European PMI data generally upbeat; Q1 growth in region decelerates from prior quarter

Notes/Observations

- European PMI Manufacturing data generally upbeat (Beats: Euro Zone, France, Spain, Swiss, Norway, Poland; Czech; Misses: Italy, Sweden, Hungary, In-line: Germany)

- UK Construction PMI moved back into expansion (March contraction was due to weather issues)

- Both Euro Zone and Italt Q1 growth decelerates from prior quarter - Focus on FOMC decision

Asia:

- Japan April Services PMI hit a 6-month high (52.5 v 50.9 prior)

- China Apr Caixin PMI Manufacturing beat expectations ( 51.1 v 50.9e) as export orders sub component declined for the first time since Nov 2016

- Fitch affirmed Australia sovereign rating at AAA; Outlook Stable

- Renewed reports that Japan govt planned to delay primary budget surplus target by five years to fiscal 25/26

Europe:

- PM May reportedly might endorse hybrid customs partnership in which the UK would mirror the EU’s customs regime at its borders and collect tariffs on behalf of the EU. Govt believed that the proposal would remove the need for a customs border between Britain/EU /Ireland

- PM May said to have been warned her government would "collapse" if she did not abandon plans for a post-Brexit customs partnership with the EU. Some 60 euro skeptic Conservative MPs from the European Research Group have sent UK PM May a 30 page report detailing their opposition to a post Brexit customs partnership with the EU

- S&P cut Turkey sovereign rating one notch to BB- from BB; outlook to Stable from Negative

Americas:

- Bank of Canada (BOC) Gov Poloz: current policy rate is well below neutral rate; moving too slowly on rate hikes would mean further accumulation of household debt and rising vulnerabilities. Concerned that interest rates are really low compared to anything that could be described as 'neutral'; forces in the economy suggest that this is not the time to be at 'neutral'

- Special Counsel Mueller said to have raised possibility of subpoena if President Trump declined to talk to investigators in the Russia probe

Energy:

- Weekly API Oil Inventories: Crude: +3.4M v +1.1M prior

 

Economic Data:

- (JP) Japan Apr Consumer Confidence: 43.6 v 44.5e

- (IN) India Apr Manufacturing PMI: 51.6 v 51.0 prior

- (CH) Swiss Apr SECO Consumer Confidence: 2 v 4e

- (FI) Finland Mar House Price Index M/M: -0.6% v +0.6% prior; Y/Y: -1.2 v +0.9% prior

- (SE) Sweden Apr Manufacturing PMI: 54.5 v 56.5e

- (NO) Norway Apr Manufacturing PMI: 56.2 v 56.0e

- (HU) Hungary Apr Manufacturing PMI: 53.3 v 57.0e (29th month of expansion)

- (PL) Poland Apr Manufacturing PMI: 53.9 v 53.2e (41st month of expansion)

- (TR) Turkey Apr Manufacturing PMI: 48.9 v 51.8 prior (1st contraction in 14 months)

- (ES) Spain Apr Manufacturing PMI: 54.4 v 54.1e (54th month of expansion)

- (CH) Swiss Mar Real Retail Sales Y/Y: -1.8% v -0.2% prior

- (CH) Swiss Apr Manufacturing PMI: 63.6 v 59.8e

- (CZ) Czech Apr Manufacturing PMI: 57.2 v 57.0e (21st month of expansion)

- (TH) Thailand Apr Business Sentiment Index: 49.5 v 53.3 prior

- (IT) Italy Apr Manufacturing PMI: 53.5 v 54.5e (20th month of expansion but lowest since Jan 2017)

- (FR) France Apr Final Manufacturing PMI: 53.8 v 53.4e (confirmed the 19th month of expansion)

- (DE) Germany Apr Final Manufacturing PMI: 58.1 v 58.1e (confirmed 40th month of expansion)

- (EU) Euro Zone Apr Final Manufacturing PMI: 56.2 v 56.0e (confirmed 57th month of expansion)

- (GR) Greece Apr Manufacturing PMI: 52.9 v 55.0 prior

- (IT) Italy Mar Unemployment Rate: 11.0% v 10.9%e

- (PL) Poland Apr Preliminary CPI M/M: 0.5% v 0.4%e; Y/Y: 1.6% v 1.5%e

- (UK) Apr Construction PMI: 52.5 v 50.5e (moved back into expansion)

- (EU) Euro Zone Q1 Advance GDP Q/Q: 0.4% v 0.4%e; Y/Y: 2.5% v 2.5%e

- (EU) Euro Zone Mar Unemployment Rate: 8.5% v 8.5%e (matches lowest level since Dec 2008)

- (IT) Italy Q1 Preliminary GDP Q/Q: 0.3% v 0.3%e; Y/Y: 1.4% v 1.4%e

- (BE) Belgium Mar Unemployment Rate: 6.4% v 6.4% prior

- (ZA) South Africa Apr Manufacturing PMI: 50.9 v 48.0e

Fixed Income Issuance:

- (DK) Denmark sold total DKK1.95B in 2027 and 2039 DGB Bonds

- (IN) India sold total INR150B vs. INR150B indicated in 3-month, 6-month and 12-month bills

- (SE) Sweden sold total SEK1.5B vs. SEK1.5B indicated in 2025 and 2032 Bonds

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 +0.7% at 387.6, FTSE +0.6 at 7564, DAX +1.2% at 12765, CAC-40 +0.3% at 5535, IBEX-35 +0.9% at 10069, FTSE MIB +1.0% at 24206, SMI +0.1% at 8896, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes: European Indices trade higher across the board led by the Dax which trades over 1% higher following May Day Holiday yesterday, and positive earnings in the Tech Space. Apple reported strong Q1 results which lifted the stock in the after hours, with European names ST Micro, Dialog Semi, AMS some of the names trading higher in positive sympathy. On the Earnings fron Danish Healthcare name Novo Nordisk trades higher after beating estiamtes and raised outlook with Inmarsat, GN Nord among other names rising after earnings. Elsewhere Hugo Boss, Standard Chartered and Paddy Power among the notable names trading lower after earnings. European Car Makers alos trade higher after positive US Sales figures. Looking ahead notable earners include CVS, AmerisourceBergen, Sprint and Humana.

 

Movers

-Consumer Discretionary [Carlsberg [CARLB.DK] +0.5% (Earnings), Just Eat [JE.UK] +4.3% (Trading update), Connect Group [CNCT.UK] -4.0% (Earnings), Hugo Boss [BOSS.DE] -1.9% (Earnings), Paddy Power [PPB.UK] -6.6% (Earnings)]

-Industrials [GN Nord [GN.DK] +4.8% (Earnings)]

-Technology [Chipmakers benefiting from Apple's earnings AMS [AMS.CH] +7%, Dialog Semi [DLG.DE] +7.4%, Infineon [IFX.DE] +3.2%, IQE [IQE.UK] +5.7%, ST Micro [STM.FR] +3.3%)]

-Financials [ Standard Chartered [STAN.UK] -1.5% (Earnings) ]

-Healthcare [Novo Nordisk [NOVOB.DK] +5% (Earnings)]

-Telecoms [Inmarsat [ISAT.UK] +10% (Earnings)]

 

Speakers

- UK Govt official Lidington: No decision coming today on Brexit Customs plan - comments ahead of "War Cabinet" meeting. Very confident that PM May could get an agreement with Ministers. Saw today's meeting as a 1st round of discussions

- Bank of Korea (BOK) Apr Minutes saw one official note that current accomodative policy was desirable as both internal and external uncertainties arise. Employment had not improved despite economic growth. Needed to closely watch US-China trade dispute

 

Currencies

- USD saw its initial gains evaporate as the Euro Zone region saw decent PMI Manufacturing data in the session. The greenback was testing key levels as its posted its best levels for the year against numerous pairs. Focus now turns to the FOMC rate decision and statement for further guidance on the rate path.

- GBP moved off 4-month lows with focus on a UK “War Cabinet’ meeting on Brexit as PM May tried to align her party policy stance. UK Construction PMI moved back into expansion (March contraction was due to weather issues). The GBP currency has now given back half of its gains since the Sept 2016 flash crash as its trys to hold above the 1.36 level.

- EUR/USD tested below the 1.20 level but moved off the worst levels of the session after European PMI Manufacturing data was generally better-than-expected and remaining in growth territory. The pair was hovering around the 1.20 area just ahead of the NY morning.

- USD/JPY approaching the psychological resistance level of 110.

 

Fixed Income

- Bund Futures trade 23 ticks lower at 158.58 as Euro Zone Q1 Advance GDP data come in line with expecations. Upside targets 159.75, while a return lower targets the 157.25 level.

- Gilt futures trade at 122.05 lower by 32 ticks, after UK construction PMI returns back to expansion. Support continues stands at 120.85 then 120.25, with upside resistance at 123.35 then 123.85.

- Monday’s liquidity report showed Friday's excess liquidity fell to €1.859T from €1.879T prior. Use of the marginal lending facility declined from €40M to €37M.

 

Looking Ahead

- (RO) Romania Apr International Reserves: No est v $38.3B prior

- (ZA) South Africa Apr Naamsa Vehicle Sales Y/Y: 2.0%e v 1.1% prior

- (IT) Italy Apr Budget Balance: No est v -€20.9B prior

- (BR) Brazil Mar CNI Capacity Utilization: No est v 78.0% prior

- (AR) Argentina Apr Government Tax Revenue (ARS): No est v 238.8B prior

- (NL) Netherland Debt Agency (DSTA) announcement for May 8th DSL bond auction

- 05:30 (EU) ECB allotment in 6-Day Main Refinancing Tender (MRO)

- 05:30 (DE) Germany to sell €3.0B in 0% Apr 2023 BOBL

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.5-1.9B in 3-month and 6-month Bills

- 05:00 (ZA) South Africa announces details of next bond auction (held on Tuesdays)

- 05:30 (ZA) South Africa sell combined ZAR2.4B in 2032, 2040 and 2048 bonds

- 06:30 (DE) German Fin Min Scholz presents 2018 draft Federal Budget

- 06:45 (US) Daily Libor Fixing - 07:00 (RU) Russia to sell OFZ bonds (usually 2 tranches)

- 07:00 (US) MBA Mortgage Applications w/e Apr 27th: No est v -0.2% prior

- 08:00 (CZ) Czech Apr Budget Balance (CZK): No est v 16.3B prior

- 08:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves in London

- 08:05 (UK) Baltic Dry Bulk Index

- 08:15 (US) Apr ADP Employment Change: +198Ke v +241K prior

- 08:30 (CA) Canada Mar MLI Leading Indicator M/M: No est v 0.2% prior

- 08:30 (US) Treasury's Quarterly Refunding

- 09:00 (BR) Brazil Apr Manufacturing PMI: No est v 53.4 prior

- 09:00 (SG) Singapore Apr Purchasing Managers Index (PMI): 52.8e v 53.0 prior; Electronic Sector: No est v 52.4 prior

- 09:00 (EU) Weekly ECB Forex Reserves

- 10:00 (MX) Mexico Central Bank (Banxico) Economist Survey

- 10:00 (MX) Mexico Mar Total Remittances: $2.6Be v $2.2B prior

- 10:00 (DK) Denmark Apr Foreign Reserves (DKK): No est v 467B prior

- 10:15 (DE) German Chancellor Merkel

- 10:30 (US) Weekly DOE Crude Oil Inventories

- 10:30 (MX) Mexico Apr Manufacturing PMI: No est v 52.4 prior

- 11:30 (DE) ECB’s Weidmann (Germany)

- 12:00 (IT) Italy Apr New Car Registrations Y/Y: No est v -5.8% prior

- 13:00 (MX) Mexico Apr IMEF Manufacturing Index: 53.5e v 54 prior; Non-Manufacturing Index: 53.0e v 53.4 prior

- 14:00 (US) FOMC Interest Rate Decision: Expected to keep Target Rate Range unchanged at 1.50-1.75%

- 14:00 (BR) Brazil Apr Monthly Trade Balance: $6.1Be v $6.3B prior; Total Exports: $20.3Be v $20.1B prior; Total Imports: $14.1Be v $13.8B prior