European data continues to disappoint

Notes/Observations

- Germany Mar Factory Orders continued the trend of weakening European data points

- Italy Center-right said to reject option of an interim govt; to stay united on govt search - financial press

- China Apr FX Reserves decline for the 2nd straight month

- WTI Crude moves above $70/bbl for the first time since late 2014; Iran nuclear deadline in focus

- Focus on BOE rate decision on Thursday whether it could be a hawkish hold

- Market participation light with London closed for banking holiday

Asia:

- China PBoC Gov Yi Gang: There had been no FX intervention in nearly 1-year, called for efforts to resolve trade disputes. China trade imbalance with US was a structural, long-term problem and should be viewed rationally. Reiterated commitment to prudent/neutral monetary policy

- Bank of Japan (BOJ) March 8-9th Policy Meeting Minutes(two meetings ago) reiterated that view that BOJ should maintain easy policy as still had a long way to go to hit price goal. Most members noted that momentum toward hitting price target was being maintained

Europe:

- France sovereign outlook raised by Moody’s to Positive from Stable; affirms AA2 rating

- Canadian rating agency DBRS raises Greece sovereign rating from CCC to B (one notch); maintains positive outlook

- Five Star leader Di Maio said he would pick a prime minister with League leader Salvini (Note: Up until this point Di Maio has insisted that he be the next premier)

Americas:

- Fed's Quarles (hawk, FOMC voter): Fed still evaluating the long run size of its balance sheet- Fed's Kaplan (dove, non-voter): US growth faces challenges in the medium term; US debt is on an unsustainable path relative to GDP

Energy:

- Iran President Rouhani said government had plans in place for any decision that US President Trump might make regarding nuclear agreement (Reminder: Trump has set May 12 as the deadline to make a decision on the prior Iran agreement made under the Obama administration)

 

Economic Data:

- (DE) Germany Mar Factory Orders M/M: -0.9% v +0.5%e; Y/Y: 3.1% v 5.0%e

- (DK) Denmark Mar Industrial Production M/M: -0.4% v -0.3% prior

- (RU) Russia Apr PMI Services: 55.5 v 53.8e, PMI Composite: 54.9 v 53.2 prior

- (AU) Australia Apr Foreign Reserves (AUD): 72.8B v 76.6B prior

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

- (CH) Swiss Apr Foreign Currency Reserves (CHF): 757.1B v 737.6B prior

- (CZ) Czech Mar Industrial Output Y/Y: -1.1% v -0.2%e; Construction Output Y/Y: 0.7% v 9.4% prior

- (CZ) Czech Mar Retail Sales Y/Y: -1.8% v +1.5%e; Retail Sales (ex-auto) Y/Y: 3.7% v 4.0%e

- (AT) Austria Apr Wholesale Price Index M/M: +1.3% v -0.2% prior; Y/Y: 2.9% v 2.4% prior

- (MY) Malaysia End-Apr Foreign Reserves: $109.5B v $110.0B prior

- (CH) Swiss Apr CPI M/M: 0.2% v 0.3%e; Y/Y: 0.8% v 0.9%e

- (CH) Swiss Apr CPI EU Harmonized M/M: 0.2% v 0.3%e; Y/Y: 0.4% v 0.7%e

- (DE) Germany Apr Construction PMI: 50.9 v 47.0 prior

- (TW) Taiwan Apr Trade Balance: $4.2B v $4.3Be; Exports Y/Y: 10.0% v 12.3%e; Imports Y/Y: 4.9% v 7.0%e

- (CN) China Apr Foreign Reserves: $3.125T v $3.131Te (2nd straight monthly decline)

- (CH) SNB Total Sight Deposits for Week Ended May 4th (CHF): 575.9B v 575.2B prior

- (EU) Euro Zone Apr Retail PMI: 48.6 v 50.1 prior

- (DE) Germany Apr Retail PMI: 51.0 v 51.5 prior

- (FR) France Apr Retail PMI: 50.1 v 50.0 prior

- (IT) Italy Apr Retail PMI: 42.7 v 48.0 prior

- (EU) Euro Zone May Sentix Investor Confidence: 19.2 v 21.0e

- (SG) Singapore Apr Foreign Reserves: $287.7B v $287.0B prior

- (IS) Iceland Apr Preliminary Trade Balance (ISK): -13.4B v -14.0B prior

Fixed Income Issuance:

- (DK) Denmark sold DKK0M (nil) in 3-month Bills auction (rejected all bids)

- (NO) Norway sold NOK4.0B vs. NOK4.0B in 3-month bills; Avg Yield: 0.75% v 0.50% prior; Bid-to-cover: 1.16x v 2.02x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 flat at 3,548, FTSE closed, DAX +0.3% at 12,860, CAC-40 flat at 5,515; IBEX-35 +0.3% at 10,138, FTSE MIB +0.3% at 24,400, SMI +0.2% at 8922 , S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European markets open flat and trade slightly higher as the session progressed; trading volumes light with UK closed for bank holiday; Energy stocks supported with Brent topping $70/bbl; Ireland closed for holiday; Air France impacted by industrial action, CEO departure and commentary from French officials; earnings reports expected in the US session include Gannett, Sempra Energy and Tyson Foods

 

Equities

- Consumer discretionary: Air France AF.FR -13.5% (CEO departure), Juventus JUVE.IT +2.7% (win over Bologna)

- Consumer staples: Bakkafrost BAKKO.NO -2.1% (results)

- Energy: Aker BP AKEBP.NO +7.9% (results)

- Financials: Banco BPI BPI.PT +20.3%(takeover offer), Societe Generale GLE.FR -0.8% (analyst action)

- Healthcare: Ambu AMBUB.DK +14.3% (results)

- Materials: PSB Industries PSB.FR +6.9% (potential asset sale)

 

Speakers

- ECB said to claim that Latvia infringed upon central bank independence by removing Gov Rimsevic

- Italy Stats Agency (ISTAT) Monthly Economic Note: Growth continued amid slower-pace signals but the leading indicator remained at a high level.

- Italy Five Star Leader Di Maio said to insist on government contract with Northern League. Five Star Party would not vote on apolitical govt and saw early elections as only other option

- Turkey Central Bank (CBRT) said to change its reserve option mechanism (ROM) from 55% to 45%; move to withdraw TRYT6.4B of liquidity from market

- Russia President Putin reportedly told the government that raising real incomes is a key task for the new term

- Russia Foreign Min Lavrov: Could meet US Sec of State Pompeo in Argentina

- Poland Central Bank's Lon saw steady interest rates in coming months (in-line with MPC statement)

- Iran President Rouhani: US aims to weaken Tehran's influence, fears Iran's independence

- Iran State Oil Co (NIOC) said to expect up to four oil deals with European companies by Oct

- Bank of Canada (BOC) Dep Gov Lane reiterated growth was reliant on stimulus

- China Commerce Ministry (MOFCOM) reiterated view of seeing rising trade protectionism in 2018. China foreign trade faced problems including rising costs. Reiterated view that China did not deliberately pursue a trade surplus

 

Currencies

- USD continued its form tone as European data continued to disappoint and some political uncertainties remain. President Trump to decide by May 12th whether he would extend waivers on Iran sanctions for another 120 days

- EUR/USD was trading at 1.1930 area, lower by 0.4% as Germany Mar Factory Orders continued the trend of weakening European data points

- Focus on BOE rate decision on Thursday whether it could be a hawkish hold which could help the pound regain some luster. GBP/USD little changed in quiet trading at 1.3530

- Emerging market currencies remains weak. Indonesia Rupiah fell to its lowest level since Dec 2015 as USD/IDR tested the 14,000 level. Turkey Central Bank (CBRT) changed its reserve option mechanism to combat recent FX weakness.

 

Fixed Income

- Bund Futures trade 2 ticks higher at 159.20 amid a quiet Monday session. Upside targets 159.75, while a return lower targets the 157.25 level.

- Gilt futures closed in observance of UK bank holiday

- Monday’s liquidity report showed Friday's excess liquidity fell to €1.898T from €1.900T prior. Use of the marginal lending facility decreased from €53M to €14M.

- Corporate issuance saw $22B sold in the primary market last week

 

Looking Ahead

- (IL) Israel Apr Foreign Currency Balance: No est v $116.0B prior

- (RO) Romania Central Bank (NBR) Interest Rate Decision: Expected to raise Interest Rate by 25bps to 2.50%

- (MX) Mexico Apr Vehicle Production: No est v 331.1K prior; Vehicle Exports: No est v 328.0K prior

- 05:30 (SE) Sweden Central Bank (Riksbank) Dep Gov Jochnick

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 6-month bills; Avg Yield: % v -0635% prior; Bid-to-cover: x v 1.43x prior (Apr 16th 2018)

- 06:45 (US) Daily Libor Fixing

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

- 07:30 (CL) Chile Mar Economic Activity Index (Monthly GDP) M/M: 0.1%e v 0.9% prior; Y/Y: 3.9%e v 4.0% prior; Economic Activity (ex-mining) Y/Y: No est v 2.8% prior

- 08:00 (CL) Chile Mar Nominal Wage M/M: +0.6%e v -0.5% prior; Y/Y: 3.7%e v +3.7% prior

- 08:00 (PL) Poland Apr Official Reserves: No est v $119.5B prior

- 08:00 (RO) Romania Central Bank gov Isarescu post rate decision press conference

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

- 08:05 (UK) Baltic Dry Bulk Index

- 08:25 (US) Fed's Bostic (FOMC voter, dove) at conference

- 08:55 (FR) France Debt Agency(AFT) to sell combined €4.4-5.6B in 3-month, 6-month and 12-month bills

- 09:00 (MX) Mexico Apr Consumer Confidence: 84.0e v 82.5 prior

- 09:00 (MX) Mexico Feb Gross Fixed Investment: 5.2%e v 4.1% prior

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

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

- 10:20 (BR) Brazil Apr Vehicle Production: No est v 267.5K prior; Vehicle Sales: No est v 207.4K prior; Vehicle Exports: No est v 67.5K prior

- 11:30 (BE) ECB’s Praet (Belgium, chief economist) in Geneva

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

- 14:00 (US) Fed’s Barkin (voter)

- 15:00 (CA) Bank of Canada (BOC) Lane on panel in Portugal

- 15:00 (US) Mar Consumer Credit: $16.0Be v $10.6B prior

- 15:00 (MX) Mexico Citibanamex Survey of Economists

- 15:30 (US) Fed's Kaplan (dove, non-voter) on panel at conference

- 15:30 (US) Fed's Evans (non-voter, dove) in Atlanta

- 16:00 (US) Weekly Crop Progress Report