Inflation concerns continue to push yields higher

Notes/Observations

- Growing concerns about rising inflation and higher borrowing costs weighs on risk appetite.

Asia:

- BOJ Gov Kuroda stated in parliament that it was important to maintain steps to respond to pandemic impact on the economy; unfortunately it was taking time to hit 2% CPI. The reiterated stance of no need to change inflation target and that the overall assessment that the domestic economy was picking up as a trend. Reiterated too early to talk about policy exit but would clarify normalization when target was close. Absolutely no change in BOJ stance to buy ETFs boldly when needed; unusual for a central bank to purchase ETFs

- Senior BOJ Official noted that it would buy ETFs as needed under guidance of conducting large purchases when market fluctuations were large.

Europe:

- UK Apr RICS House Price Balance: 75% v 62%e (the highest level since the 1970s).

- BOE’s Haskel stated that he was not that worried about inflation. Expected to see an economic rebound in the short term but must keep in mind the effects of scarring on the medium-term inflation outlook.

- BOE's Haldane (chief economist) stated that by the end of 2021 CPI was likely to be above 2% target, expect double-digit growth a year from now.

Americas:

- Fed's Bostic (FOMC voter) noted that the US was in a turbulent time. Would expect volatility in inflation readings; transitory moves in inflation did not warrant a response. Transitory inflation pressure could last for months.

- Senate GOP Leader McConnell stated that there was a bipartisan desire for an outcome on infrastructure; still needed to decide what infrastructure was. Not interested in reopening the 2017 tax bill.

Energy:

- Colonial Pipeline spokesperson announced it was beginning the restart of its pipeline with a prepared controlled, a staggered restart of the system. Expected to return its gasoline pipeline to service imminently after a cyber-attack last Friday.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 % at #, FTSE % at #, DAX % at #, CAC-40 -1% at #, IBEX-35 -1.82% at 8,842.00, FTSE MIB -2.01% at 23,960.50, SMI +0.41% at 11,033.90 , S&P 500 Futures -0.42%].

Market Focal Points/Key Themes: European indices open lower across the board; all sectors begin in the red lead by industrials and energy; less negative sectors are telecom and real estate; several bourses closed for holidays, including Denmark, Finland, Iceland, Norway, Sweden, and Switzerland; NCC acquires Iron Mountain’s IP management business; UK’s Sage to convene later to analyze potential measures to address Indian covid variant; earnings expected during the upcoming US session include Alibaba, Walt Disney, and Brookfield Asset Management.

Equities

- Consumer discretionary: Burberry [BRBY.UK] -8% (earnings; reinstates dividend).

- Healthcare: Pharming Group [PHARM.NL] -10% (earnings).

- Industrials: Rolls-Royce [RR.UK] -2% (AGM update).

- Telecom: Telefonica [TEF.ES] +3% (earnings),

Speakers

- ECB's De Cos (Spain): ECB should adopt a 2% symmetric inflation target. Fed's experience showed benefits of overshoot strategy Vaccinations were paving the way for strong global recovery.

- Bank of Spain Chief Economist Arce stated that a very accommodative was needed in the coming quarters due to fragile recovery. 2022 GDP could be better than expected due to delayed boost from EU Recovery Fund.

- Poland Central Bank member Zyzynski stated that a 10-15bps hike might be worth considering.

- China Commerce Ministry (MOFCOM) denied a recent report on the replacement of US economic envy. It also noted it supported intellectual property waiver for covid-19 vaccines.

- Taiwan government said to warn of power reductions after an outage at the power plant. To start rotational electricity blackout following an unknown outage at a power plant in the south of the island.

Currencies/Fixed Income

- USD held onto its recent gains after Apr CPI data fanned the flames of inflation. Growing concerns about rising inflation and higher borrowing costs weighed on risk appetite and prompted safe-haven flows into the greenback.

- EUR/USD dipping to approach 1.2050 by mid-session with GBP/USD testing 1.4025.

- European bond yields continued to rise amid global inflation concerns with the German 10-year Bund at -0.1% for its highest level since May 2019. The 10-year Italy/German Gov't bond spread at approx. +112bps.

- Cryptocurrencies saw volatility after Elon Musk reversed his backing of bitcoin and said that Tesla was suspending plans to accept the cryptocurrency as payment for its cars. Musk cited the environmental impact of Bitcoin mining for the reversal.

Economic data

- (RO) Romania Apr CPI M/M: 0.5% v 0.3%e; Y/Y: 3.2% v 3.2%e.

- (IT) Bank of Italy (BOI) Money and Bank Statistics: Mar Gross Non-performing Loans (NPLs) at €51.9B vs. €52.0B m/m.

- (GR) Greece Feb Unemployment Rate: % v 15.8% prior (Dec).

Fixed income Issuance

- (IT) Italy Debt Agency (Tesoro) sold total of €9.25B vs. €7.75-9.25B indicated range in 3-year, 7-year, and 30-year BTP Bonds.

- Sold €3.0B vs. €2.5-3.0B indicated range in 0.00% Apr 2024 BTP; Avg Yield: -0.06% v -0.17% prior Bid-to-cover: 1.41x v 1.38x prior.

- Sold €4.5B vs. €4.0-4.5B indicated range in new July 2028 2028 BTP; Avg Yield: 0.69% v 0.31%prior; bid-to-cover: 1.35x v 1.53x prior.

- Sold €1.75B vs. €1.25-1.75B indicated range in 1.70% Sept 2051 BTP bonds; Avg Yield: 2.06% v 1.47% prior; Bid-to-cover: 1.30x v 1.37x prior.

Looking Ahead

- - (IE) Ireland Debt Agency (NTMA) to sell €1.0-1.5B in 2031, 2033 and 2050 IGB Bonds.

- 05:20 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa Mar Total Mining Production M/M: -1.8%e v +3.8% prior; Y/Y: 17.3%e v 0.8% prior; Gold Production Y/Y: No est v -8.7% prior; Platinum Production Y/Y: No est v

-0.9% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) issuance.

- 05:50 (HU) Hungary Central Bank One-Week Deposit Rate Tender.

- 06:00 (IL) Israel Apr Trade Balance: No est v -$3.0B prior.

- 06:00 (IE) Ireland Apr CPI M/M: No est v 0.8% prior; Y/Y: No est v 0.0% prior.

- 06:00 (IE) Ireland Apr CPI EU Harmonized M/M: No est v 0.9% prior; Y/Y: No est v 0.1% prior.

- 06:45 (US) Daily Libor Fixing.

- 08:00 (BR) Brazil Mar Economic Activity Index (Monthly GDP) M/M: -3.7%e v +1.7% prior; Y/Y: 5.5%e v 1.0% prior.

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

- 08:00 (UK) BOE’s Cunliffe.

- 08:30 (US) Apr PPI Final Demand M/M: 0.3%e v 1.0% prior; Y/Y: 5.8%e v 4.2% prior.

- 08:30 (US) Apr PPI (ex-food/energy) M/M: 0.4%e v 0.7% prior; Y/Y: 3.8%e v 3.1% prior.

- 08:30 (US) Apr PPI (ex-food/energy/trade) M/M: 0.4%e v 0.6% prior; Y/Y: 4.3%e v 3.1% prior.

- 08:30 (US) Initial Jobless Claims: 490Ke v 498K prior; Continuing Claims: 3.65Me v 3.690M prior.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e May 7th: No est v $590.5B prior.

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

- 11:00 (CO) Colombia Mar Manufacturing Production Y/Y: 15.3%e v 0.6% prior.

- 11:00 (CO) Colombia Mar Retail Sales Y/Y: 14.8%e v 1.2% prior.

- 11:00 (CA) Bank of Canada (BOC) Gov Macklem.

- 11:30 (US) Treasury to sell 4-week and 8-week Bills.

- 12:00 (UK) BOE Gov Bailey on panel.

- 13:00 (US) Fed’s Waller on US economy.

- 13:00 (US) Treasury to sell 30-year bonds.

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 4.00%.

- 15:00 (AR) Argentina Apr National CPI M/M: 4.0%e v 4.8% prior; Y/Y: 46.2%e v 42.6% prior.

- 15:00 (CO) Colombia Mar Industrial Production Y/Y: No est v -6.2% prior.

- 16:00 (US) Fed’s Bullard.

- 17:00 (KR) South Korea Apr Import Price Index M/M: No est v 3.4% prior; Y/Y: No est v 5.6% prior.

- 17:00 (KR) South Korea Apr Export Price Index M/M: No est v 3.3% prior; Y/Y: No est v 9.0% prior.

- 18:00 (CL) Chile Central Bank (BCCh) Interest Rate Decision: Expected to leave Overnight Rate Target unchanged at 0.50%.

- 18:30 (NZ) New Zealand Apr Manufacturing PMI: No est v 63.6 prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 0.25%.

- 19:50 (JP) Japan Apr M3 Money Supply Y/Y: No est v 8.0% prior; M2 Money Supply Y/Y: No est v 9.5% prior.

- 21:10 (JP) BOJ bond-buying operation for 1-3 years; 3-5 years; 5-10-year maturities.

- 23:00 (CN) China to sell 30-year Upsize Bond.

- 23:30 (JP) Japan to sell 3-Month Bills.