Global Indices decline as trade tensions show no signs of waning

Notes/Observations

Asia:

-Japan Prelim PMI Manufacturing slipped to contraction territory on trade fears as new export order fell at the fastest pace in 4 months

-China Mofcom reiterates US actions have escalated trade tensions; China will not make concessions on key major issues; Will protect American companies interests in China

Europe/Mideast:

-German Manufacturing PMI register 4th month of contraction, as year ahead output expectations fell to a 55 month low. Confidence among the service sector fell to a three and a half year low.

- German IFO Business Climate fell in May and missed forecasts

-French Manufacturing PMI rose to a 3 month higher, with Services PMI reaching a 6 month high, as business activity saw the fastest rise in six months.

-Eurozone Manufacturing recorded third straight contraction; current readings indicate Q2 GDP growth of 0.2%, German GDP growth of 0.2% and French GDP growth at 0.1%.

-Concern for the rest of Europe as growth falters as orders fell for the first time in six years

-Conservative Senior PMs and Backbenchers expect PM May to resign within the coming days

Americas

Fomc minutes from May 1 meeting: Officials saw patient approach appropriate for 'some time'; many policymakers said recent dip in PCE inflation likely to be transitory

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -1.24% at 374.50, FTSE -1.07% at 7,255.83, DAX -1.58% at 11,976.78, CAC-40 -1.54% at 5,296.19, IBEX-35 -1.24% at 9,121.00, FTSE MIB -1.54% at 20,255.50, SMI -0.53% at 9,593.80, S&P 500 Futures -0.75%]

Market Focal Points/Key Themes:

Equities

European Indices decline sharply across the board led by declines in the auto and tech sector amid weaker than expected PMI datafrom Germany and Eurozone and German IFO Business Climate release. U.S. futures also trade deep in negative territory following China-U.S. trade concerns. On the corporate front, shares of Casino Guichard-Perrachon were halted after falling almost 8% in Paris following suspension of Rallye shares. U.K.'s company Mucklow A&J trading 18% higher after LondonMetric made offer to acquire it in a cash-stock deal, while Merlin Entertainments also trade higher amid responding to 'going private' proposal. On the earnings front, global supplier of food and beverage ingredients to industrial markets Tate & Lyle shares trade 4% lower after missing expectations on guidance. Derichebourg trade 10% lower after fall in year-to-year financials. Industrial firm Renewi and Mitchells & Butlers in the U.K. among notable risers this morning. In other news, Deutsche Bank renews all-time lows amid CEO commentaries during annual meeting. Looking ahead, notable earners include Best Buy, Medtronic, BJ's Wholesale Club, Hormel Foods and Royal Bank of Canada.

- Consumer discretionary: Casino Guichard-Perrachon [CO.FR] -7% (Rallye trading suspended), Merlin Entertainments [MERL.UK] +4% (responds to 'going private' proposal), Intertek Group [ITRK.UK] -2% (trading update), Serco Group [SRP.UK] +10% (acquisition; placement), Mitchells & Butlers [MAB.UK] +4% (earnings)

- Industrials: Pfeiffer Vacuum Technology [OFV.DE] -8% (profit warning), Derichebourg [DBG.FR] -10% (earnings), Renewi [RWI.UK] +5% (earnings)

-Materials: ENQUEST [ENQ.UK] -8% (operations update)

- Financials: Mucklow A&J [MKLW.UK] +18% (to be acquired)

- Utilities: United Utilities Group [UU.UK] -1% (earnings)

- Consumer staples: Tate & Lyle [TATE.UK] -4% (earnings)

 

Speakers

- (CN) China Commerce Ministry (MOFCOM) spokesperson Gao: US wrong practices escalated trade tensions with China; If US wants to keep talks, they should show sincerity

(UK) Parliamentary Lawmaker Duncan-Smith: new PM could be in before summer

(CN) China Foreign Min Spokesman Lu Kang: noted reports on US's Taiwan strait naval passage

(UR) Ukraine Central Bank Gov Smoliy: See no significant market upheaval due to dissolution of Parliament, the situation is under control

(CN) China PBoC Deputy Governor: FX market condition is stable, has ample policy tools to cope with exchange rate fluctuations

(EU) ECB's de Guindos (Spain): Reiterates cross-border asset holdings has stalled, may need more centralized supervision of the Financial markets

 

Currencies/Fixed Income

The US Dollar index saw its 7th straight day of trading higher as risk-off is the main topic on everyone's mind. Also, the China and US trade war has begun to reach the global equity markets as companies begin to feel the effects. There was also the release of the FOMC Meeting minutes where the fed showed they were comfortable where interest rates were. EUR/USD The euro continued its slow grind down lower towards the 1.11 handle as Euro area Flash PMI figures showed a mixed bag in both Services and manufacturing. The EU Trade Minister also commented that they were ready to start trade talks, but believed the US was not ready to start tariff discussions. GBP/USD The Cable traded lower again for the 11th straight day as it approaches the 1.26 handle. We could continue to see the cable to sell off, however any positive comments about Brexit and a break of the 1.27 handle could see upside as shorts may begin to take profits

 

Economic Data

(DE) GERMANY MAY PRELIMINARY PMI MANUFACTURING: 44.3 V 44.8E

(FR) FRANCE MAY PRELIMINARY PMI MANUFACTURING: 50.6 V 50.0E

(EU) EURO ZONE MAY PRELIMINARY PMI MANUFACTURING: 47.7 V 48.1E

(DE) GERMANY MAY IFO BUSINESS CLIMATE SURVEY: 97.9 V 99.1E; CURRENT ASSESSMENT SURVEY: 100.6 V 103.5E

(DE) GERMANY Q1 FINAL GDP Q/Q: 0.4% V 0.4%E; Y/Y: 0.7% V 0.7%E

(FR) FRANCE MAY BUSINESS CONFIDENCE: 106 V 105E

(SE) Sweden Apr Unemployment Rate: 6.2% v 6.9%e

(TR) Turkey May Real Sector Confidence (Seasonally Adj): 94.7 v 100.0 prior; Real Sector Confidence NSA (unadj): 98.9 v 105.5 prior

(CH) Swiss Q1 Industrial Output Y/Y: +4.3% v -0.3%e

**Fixed Income Issuance**

-(ES) SPAIN DEBT AGENCY (TESORO) SELLS TOTAL €3.97B VS. €3.5-4.5B INDICATED RANGE IN 2024, 2029 AND 2035 BONDS

 

Looking Ahead

- 07:00 (BR) Brazil May FGV Consumer Confidence: No est v 89.5 prior

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

- 08:30 (US) Initial Jobless Claims: No est v K prior; Continuing Claims: No est v M prior

- 08:30 (CA) Canada Mar Wholesale Trade Sales M/M: No est v 0.3% prior

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 17th: No est v $B prior

- 09:00 (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave Interest Rate unchanged at 6.75%

- 09:45 (US) May Preliminary Markit Manufacturing PMI: No est v 52.6 prior; Services PMI: No est v 53.0 prior; Composite PMI: No est v 53.0 prior

- 10:00 (US) Apr New Home Sales: No est v 692K prior

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

- 11:00 (US) May Kansas City Fed Manufacturing Activity Index: No est v 5 prior

- 15:00 (AR) Argentina Apr Trade Balance: No est v $1.2B prior; Total Exports: No est v $5.1B prior; Total Imports: No est v $4.0B prior