European services PMIs leaves door open for inflation return, large share of SP 500 to report today

Notes/observations

- EU flash PMIs showed strength in the services sector, helping push an economic recovery despite continued weakness in manufacturing. Publisher commentary noted concern over rising price pressures; Euro and sterling saw a bid, while stock indices pulled back off opening highs as bets were adjusted on what it means for inflation.

- USD/JPY remained stuck below key155 level as Japan Fin Min Suzuki confirmed discussions in Washington last week laid groundwork for potential intervention.

- Microsoft unveils three smaller AI models that are part of a technology family the company has named Phi-3, which reportedly do not need high-end Nvidia chips, can fit on a smartphone and do not require an internet connection; Even the smallest of the three performed almost as well as GPT-3.5.

- EU Earnings Recap: SAP higher in trade after Q1 cloud metrics outperform; Novartis raises FY24 guidance after top and bottom-line beat; AB Foods H1 significantly ahead of expectations, driven by Primark contributions; Renault Q1 figures were inline and support FY24 targets.

- Upcoming US Premarket Earnings: DGX, FCX, GE, HAL, JBLU, KMB, LMT, NEE, PEP, PHM, PM, R, SHW, UPS, XRX.

- Asia closed mixed with Hang Seng outperforming +1.9%. EU indices are +0.3-1.4%. US futures are +0.1%. Gold -1.1%, DXY -0.1%; Commodity: Brent +0.7%, WTI +0.6%; Crypto: BTC +0.5%, ETH -1.1%.

Asia

- South Korea Mar PPI Y/Y: 1.6% v 1.5% prior

- Australia Apr Preliminary PMI Manufacturing registered its (3rd month of contraction, (49.9 v 47.3 prior.

- Japan Apr Preliminary PMI Manufacturing registered its 11th month of contraction (49.9 v 48.2 prior).

- Japan Fin Min Suzuki affirmed that US, South Korea and Japan acknowledged FX concerns, the recent FX agreement between the countries was a 'milestone'. Would not deny that last week's discussions in Washington had laid groundwork for Japan to take appropriate FX action.

- China PBoC might still cut MLF rate further to reduce funding costs.

- Recent reports of Chinese companies denying transactions with Russian companies. WSJ reported that US was said to be drafting sanctions to "cut off some China banks from the global financial system".

Global conflict/tensions

- North Korea Leader Kim Jong Un is leading nuclear counterstrike drills; These drills are a clear warning to our enemies - KCNA state media.

Europe

- Italy Econ Min Giorgetti noted that he foresaw gradual easing from ECB in monetary policy to take place in the second half of 2024.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.61% at 505.36, FTSE +0.23% at 8,042.60, DAX +0.63% at 17,963.15, CAC-40 +0.28% at 8,062.64, IBEX-35 +0.97% at 10,995.50, FTSE MIB +0.90% at 34,030.00, SMI +1.30% at 11,475.91, S&P 500 Futures +0.10%].

Market Focal Points/Key Themes: European indices open higher across the board and remained upbeat through the early part of the session; among sectors leading the way higher are technology and consumer discretionary; materials; tech sector supported following upbeat results by SAP overnight; health care sector trending positive in the wake of Novartis’ results; JD sports to acquire Hibbett; earnings expected in the upcoming US session include ASML, Tesla, General Motors and Kimberly-Clark.

Equities

- Consumer discretionary: JD Sports Fashion [JD.UK] +5.0% (acquires Hibbett Sports) - Consumer staples: Associated British Foods [ABF.UK] +8.5% (H1 results, outlook ahead of expectations).

- Financials: DNB Bank [DNB.NO] -3.5% (Q1 results, misses rev estimate), Randstad [RAND.NL] -5.5% (earnings) - Healthcare: Novartis [NOVN.CH] +5.0% (Q1 results, raises guidance) - Industrials: Renault [RNO.FR] -0.5% (Q1 sales, affirmed guidance), Taylor Wimpey [TW.UK] +1.0% (trading update, affirmed guidance), Aixtron [AIXA.DE] +6.0% (Vishay selects AIXTRON SiC multiwafer batch technolog - Technology: SAP [SAP.DE] +4.5% (Q1 results, post close, affirmed guidance), STMicroelectronics [STM.FR] +1.0% (analyst upgrade) - Materials: Anglo American [AAL.UK] -0.5% (Q1 production, affirmed most guidance, cuts diamond production).

Speakers

- ECB's De Guindos (Spain) stated that a June cut looked like a set deal if no surprises; End of inflation fight was in sight.

- BOE’s Haskel stated that UK food price inflation was 'unusually high' and labor market extremely tight. Inflation would stay high unless the job market weakened.

- UK DMO raised its fiscal year issuance by £12.4B to £278B.

- Czech Central Bank (CNB) Gov Michl stated that it would remain hawk to keep inflation in check. Possible to cut rate at the upcoming April meeting but would approach further easing with caution.

- Czech Central Bank (CNB) Vice Gov Zamrazilova commented that GDP outlook likely to be higher in upcoming Staff Projections.

- Greece said to be considering early repayment of €2.5-5.0B in Euro Zone bailout funds.

- Japan business lobby (Keidanren) Chief Tokura commented that he believed Japan govt would make an appropriate decision on intervention; The yen currency was too weak given country’s economic fundamentals.

- Fitch affirmed Japan sovereign rating at 'A'; Outlook Stable.

Currencies/fixed income

- Dealers noted the Euro was firming up in the session as the major European PMI readings signaled intensifying price pressures across the region. EUR/USD approaching 1.07 as market participants pondered potentially fewer interest rate cuts by the ECB.

- USD/JPY continued languishing below the pivotal 155 resistance. Japan Fin Min would not deny that last week's discussions in Washington had laid groundwork for Japan to take appropriate FX action. Japan business lobby believed the yen currency was too weak given country’s economic fundamentals.

Economic data

- (UK) Mar Public Finances (PSNCR): £20.7B v £3.2B prior; PSNB (ex-banking groups): £11.9B v £10.0Be; Net Borrowing: £11.0B v £8.8Be; Central Govt NCR: £28.3B v £8.6B prior.

- (ZA) South Africa Feb Leading Indicator: 112.8 v 110.9 prior.

- (FR) France Apr Preliminary Manufacturing PMI: 44.9 v 46.8e (16th month of contraction); Services PMI: 50.5 v 48.9e (1st expansion in 11 months); Composite PMI: 49.9 v 48.7e.

- (DE) Germany Apr Preliminary Manufacturing PMI: 42.2 v 42.7e (22nd month of contraction); Services PMI: 53.3 v 50.5e; Composite PMI: 50.5 v 48.4e.

- (EU) Euro Zone Apr Preliminary Manufacturing PMI: 45.6 v 46.5e (22nd month of contraction); Services PMI: 52.9 v 51.8e; Composite PMI: 5.4 v 50.7e.

- (PL) Poland Mar Real Retail Sales M/M: 14.2% v 15.2%e; Y/Y: 6.1% v 6.9%e; Retail Sales (current prices) Y/Y: 6.0% v 7.5%e.

- (TW) Taiwan Mar Industrial Production Y/Y: 4.0% v 7.5%e.

- (UK) Apr Preliminary Manufacturing PMI: 48.7 v 50.4e (moved back into contraction ); Services PMI: 54.9 v 53.0e; PMI Composite: 54.0 v 52.6e.

- (HK) Hong Kong Mar CPI Composite Y/Y: 2.0% v 2.1%e.

Fixed income issuance

- (FI) Finland opened its book to sell new Sept 2034 RFGB bonds via syndicate; guidance seen +23bps to mid-swaps.

- (EU) European Union opened its book to sell 3-year and 20-year NGEU bonds via syndicate.

- (ID) Indonesia sold total IDR5.08T vs. IDR11.0T target in Islamic bills and bonds (sukuk).

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.0-2.5B indicated range in 3.2% Jan 2026 BTP bonds; Avg Yield: % v 3.31% prior.

- (IT) Italy Debt Agency (Tesoro) sold total €B vs. €2.0-2.5B in 2029 and 2036 I/L Bonds (BTPei).

- (AT) Austria Debt Agency (AFFA) sold total €2.0B vs. €2.0B indicated in 3-month and 6-month Bill.

Looking ahead

- (AR) Argentina Mar Budget Balance (ARS): No est v 1.232T prior.

- (CO) Colombia Mar Retail Confidence: No est v 10.9 prior; Industrial Confidence: No est v -0.3 prior.

- 05:30 (CH) Switzerland to sell 3-month Bils.

- 05:30 (DE) Germany to sell €5.0B in new Jun 2026 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2031, 2037 and 2040 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €1.577B with 24 bids recd).

- 05:30 (PL) Poland to sell Bonds.

- 07:15 (UK) BOE’s Pill (chief economist).

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

- 08:00 (PL) Poland Mar M3 Money Supply M/M: 0.8%e v 1.4% prior; Y/Y: 7.8%e v 7.4% prior.

- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to cut Base Rate by 50bps to 7.75%.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:30 (US) Apr Philadelphia Fed Non-Manufacturing Activity Regional Index: No est v -18.3 prior.

- 08:30 (DE) ECB’s Negal (Germany).

- 09:30 (BR) Brazil Mar Tax Collections (BRL): 191.0Be v 186.5B prior.

- 09:45 (US) Apr Preliminary S&P Manufacturing PMI: 52.0e v 51.9 prior; Services PMI: 52.0e v 51.7 prior; PMI Composite: 52.0e v 52.1 prior.

- 10:00 (US) Mar New Home Sales: 670Ke v 662K prior.

- 10:00 (US) Apr Richmond Fed Manufacturing Index: -8e v -11 prior; Business Conditions: No est v -8 prior.

- 13:00 (US) Treasury to sell 2-Year Notes.

- 15:00 (AR) Argentina Feb Economic Activity Index (Monthly GDP) M/M: No est v -1.2% prior; Y/Y: -6.0%e v -4.3% prior.

- 17:00 (KR) South Korea Apr Consumer Confidence: No est v 100.7 prior.

- 18:45 (NZ) New Zealand Mar Trade Balance (NZD): No est v -0.2B prior; Exports: No est v 5.9B prior; Imports: No est v 6.1B prior.

- 19:50 (JP) Japan Mar PPI Services Y/Y: 2.1%e v 2.1% prior.

- 21:10 (JP) BOJ bond buying operation.

- 21:30 (AU) Australia Q1 CPI Q/Q: 0.8%e v 0.6% prior; Y/Y: 3.5%e v 4.1% prior; CPI Trimmed Mean Q/Q: 0.9%e v 0.8% prior; Y/Y: 3.8%e v 4.2% prior; CPI Weighted Median Q/Q: 0.9%e v 0.9% prior; Y/Y: 4.1%e v 4.4% prior.

- 21:30 (AU) Australia Mar CPI Y/Y: 3.4%e v 3.4% prior.

- 22:00 (NZ) New Zealand to sell combined NZ$500M in 2029 and 2034 bonds.

- (US) Pennsylvania Democratic Primary and GOP Primary.