European PMI Services continue retreat from cycle highs

Notes/Observations

- Risk aversion subsides for now as trade war concerns ease amid comments from US officials

- Major Mar PMI Services data for Europe (Beats: France, Spain; Misses: Euro Zone, Germany, UK, Italy)

Asia:

- BoJ March Household Expectation Survey: 73.9% see 12-month inflation higher vs. 75.6% prior survey (Dec)

Americas:

- White House Econ Adviser Kudlow: Trump's China tariffs were 'all proposals' and that might never take effect

- US Trade official stated that hoped China changed its behavior on trade and intellectual property; no legal reason why China could levy $50B in tariffs. Had no firm deadline for final tariffs list on China products

- Canada's NAFTA negotiators said to be open to US ideas on deal agreement, but did not see how it's possible to finish remaining chapters in next two weeks, as President Trump has sought. Saw see large gaps remaining on issues like govt procurement and dispute settlement

- President Trump reportedly softened key NAFTA demand regarding automotive content; to lower 85% sourcing demand on some auto parts. US proposal would distinguish between car parts by grouping them into 5 categories, some of which would have a lower North American content or none at all

 

Economic Data:

- (IE) Ireland Mar Services PMI: 56.5 v 57.2 prior, Composite PMI: 53.7 v 56.8 prior

- (IN) India Mar Services PMI: 50.3 v 47.8 prior; Composite PMI: 50.8 v 49.7 prior

- (DE) Germany Feb Factory Orders M/M: 0.3% v 1.5%e; Y/Y: 3.5% v 6.5%e

- (DK) Denmark Q4 Final GDP Q/Q: 0.9% v 1.0% prelim; Y/Y: 1.3% v 1.2% prior

- (DK) Denmark Feb Gross Unemployment Rate: 4.1% v 4.1% prior, Unemployment Rate (Seasonally adj): 3.2% v 3.3% prior

- (RO) Romania Q4 Final GDP (3rd reading) Q/Q: 0.5% v 0.6%e; Y/Y: 6.7% v 6.9%e

- (NO) Norway Feb Credit Indicator Growth Y/Y: 6.1% v 6.1%e

- (SE) Sweden Mar PMI Services: 59.2 v 59.0 prior

- (HU) Hungary Feb Retail Sales Y/Y: 6.5% v 7.2%e

- (ES) Spain Mar Services PMI: 56.2 v 56.1e (53rd month of expansion), Composite PMI: # v 56.0e

- (ZA) South Africa Mar PMI (whole economy): 51.1 v 51.4 prior (2nd month of expansion)

- (CH) Swiss Mar CPI M/M: 0.4% v 0.2%e; Y/Y: 0.8% v 0.7%e

- (CH) Swiss Mar CPI EU Harmonized M/M: 0.3% v 0.3% prior; Y/Y: 0.7% v 0.5% prior

- (SE) Sweden Feb Private Sector Production M/M: 0.4% v 0.0%e; Y/Y: 4.9% v 4.6%e

- (SE) Sweden Feb Industrial Orders M/M: +0.2% v -0.5% prior; Y/Y: 1.3% v 8.7% prior

- (IT) Italy Mar Services PMI: 52.6 v 53.9e (22nd month of expansion), Composite PMI: 53.9 v 53.9e

- (FR) France Mar Final Services PMI: 56.9 v 56.8e (confirms 21st month of expansion), Composite PMI: 56.3 v 56.2e

- (DE) Germany Mar Final Services PMI: 53.9 v 54.2e (confirms 57th month of expansion); Composite PMI: 55.1 v 55.4e

- (EU) Euro Zone Mar Final Services PMI: 54.9 v 55.0e (confirms 57th month of expansion); Composite PMI: 55.2 v 55.3e

- (UK) Mar Services PMI: 51.7 v 54.0e (20th month of expansion but lowest since July 2016), Composite PMI: # v 53.9e

- (EU) Euro Zone Feb Retail Sales M/M: 0.1% v 0.5%e ; Y/Y: 1.8% v 2.2%e

- (EU) Euro Zone Feb PPI M/M: 0.1% v 0.0%e; Y/Y: 1.6% v 1.5%e

- (GR) Greece Feb Industrial Production Y/Y: -2.0% v -1.2% prior

- (IN) India Central Bank (RBI) left Repurchase Rate unchanged at 6.00%; as expected

- (RU) Russia Gold and Forex Reserve w/e Mar 30th: $457.7B v $457.8B prior

 

Fixed Income Issuance:

- (ES) Spain Debt Agency (Tesoro) sold total €4.02B vs. €4.0-5.0B indicated range in 2021, 2028 and 2048 Bonds

- Solds €1.01B in 0.05% Jan 2021 SPGB; Avg yield: -0.232% v -0.034% prior, Bid-to-cover: 3.08x v 3.14x prior

- Sold €1.36B in 1.40% Apr 2028 SPGB; Avg yield: 1.148% v 1.363% prior, Bid-to-cover: 1.51x v 1.28x prior

- Sold €1.65B in 2.7% Apr 2048 SPGB; Avg Yield: 2.225% v 2.691% prior; Bid-to-cover: 1.27x v 1.40x prior

- (ES) Spain Debt Agency (Tesoro) sold €625M vs. €250-750M indicated range in 0.65% Nov 2027 Inflation-linked Bonds (SPGBei); Real Yield: -0.297% v 0.000% prior; Bid-to-cover: x v 2.69x prior (Feb 1st 2018)

- (FR) France Debt Agency (AFT) sold total €7.665B vs. €7.5-8.5B indicated range in 2028, 2034, 2039 and 2048 Oats

- Sold €4.197B in 0.75% May 2028 Oat; Avg Yield: 0.74% v 0.90% prior; Bid-to-cover: 1.94x v 1.86x prior

- Sold €1.091B in 1.25% May 2034 Oat; Avg Yield: 1.14% v 1.33% prior; Bid-to-cover: 1.80x v 1.34x prior

- Sold €1.096B in 1.75% Jun 2039 green Oat; Avg Yield: 1.34% v 1.27% prior; Bid-to-cover: 1.76x v 1.69x prior

- Sold €1.281B in 2.00% May 2048 Oat; Avg Yield: 1.58% v 1.71% prior, Bid-to-cover: 1.85x v 1.96x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

**Equities**

Indices [Stoxx600 +1.4% at 372.6, FTSE +1.2% at 7121, DAX +1.6% at 12148, CAC-40 +1.6% at 5222, IBEX-35 +1.5% at 9657, FTSE MIB +1.6% at 22790, SMI +1.2% at 8654, S&P 500 Futures +0.4%]

Market Focal Points/Key Themes: European Indices trade sharply higher across the board following a sharp reversal in Wallstreet overnight and continued follow through this morning after calming comments from White House Adviser Kudlow in regards to China Tariffs. Earnings related movers include Sophos, Electrocomponents, Watkin Jones which trade higher, while Rank Group and BTG Group are notable decliners following their trading updates. In the healthcare space OSE Immunitherapuetics trades over 40% higher after announcing a partnership with Boehringer Ingelheim; Shire trades highers after a Takeda sell side analyst meeting. Telecom names Vodafone, Telefonica and BT trades higher after the results from 4G and 5G Spectrum auctions. Looking ahead notable earners include Monsanto, Conn's Inc, RPM and Hooker Furniture.

 

Movers

-Consumer Discretionary [Rank Group [RNK.UK] -15.7% (Trading update), Electrocomponents [ECM.UK] +3.0% (Earnings)]

-Financials [Sanne Group [SNN.UK] -3.7% (Share sale)]

-Healthcare [Indivior [INDV.UK] +2.6% (Files Complaints Asserting New SUBOXONE® Film Patent Against ANDA-filers against Dr. Reddy, Actavis, Par, Alvogen and Teva), Sannthera Pharmaceuticals [SANN.CH] +15.1% (Successful completion of phase 1 trial), Shire [SHP.UK] +4.6% (Broker commentary), OSE Immunotherapeutics [OSE.FR] +42% (Partners with Boehringer Ingelheim on global immuno-oncology to develop checkpoint inhibitor for treatment of advanced solid tumors)]

-Telecoms [Vodafone [VOD.UK] +1.4%, Telefonica [TEF.ES] +1.7%, BT [BT.A.UK] +1.4% (Spectrum auction for 4G and 5G results), Adept Telecom [ADT.UK] +4.3% (Raises outlook), Adept Telecom [ADT.UK] +4.3% (Raises outlook)]

-Technology [Sophos [SOPH.UK] +18% (Trading update)]

-Energy [Faroe Petrolem [FPM.UK] +2.7% (DNO raises stake)]

 

Speakers

- Italy Democratic Party (PD) said to see no role in the forming of a new govt

- Indonesia Central Bank (BI) official: New reserve ratio rule will not change monetary policy stance but allow banks to better manage liquidity

- India Central Bank Policy Statement noted that the decision was again not unanimous (5-1) to keep it policy steady with dissenter calling for 25bps hike. Monetary policy stance remained neutral. Inflation seen between 4.6-4.6% range in FY19/20 assuming normal monsoon rains and no policy shocks. Forecasted FY19/20 GDP at 7.4%

- North Korea leader Kim Jong Un reportedly told China Premier Xi of intent to rejoin 6 party talks

- Qatar Energy Min al Sada reiterated view that was too early to exit OPEC oil cuts as investment still low

 

Currencies

- USD was on firmer footing as overall risk aversion sentiment subsided for the time being as trade war concerns eased amid comments from US officials. Dealers noted that White House did not respond to China’s retaliation by sharpening its rhetoric again. Focus will turn to Friday payroll and wage report. Dealers believing that USD rally could broaden out and gather momentum if data exceeds expectations

- UK PMI Services registered its lowest reading since the initial contraction following the Brexit Referendum in Jun 2016. GBP/USD off approx. 0.3% at 1.4035 area.

- EUR/USD lower by 0.2% as major Services PMI data in the session generally disappointed as growth continued to drift from recent cycle highs.

- USD/JPY was higher as waning risk aversion helped the yen currency weaken. USD/JPY higher by 0.3% and holding above the 107 level.

 

Fixed Income

- Bund Futures trade 28 ticks lower at 159.01 after major European PMI data comes in mixed. Upside targets 159.75, while a return lower targets the158.25 level.

- Gilt futures trade at 122.26 down 43 ticks tentatively respecting the 123 handle. Support continues stands at 121.25 then 120.85, with upside resistance at 123.35 then 123.85.

- Thursday's liquidity report showed Wednesday's excess liquidity rose to €1853.T from €1.759T prior. Use of the marginal lending facility fell from €35M to €30M.

- Corporate issuance saw 2 issuers raise $2.1B in the primary market

 

Looking Ahead

- (RU) Russia Mar Light Vehicle Car Sales Y/Y: 20%e v 25% prior

- 05:30 (ZA) South Africa Mar Sacci Business Confidence: No est v 98.9 prior

- 05:30 (HU) Hungary Debt Agency (AKK) to sell HUF30B in 12-month bills

- 05:30 (PL) Poland to sell Bonds

- 07:00 (ZA) South Africa Feb Electricity Production Y/Y: No est v 2.4% prior; Electricity Consumption Y/Y: No est v 1.2% prior

- 07:30 (US) Mar Challenger Job Cuts: No est v 35.4K prior; Y/Y: No est v -4.3% prior

- 07:30 (CL) Chile Feb Economic Activity Index (Monthly GDP) M/M: No est v 0.8% prior; Y/Y: 4.5%e v 3.5% prior (revised from 3.9%), Economic Activity (ex-mining) Y/Y: No est v 3.1% prior (revised from 3.5%)

- 07:30 (CL) Chile Central Bank (BCCh) Mar Minutes

- 08:00 (CL) Chile Feb Nominal Wage M/M: No est v 0.5% prior; Y/Y: 4.1%e v 3.9% prior

- 08:05 (UK) Baltic Dry Bulk Index

- 08:30 (US) Feb Trade Balance: -$56.8Be v -$56.6B prior

- 08:30 (US) Initial Jobless Claims: 225Ke v 215K prior; Continuing Claims: 1.84Me v 1.871M prior

- 08:30 (CA) Canada Feb Int'l Merchandise Trade (CAD): -2.1Be v -1.91B prior

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

- 09:00 (MX) Mexico Mar Consumer Confidence: 84.2e v 82.0 prior

- 09:00 (MX) Mexico Jan Gross Fixed Investment: +3.5%e v -0.4% prior

- 10:00 (PT) Portugal PM Costa in Parliament

- 10:20 (BR) (BR) Brazil Mar Vehicle Production: No est v 213.5K prior; Vehicle Sales: No est v 156.9K prior

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

- 11:00 (US) Treasury announcement for upcoming 3-year, 10-year and 30-year auction during week of Apr 9th

- 12:00 (CH) SNB members Maechler and Moser in Zurich

- 13:00 (US) Fed's Bostic (FOMC voter, dove)

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