European Indices subdued as US-China trade spat continues

Notes/Observations

Asia:

-China Commerce Ministry's Gao echoes sentiment from the Foreign Ministry spokesperson Geng Shuang; Reiterates China strongly opposes U.S. bullying; Urges U.S. to cancel tariffs on Chinese goods as soon as possible to avoid causing recession-like impact on world economy

-Expresses no knowledge of plans for U.S. trade delegation to visit China at present contrary to earlier reports -Indonesia leaves rates unchanged as expected

- Australian Dollar (AUD) and bond yields decline, June rate cut bets rise after disappointing April unemployment data

Europe/Mideast:

-Italy ECB member Visco sees rising bond yields filtering to higher cost of loans for households and firms; stresses need to reduce debt -National Grid CEO opposes Labour proposals to nationalize energy networks, stating it would slow investment and raise costs for customers

Americas

(US) Pres Trump signed executive order banning the purchase or use of communications technology that poses a national security risk (as expected

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.14% at 377.54, FTSE -0.06% at 7,292.29, DAX -0.33% at 12,060.20, CAC-40 -0.36% at 5,355.05, IBEX-35 -0.01% at 9,176.50, FTSE MIB -0.18% at 20,826.50, SMI +0.38% at 9,516.50, S&P 500 Futures -0.04%]

Market Focal Points/Key Themes: Equities European Indices trade mostly lower strong U.S. session yesterday on press reports that U.S. President Trump plans to delay auto imports tariffs up to 6 months. U.S. Index futures trade slightly lower as trade tensions continue to be at the forefront. On the earnings front, shares of Ubisoft trade sharply lower after weak bookings guidance in earnings report yesterday. In the U.K. Thomas Cook trades almost 18% lower following increase in operating losses and citing challenging trading environment for upcoming summer period. Shares of Sophos, Norsk Hydro and Bouygues are among notable risers this morning, while Burberry and Safestyle trade notably in negative territory. On the corporate front, both German giant ThyssenKrupp and Finnish company Kone trade higher on press speculation that Kone exploring whether option to bid for ThyssenKrupp's Elevator unit is viable. Shares of Nokia and Ericsson trade slightly higher after U.S. President Trump signed order likely to restrict Huawei/ZTE on 5G. Looking ahead notable earners include Walmart, Manchester United and QIWI.

- Consumer discretionary: Ubisoft [UBI.FR] -13% (earnings), Thomas Cook [TCG.UK] -18% (earnings; mulling divestment; credit facility), Burberry [BRBY.UK] -4.5% (earnings; buyback program), Safestyle [SFE.UK] -15% (trading update)

- Energy: Norsk Hydro [NHY.NO] +4.5% (embargo lifted)

- Financials: Investec [INVP.UK] +0.5% (earnings), Generali [G.IT] +0.5% (earnings)

- Materials: KBC Group [KBC.BE] -0.5% (earnings)

- Industrials: ThyssenKrupp [TKA.DE] +3%, Kome [KNEBV.FI] +3% (Kone reportedly exploring whether option to bid for Elevator unit is viable), Balfour Beatty [BBY.UK] -1% (trading update), National Grid [NG.UK] -0.5% (earnings)

- Technology: Sophos [SOPH.UK] +13% (earnings)

- Telecom: Bouygues [EN.FR] +2.5% (earnings), Nokia [NOKIA.FI] +1%, Ericsson [ERICB.SE] +1.5% (Trump signed order likely to restrict Huawei/ZTE on 5G)

Speakers

- (CN) China Commerce Ministry (MOFCOM) spokesperson Gao: Reiterates China strongly opposes U.S. bullying; no information on any plans for U.S. trade delegation to visit China

(CN) China Foreign Min Spokesman Lu Kang: Reiterates China to take necessary measures to defend its companies

(JP) Japan Cabinet Secretary Suga: Broad US car import restrictions cold hit global economy

(EU) ECB's Visco (Italy): Global Economy, Euro Area and Italy are in a difficult time

(DE) ECB's Weidmann (Germany): domestic inflation is stubbornly low; no need to postpone normalization if outlook

Currencies/Fixed Income

-As comments between the Trump and China continue to dominate the main stage, China seen becoming more aggressive saying that if the US continues on their path, they will have to take necessary countermeasures. They also urge the US to cancel the tariffs on Chinese goods to avoid causing a recession like impact on the world economy

-EUR/USD Seen trading higher as it tested the 1.12 handle only to be pushed higher after Trump made comments reportedly plans to delay auto import tariffs. Also, the Bund yields remain negative as Bund future contracts break through the 167 handle a level tested earlier this year making a new high of 167.43.

-AUD/USD – The Aussie making a new low as it breaks the 0.69 level as it now trades higher on the day following a mixed bag of news with a higher employment change than expected as well as a higher unemployment rate.

-GBP/USD – The cable trading lower as it broke the 1.29 handle as concerns over the labour party's plan for nationalizing the UK utility industry. The next level seen is 1.2770 a level created back in February

Economic Data

(FR) France Q1 ILO Unemployment Rate: 8.7% v 8.7%e

(IT) Italy Apr Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 1.1% v 1.1% prelim

(EU) Euro Zone Mar Trade Balance (Seasonally Adj): €17.9B V €19.4Be; Trade Balance NSA (unadj): €22.5B V €17.5B prior

(IT) Italy Mar Total Trade Balance: €4.6B v €3.3B prior; Trade Balance EU: €1.2B v €1.1B prior

**Fixed Income Issuance**

(FR) France Debt Agency (AFT) sells total €8.998B vs. €8.0-9.0B indicated range in Inflation-linked 2022 and 2025 bonds (Oatei)

(SE) Sweden sells SEK500M vs .SEK500M of 0.125% June 2032 inflation linked bonds; Avg Yield: -1.5950% v -0.9946% prior; Bid-to-cover: 2.58x v 3.77x prior

Looking Ahead

- 06:00 (IL) Israel Q1 Advance GDP Annualized: 2.9%e v 3.1% prior

- 06:00 (IL) Israel Apr Consumer Confidence: No est v 130 prior

- 07:00 (BR) Brazil May FGV Inflation IGP-10 M/M: 0.8%e v 1.0% prior

- 07:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves Keynote Address

- 07:30 (TR) Turkey Central Bank TCMB Survey of Expectations: 12-months Inflation Expectations: No est v 15.4% prior

- 08:00 (PL) Poland Apr CPI Core M/M: 0.9%e v 0.4% prior; Y/Y: 1.7%e v 1.4% prior

- 08:00 (UK) Baltic Dry Bulk Index

- 08:30 (US) Apr Housing Starts: 1.209Me v 1.139M prior; Building Permits: 1.290Me v 1.269M prior

- 08:30 (US) Initial Jobless Claims: 220Ke v 228K prior; Continuing Claims: 1.68Me v 1.684M prior

- 08:30 (US) May Philadelphia Fed Business Outlook: 9.0e v 8.5 prior

- 08:30 (CA) Canada Mar Int'l Securities Transactions (CAD): No est v 12.1B prior

- 08:30 (CA) Canada Mar Manufacturing Sales M/M: +1.5%e v -0.2% prior

- 08:30 (CA) Canada Apr ADP Payroll Estimates: No est v +13.2K prior

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

- 08:30 (ES) ECB's De Guindos (Spain)

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 10th: No est v $490.9B prior

- 09:00 (EU) European Finance Ministers (Eurogroup) with ECB's Draghi in attendance

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

- 12:05 (US) Fed's Kashkari (dove, non-voter)

- 13:30 (UK) BOE's Haskel in NY

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 8.25%

- 14:00 (FR) ECB's Corure (France) on banking