- Risk aversion sentiment seeped back into the markets (concerns on trade, emerging markets and European periphery)

- Awkward G7 leader summit seen as allies poise for showdown with Trump; trade row could deepen

- Fed, ECB and BOJ decisions next week

Asia:

- China May Trade Balance: $24.9B v $33.8Be; Imports Y/Y: 26.0% v 18.8%e

- China Securities Journal reiterated PBoC had room to cut the RRR despite of US Fed rate hike (Note: recent speculation suggested that PBoC might cut the RRR, but raise yields on the MLF facility and reverse repos)

- Japan Q1 Final GDP revised lower and confirmed its 1st contraction in 9 quarters (QoQ: -0.2% v -0.1%e; Annualized : -0.6% v -0.4%e)

- BoJ said to consider cutting inflation forecasts at its upcoming policy meeting on Jun 14-15th (Reminder: In the BoJ’s Quarterly Outlook for Economic Activity (released on April 27th), the central bank then removed the wording on reaching the 2% inflation target around FY19/20)

Europe:

- BOE Dep Gov Ramsden (dove): period of unusually subdued growth in wages appears to be coming to an end. MPC view that the slowdown in early 2018 was temporary has been borne out by data

Americas:

- White House: US President Trump to leave the G-7 in Canada earlier than scheduled. To leave on Saturday to travel to Singapore ahead of meeting with North Korea's Kim

 

Economic Data:

- (NL) Netherland Apr Manufacturing Production M/M: +0.6 v -0.1% prior; Y/Y: 5.0 v 3.3% prior; Industrial Sales Y/Y: 10.2 v 2.2% prior

- (DE) Germany Apr Current Account: €22.7B v €20.0Be; Trade Balance: €20.4B v €20.2Be; Exports M/M: -0.3% v -0.3%e; Imports M/M: 2.2% v 0.6%e

- (DE) Germany Apr Industrial Production M/M: -1.0% v +0.3%e; Y/Y: 2.0% v 2.8%e

- (DE) Germany Q1 Labor Costs Q/Q: 1.0% v 0.4% prior; Y/Y: 2.3% v 1.5% prior

- (FI) Finland Apr Industrial Production M/M: -1.7% v +2.2% prior; Y/Y: 3.9 v 7.2% prior

- (FR) France Apr Industrial Production M/M: -0.5% v +0.3%e; Y/Y: 2.1% v 2.9%e

- (FR) France Apr Manufacturing Production M/M: 0.4% v 1.3%e; Y/Y: 3.0% v 3.7%e

- (HU) Hungary May CPI M/M: 0.6% v 0.5%e; Y/Y: 2.8% v 2.7%e (3rd straight month back within target range and fastest pace in 15 months)

- (CZ) Czech May Unemployment Rate 3.0% v 3.0%e

- (HU) Hungary Apr Preliminary Trade Balance: €0.5B v €0.8Be

- (SE) Sweden May Average House Prices (SEK): 3.031M v 3.069M prior

- (SE) Sweden May Budget Balance (SEK): 50.6B v 2.8B prior

- (SE) Sweden Apr (SE) Sweden Apr Household Consumption M/M: 0.5% v 0.9% prior; Y/Y: 3.1% v 2.8% prior

- (TW) Taiwan May Trade Balance: $4.4B v $4.3Be; Exports Y/Y: 14.2% v 12.0%e; Imports Y/Y: 12.0% v 9.0%e

- (UK) BOE/TNS May Inflation Survey next 12-months: 2.9% v 2.9% prior

- (GR) Greece May CPI Y/Y: 0.6% v 0.0% prior; CPI EU Harmonized Y/Y: 0.8% v 0.5% prior

- (GR) Greece Apr Industrial Production Y/Y: 1.9% v 1.2% prior

- (IS) Iceland Q1 GDP Q/Q: -2.6% v +0.6% prior; Y/Y: 5.4% v 1.5% prior

Fixed Income Issuance:

- (IN) India sold total INR120B vs. INR120B indicated in 2022, 2028, 2035 and 2045 bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 -0.6% at 383.7, FTSE -0.7% at 7649, DAX -1.2% at 12656, CAC-40 -0.3% at 5432, IBEX-35 -0.9% at 9740, FTSE MIB -1.5% at 21433, SMI -0.8% at 8484, S&P 500 Futures -0.6%]

Market Focal Points/Key Themes: European Indices trade lower across the board in risk off trade, tracking US Index futures lower. The Nasdaq futures trade lower after reports Apple were warning suppliers of 20% drop in component orders for upcoming models, with Apple shares dropping 2% in the premarket on those reports. Tech names in Europe are also under pressure following these reports with Dialog Semi and Infineon trading over 2% lower. Elsewhere Clas Ohlson drops on a miss in earnings, with Air France, Commerzbank and Aberdeen Asset Management other notable fallers this morning. Bucking the trend, BT trades higher after the stepping down of its CEO.

 

Movers

-Consumer Discretionary Air France [AF.FR] -2.4% (May metrics), Clas Ohlson [CLASB.DK] -11% (Earnings), Fastjet [FJET.UK] -3.2% (Delays earnings)

-Materials Kaz Minerals [KAZ.UK] -6.5% (Investment by NFC into Koksay project)

-Technology Dialog Semi [DLG.DE] -3.2%, Infineon [IFX.DE] -2.1% (Tech sector pressure)

-Financials Standard Life Aberdeen [SLA.UK] -3.5% (Lloyds places shares), Deutsche Bank [DBK.DE] -1.6%, Commerzbank [CBK.DE] -2.3% (Reportedly resurfacing of potential merger talks)

 

Speakers

- ECB’s Mersch (Luxembourg): Should maintain the flexibility of collateral framework (**Note: ECB now in blackout period ahead of next week’s rate decision)

- German Fin Min Scholz: Look to avoid a hard Brexit. Wanted to maintain a close cooperation with UK in the future. Optimistic on an agreement for the ESM in coming weeks (**Note: look to have it turned into an IMF-like facility)

- Ireland Dep PM Coveney (also foreign Min): Welcomed UK proposal on backstop; regulatory issues still needed to be addressed

- Italy Industry and Labor Min Di Maio (also Dep PM): Will ask for more funds from EU 7-year budget plan

- Italy European Affairs Min Savona: Need to strengthened the EU single market and Euro

- Bank of Italy (BOI) Director Rossi: Wider BTP-Bund spread due to concerns over Euro exit risk

- ESM said to have postponed a €1.0B decision regarding a bailout payment on Greece. Looking for confirmation for some payment of arrears reduction by the Greek govt

- Russia Central Bank (CBR) Gov Nabiullina stated that she saw a real discussion on interest rates at the upcoming meeting (Fri, Jun 15th). Inflation expectations remained unanchored and volatile

- China govt said to be scraping the rules on foreign ownership in domestic banks and asset management companies

 

Currencies

- Risk aversion sentiment seeped back into the markets on Friday with concerns that the US trade row could deepen amongst its own allies and continued concerns over emerging markets. Market participants anticipated an awkward G7 leader summit as allies seemed poise for showdown with Trump. Also reports circulating that Apple warned on a 20% decline in new iPhone parts orders weighed on the tech sector. USD, CHF and JPY were the main beneficiaries of the safe-haven flows

- EUR/USD moved back below the 1.18 level as Italian yields continued to edge higher with the 10-year BTP yield above 3.07%.

- GBP/USD saw its initial gains ebbed away and was retesting the 1.34 just ahead of the NY morning. . Market did like the recent proposal on the backstop from the UK. In summary the UK would not leave the customs union until permanent arrangements could be put in place, possibly involving new technologies that avoid the emergence of a visible border between Northern Ireland and the Republic of Ireland

- USD/JPY testing below the 109.30 level for 1-week lows due to safe-haven flows

- Emerging market currencies were weaker with South African Rand off 2% to test above 13.25 and the Turkish Lira giving back over half of Thursday’s gains despite the aggressive rate hike by the CBRT.

 

Fixed Income

- Bund Futures trade 39 ticks higher at 160.58 following the move in Treasuries as the FX risk-off move hits emerging markets. Upside targets 161.75 followed by 162.50, while a return lower targets the 159.25 level.

- Gilt futures trade at 123.07 higher by 29 ticks and off the lows of the week. Support continues stands at 122.75 then 122.25, with upside resistance at 124.85 then 126.35.

- Friday’s liquidity report showed Thursday’s excess liquidity rose from €1.922T to €1.924T. Use of the marginal lending facility decreased from €146M to €92M.

- Corporate issuance saw 4 issuers raise $3.7 in the primary market

 

Looking Ahead

- (G7) Leader Summit

- (UR) Ukraine May CPI M/M: 0.5%e v 0.8% prior; Y/Y: 12.3%e v 13.1% prior

- 05:30 (ZA) South Africa to sell ZAR600M in I/L 2022, 2033 and 2046 bonds

- 06:00 (PT) Portugal Apr Trade Balance: No est v -€1.2B prior

- 06:00 (IE) Ireland May Live Register Monthly Change: No est v -3.1K prior; Live Registry Level: No est v 229.6K prior

- 06:00 (UK) DMO to sell combined £4.0B in 1-month, 6-month and 12-month Bills (£1.5B, £1.0B and £1.5B respectively)

- 07:30 (IN) India Weekly Forex Reserves

- 08:00 (BR) Brazil May IBGE Inflation IPCA M/M: 0.3%e v 0.2% prior; Y/Y: 2.7%e v 2.8% prior

- 08:00 (CL) Chile May CPI M/M: 0.3%e v 0.3% prior; Y/Y: 2.0%e v 1.9% prior

- 08:00 (CL) Chile May CPI Ex Food and Energy M/M: 0.2%e v 0.3% prior; Y/Y: No est v 1.6% prior

- 08:00 (UK) EU Chief Brexit Negotiator Barnier:

- 08:00 (IN) India announces upcoming bill issuance (held on Wed)

- 08:15 (UK) Baltic Dry Bulk Index - 08:15 (CA) Canada May Annualized Housing Starts: 220.0Ke v 215.3K prior (revised from 214.4K)

- 08:30 (CA) Canada May Net Change in Employment: +23.5Ke v -1.1K prior; Unemployment Rate: 5.8%e v 5.8% prior

- 08:30 (CA) Canada Q1 Capacity Utilization Rate: 86.4%e v 86.0% prior

- 08:30 (CL) Chile Central Bank Traders Survey

- 10:00 (US) Apr Final Wholesale Inventories M/M: 0.0%e v 0.0% prelim, Wholesale Trade Sales M/M: No est v 0.3% prior

- 11:00 (EU) Potential sovereign ratings after the European close (Iceland and Poland Sovereign Debt to be rated by Fitch; Iceland Sovereign Debt to be rated by S&P)

- 13:00 (US) Weekly Baker Hughes Rig Count data

- 21:30 (CN) China May CPI M/M: No est v -0.2% prior; Y/Y: 1.8%e v 1.8% prior; PPI Y/Y: 3.9%e v 3.4% prior

All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

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