to more than just weather. The UK govt possible customs union plan with the EU had been put under question, moving the Irish border issue back on top of the political agenda.

- EUR/NOK cross was lower after the Norway Central Bank policy statement was deemed less dovish than expected after recent spat of weak data. Norges still saw the 1st potential rate hike after summer. Cross trading below 9.70 ahead of the NY morning.

 

Fixed Income

- Bund Futures trade 13 ticks higher at 158.74 as Euro Zone Apr Advance CPI data remains subdued. Upside targets 159.75, while a return lower targets the 157.25 level.

- Gilt futures trade at 122.00 higher by 10 ticks, after UK Services disappoints, but does rebound from the 20-month low in March. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.

- Thursday’s liquidity report showed Wednesday's excess liquidity rose to €1.901T from €1.859T prior. Use of the marginal lending facility increased from €20M to €47M.

 

Looking Ahead

- (UK) Last Day of Commons Session Before May Recess

- (IT) Italy Democratic Party (PD) debate whether to join Five Star in coalition govt

- (UK) EU-UK officials meet in Brexit negotiations

- (CN) US delegation in China for trade talks

- (RU) Russia Apr Sovereign Wealth Funds: Wellbeing Fund: $B v $65.9B prior

- 05:30 (NO) Norway Central Bank (Norges) Gov Olsen post rate decision press conference

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month bills

- 05:30 (UK) DMO to sell £3.0B in 0.75% July 2023 Gilts;

- 06:00 (IE) Ireland Apr Live Registry Monthly Change: No est v -2.2K prior; Liver Registry Level: No est v 233.1K prior

- 06:45 (US) Daily Libor Fixing

- 07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 0.75%

- 07:00 (ZA) South Africa Mar Electricity Consumption Y/Y: No est v 0.4% prior; Electricity Production Y/Y: No est v 2.0% prior

- 07:30 (US) Apr Challenger Job Cuts: No est v 60.4K prior; Y/Y: No est v 39.4% prior

- 08:00 (BR) Brazil CONAB Crop Report

- 08:00 (BR) Brazil Mar Industrial Production M/M: 0.5%e v 0.2% prior; Y/Y: 3.0%e v 2.8% prior

- 08:00 (CL) Chile Mar Retail Sales Y/Y: 4.7%e v 4.0% prior; Commercial Activity Y/Y: No est v 5.9% prior

- 08:00 (PT) ECB’s Constancio (Portugal, outgoing) in Frankfurt

- 08:05 (UK) Baltic Dry Bulk Index

- 08:15 (CZ) Czech Central Bank Gov Rusnok to hold post Rate Decision press conference (with staff updates)

- 08:30 (US) Initial Jobless Claims: 225Ke v 209K prior; Continuing Claims: 1.84Me v 1.837M prior

- 08:30 (US) Q1 Preliminary Nonfarm Productivity: 0.9%e v 0.0% prior; Unit Labor Costs: 3.0%e v 2.5% prior

- 08:30 (US) Mar Trade Balance: -$50.0Be v -$57.6B prior

- 08:30 (CA) Canada Mar Int'l Merchandise Trade (CAD): -2.3Be v -2.7B prior

- 08:30 (US) Weekly USDA Net Export Sales - 08:30 (FR) ECB’s Coeure (France) in Frankfurt

- 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 27th: No est v $463.8B prior

- 09:00 (MX) Mexico Mar Leading Indicators M/M: No est v 0.00 prior

- 09:45 (US) Apr Final Markit Services PMI: 54.4e v 54.4 prelim, Composite PMI: 54.8 prelim

- 10:00 (US) Apr ISM Non-Manufacturing Composite: 58.0e v 58.8 prior

- 10:00 (US) Mar Factory Orders: 1.4%e v 1.2% prior; Factory Orders (ex-transportation): No est v 0.1% pror

- 10:00 (US) Mar Final Durable Goods Orders: No est v 2.6% prelim; Durables Ex Transportation: No est v 0.0% prelim, Capital Goods Orders (Non-defense/ex-aircraft): No est v -0.1% prelim, Capital Goods Shipment (Non-defense/ex-aircraft): No est v -0.7% prelim

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

- 12:00 (CH) SNB's Jordan in Zurich

- 17:00 (CL) Chile Central Bank (BCCH) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 2.50%