German IFO survey comes in below consensus

Notes/observations

- German IFO survey bucks’ recent trend of optimism over the economy.

- Light participation due to UK, US holidays.

- Fed futures currently price only 1 full rate cut this year ahead of PCE Deflator data later this week.

- China's National Integrated Circuit Industry Investment Fund (its largest-ever semiconductor investment fund) has amassed ~$47.5B to boost self-resilience in the chip sector.

Asia

- Japan top currency diplomat Kanda: Told G7 speculative, excessive FX moves undesirable so needs to be monitored.

- BOJ Dep Gov Uchida: The end of the fight with deflation is in sight; anchoring 2% inflation remains a big challenge.

Mid-East

- Israel’s military is pressing ahead with its operations against Hamas in the southern Gaza city of Rafah.

- Hamas launched several rockets from Rafah at Tel Aviv for the 1st time in 4 months.

Europe

- Reportedly some Baltic countries think that insufficient Western support for Ukraine could lead to a breakthrough by Russian troops; In this case, the Baltic countries and Poland would consider sending their troops to Ukraine.

- ECB's Panetta (Italy) commented that the global economy was showing resilience in the face of monetary tightening; the risks to financial stability had diminished. Expect ECB to cut rates

- ECB’s Cipollone (Italy) stated that saw 1st rate move in June and to be data depended afterwards.

- ECB's Muller (Estonia, hawk) stated that Council must stay cautious as prices could surprise to upside.

- G7 Fin Mins draft statement noted it was making progress on considering ways to use profits from frozen Russian assets to help Ukraine, and to present options at leaders' summit in Jun. Group reaffirmed its long-held commitment on currencies.

- UK markets closed for bank holiday.

Americas

- US markets close for Memorial Day holiday.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.08% at 520.98, FTSE closed, DAX +0.11% at 18,714.45, CAC-40 +0.18% at 8,109.54, IBEX-35 +0.26% at 11,275.37, FTSE MIB +0.31% at 34,596.00, SMI -0.05% at 11,933.81, S&P 500 Futures -0.04%].

Market focal points/key themes: European indices open generally mixed and failed to gain direction through early trading; light trading with both the US and UK away for holiday; better performing sectors include industrials and real estate; while sectors inclined lower include communication services and technology; reportedly Persimmon looking to acquire Cala Group; reportedly Haleon to sell Nicotinell to Dr Reddy’s; no major events expected in the upcoming US session.

Equities

- Consumer staples: Bakkafrost [BAKKO.NO] -2.5% (found the presence of the infectious salmon anemia virus in two pens).

- Financials: UBS [UBSG.CH] +0.5% (ruling out external successor to CEO Sergio Ermotti), EFG International [EFGN.CH] +3.5% (said to have halted takeover talks with Julius Baer).

- Healthcare: Sanofi [SAN.FR] -0.5% (US FDA priority review), Novo Nordisk [NOVOB.DK] -0.5% (US FDA AdCom Votes; trial data).

- Industrials: Alstom [ALO.FR] -3.0% (trance of share offer).

- Real Estate: SBB [SBBB.SE] +5.5% (forming Social Facilities JV with Castlelake which signs a loan agreement of ~SEK5.7B).

Speakers

- ECB’s Rehn (Finland) reiterated Council view that the time was ripe in June to start rate cuts; rate path afterwards to be data-dependent.

- China Politburo held meeting on preventing financial risk rules and strengthen financial supervision.

- Japan Cabinet Office (Govt) May Monthly Report maintained its overall economic assessment of seeing a gradual economic recovery despite some weakness.

- US said to be mulling alternative strategy for pressing Iran over nuclear activities for later this year; US sought to keep tensions with Iran from escalating before the autumn's US presidential election. US pressing countries not to back UK, French censure of Iran at UN Atomic Agency.

Currencies/fixed income

- USD was slightly softer in a quiet EU session. Dealers remain confident the overall trend for the greenback would be aided by prospects of waning rate cut hopes from the Fed during the latter part of 2024.

- EUR/USD at 1.0850 as markets look ahead to next week’s ECB rate decision. ECB rhetoric has made it look highly likely to cut interest rates. German IFO reading had little impact of price action. Data defied expectations for an uptick in the survey despite recent positive outlook on the German economy.

- USD/JPY staying just below the 157 level with market participant paying little heed to G7 Group reaffirming its long-held commitment on currencies to reflect fundamentals.

Economic data

- (FI) Finland May Consumer Confidence: -10.3 v -12.6 prior; Business Confidence: -13 v -17 prior.

- (JP) Japan Mar Final Leading Index CI: 112.2 v 111.4 prelim; Coincident Index: 113.6 v 113.9 prelim.

- (NO) Norway Apr Credit Indicator Growth Y/Y: 3.2% v 3.5% prior.

- (NO) Norway Apr Trend Unemployment Rate: 4.0% v 3.9% prior.

- (HK) Hong Kong Apr Trade Balance (HK$): -10.2B v -39.4Be; Exports Y/Y: 7.6%e v 4.7% prior; Imports Y/Y: 6.8%e v 5.3% prior.

- (ES) Spain Mar Total Mortgage Lending Y/Y: -19.4% v +0.2% prior; House Mortgage Approvals Y/Y: -18.1% v +3.8% prior.

- (TR) Turkey May Real Sector Confidence : 102.4 v 103.5 prior; Real Sector Confidence (unadj): 105.4 v 106.1 prior; Capacity Utilization: 76.3% v 76.7% prior.

- (DE) Germany May IFO Business Climate: 89.3 v 90.4e; Current Assessment: 88.3 v 89.8e; Expectations: 90.4 v 90.8e.

- (PL) Poland Q1 Unemployment Rate: 3.1% v 3.1%e.

- (PL) Poland Apr Unemployment Rate: 5.1% v 5.2%e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 461.2B v 467.4B prior; Domestic Sight Deposits: 452.5B v 459.0B prior.

- (TW) Taiwan Apr Monitoring Leading Indicator: 35 v 31 prior.

- (FR) France Apr Retail Sales Y/Y: 0.0% v 0.9% prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 4.48% v 4.43% prior; bid-to-cover: 2.60x v 3.21x prior.

Looking ahead

- (RO) Romania Apr M3 Money Supply Y/Y: No est v 10.8% prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell combined €5.0B in 6-month and 12-month BuBills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays.

- 05:30 (EU) European Union to sell combined €5.0B in 2027 and 2043 NGEU bonds.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell 2034 and 2055 OLO bonds.

- 06:00 (RO) Romania to sell 7.9% Feb 2038 bonds.

- 07:00 (BR) Brazil May FGV Construction Costs M/M: 0.5%e v 0.4% prior.

- 07:00 (EU) ECB's Lane.

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

- 07:30 (BR) Brazil Apr Total Outstanding Loans (BRL): No est v 5.873T prior; M/M: No est v 1.2% prior; Personal Loan Default Rate: No est v 5.4% prior.

- 08:00 (UK) No Daily Baltic Dry Bulk Index (UK bank holiday).

- 09:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 (FR) France Debt Agency (AFT) to sell €5.8-7.4B in 3-month, 6-month and 12-month bills.

- 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 4.50%.

- 09:00 (BE) Belgium May Business Confidence: -10.8e v -11.9 prior.

- 13:00 (UK) BOE's Haskel speaks.

- 18:45 (NZ) New Zealand Apr Filled Jobs M/M: No est v 0.4% prior.

- 19:01 (UK) May BRC Shop Price Index Y/Y: 1.0%e v 0.8% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 82.0 prior.

- 19:50 (JP) Japan Apr PPI Services Y/Y: 2.3%e v 2.3% prior.

- 21:30 (AU) Australia Apr Retail Sales M/M: +0.2%e v -0.4% prior.

- 21:30 (JP) BOJ Board Adachi.

- 22:00 (SL) Sri Lanka Central Bank (CBSL) Interest Rate Decision: Expected to leave Key Rates unchanged.

- 23:00 (TH) Thailand Central bank to sell THB60B in 3-month bills.

- 23:30 (HK) Hong Kong to sell 3-month and 6-month Bills.

- 23: 35 (JP) Japan to sell 10-Year Climate Transition Bonds.