OPEC officials signal that production cuts likely to be extended

Notes/Observations

- OPEC officials signal that production cuts likely to be extended

- Political developments have come back into focus (reduced political uncertainty in the UK vs still significant uncertainties in the Eurozone

- GBP supported by the view that early elections in the UK diminished prospects of a messy exit from the European Union

- Oil ministers posturing for an extension of OPEC/Non-Opec oil cuts

Overnight:

Asia:

- Japan Fin Min Aso: Must eventually raise sales tax, cut healthcare and pension payments to pursue steps to raise inflation to slash Japan's huge public deficit

- China State Administration of Foreign Exchange (SAFE) spokesperson reiterated view that pressure on capital outflows eased significantly in Q1. Forex supply and demand were balanced in Q1. Expectations on yuan currency depreciation have weakened significantly so far this year

- New Zealand Q1 CPI annual reading remained within the target range for the 2nd straight month and highest level since Q3 2011 (YoY: 2.2% v 2.0%e)

Europe:

- ECB’s Villeroy (France): Current ECB policy stance remains fully appropriate; current macro environment doesn't call for a re-calibration

- Harris poll on upcoming France Presidential election: Le Pen would lose to either Macron, Fillion and Melenchon in 2nd round

- Recent Polls on upcoming snap elections in UK puts Conservative well ahead of Liberals (44-48% vs. 24-26% range)

Americas:

- Fed Vice Chairman Fischer: Gradual rate hikes will mitigate spillover risks abroad

- Fed's Rosengren (moderate, non-voter): Fed could start shrinking balance sheet "relatively soon"’

- FED Beige Book: Economic activity increased in all 12 districts at a modest pace

 

Economic Data

- (NL) Netherlands Mar Unemployment Rate: 5.1% v 5.3% prior

- (NL) Netherlands Apr Consumer Confidence: 26 v 24 prior

- (JP) Japan Mar Nationwide Dept Sales Y/Y: -0.9% v -1.7% prior; Tokyo Dept Store Sales Y/Y: -0.2% v -3.1% prior

- (DE) Germany Mar PPI M/M: 0.0% v 0.2%e; Y/Y: 3.1% v 3.2%e

- (JP) Japan Mar Convenience Store Sales Y/Y: 0.0% v -1.7% prior

- (DK) Denmark Apr Consumer Confidence: 7.4 v 6.2 prior

- (TR) Turkey Apr Consumer Confidence: 71.3 v 65.0e

- (CZ) Czech Mar PPI Industrial M/M: -0.1% v 0.0%e; Y/Y: 3.0% v 3.1%e

- (TW) Taiwan Mar Export Orders Y/Y: 12.3% v 8.8%e

- (EU) Euro Zone Feb Construction Output M/M: +6.9% v -2.4% prior; Y/Y: +7.1% v -5.1% prior

Fixed Income Issuance:

- (ES) Spain Debt Agency (Tesoro) sold total €4.9&B vs. €4.5-5.5B indicated range in 2022, 2027, 2029 and 2046 bonds

- Sold €1.63B in 0.4% Apr 2022 Oblig; Avg yield: 0.439% v 0.548% prior; Bid-to-cover: 1.58x v 1.45x prior

- Sold €1.42B in 1.5% Apr 2027 SPGB; Avg yield: 1.683% v 1.610% prior; Bid-to-cover: 1.55x v 1.65x prior

- Sold €991M in 6% Jan 2029 SPGB; Avg Yield: 1.880% v 1.249% prior, bid-to-cover: 1.67x v 1.36x prior

- Sold €937M in 2.90% Oct 2046 SPGB; Avg Yield 2.957% v 3.044% prior; Bid-to-cover: 1.70x v 1.56x prior

- (FR)France Debt Agency(AFT) sold total €5.449B vs. €4.5-5.5B indicated range in 2020 and 2022 Oats

- Sold €3.425B in 0.00% Feb 2020 Oat; Avg Yield: -0.32% v -0.29% prior; Bid-to-cover: 1.67x v 1.68x prior

- Sold €2.074B in 0.00% May 2022 Oat; Avg yield: 0.09% v 0.18% prior; Bid-to-cover: 1.96x v 2.06x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 +0.5% at 3,440, FTSE -0.1% at 7,105, DAX +0.2% at 12,034, CAC-40 +0.9% at 5,048, IBEX-35 +0.9% at 10,461, FTSE MIB +0.4% at 19,907, SMI +0.4% at 8,564, S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European equity indices are trading generally higher as market participants continue to focus on the upcoming French presidential elections; Banking stocks generally higher but mixed across the board with shares of BNP Paribas, BBVA, and SocGen trading higher in the Eurostoxx, but with shares of ING and Deutsche Bank trading lower; shares of Schneider Electric trading notably higher in the index after releasing Q1 sales results; shares of Unilever trading notably higher in the FTSE 100 after releasing Q1 sales results and raising its dividend; energy, commodity and mining stocks trading lower in the index as oil prices consolidate after yesterday’s sell off in WTI and Brent; FTSE 100 underperforming against the board as a result.

A plethora of upcoming scheduled US earnings (pre-market) include Alliance Data Systems, AZZ Inc, BB&T, Bank of New York Mellon, Blackstone, Citizens Financial, Celestica, Quest Diagnostics, DR Horton, Danaher, Dover, GATX, Janus Capital, KCG Holdings, KeyCorp, Nucor, NVR, People’s United Financial, Philip Morris, Pool Corp, PPG Industries, Sherwin-Williams, Snap-On, Sonoco Products, SunCoke Energy, Syntel, Travelers Companies, and Verizon Communications.

 

Equities (as of 09:50 GMT)

- Consumer Discretionary: [Debenhams DEB.UK -4.2% (H1 results), Pandora PNDORA.DK +5.1% (updates financial reporting structure), Publicis PUB.FR +2.2% (Q1 sales), Pernod Ricard RI.FR +1.9% (Q3 sales), Sky SKY.UK +0.1% (9M results, partnership with HBO), Unilever UNA.NL +1.0% (Q1 sales, raises dividend)]

- Financials: [Man Group EMG.UK +2.2% (Q1 FUM)]

- Industrials: [ABB ABBN.CH +1.5% (Q1 results), Eurotunnel GET.FR +0.8% (Q1 sales), Kuehne & Nagel KNIN.CH -0.5% (Q1 results)]

- Technology: [Schneider Electric SU.FR +2.5% (Q1 sales)]

- Telecom: [Utility Warehouse TEP.UK +0.2% (trading update)]

- Utilities: [Abertis ABE.ES +3.2% (Atlantia said to offer more than €17B)]

 

Speakers

- Japan Cabinet Office (Govt) Monthly Report reiterated view that domestic economy was continuing a moderate recovery although with a delay in some areas

- Saudi Energy Min Falih: Have yet to reach target to bring global inventories down. OPEC might have to extend production cuts to reduce oil supply

- Kuwait Oil Min Al-Marzouk: Extension of oil production cuts are necessary. Compliance between OPEC and Non-Opec members on agreed upon production cuts was over 90% in March. There was a preliminary agreement from Russia to extend production cuts. Iran said to commit to freezing its oil production at 3.8M bpd for the remainder of 2017 (**Implies a 6-month extension of oil production cuts). If cuts were extended they might be less deep due to stringer demand in H2

- Iraq Ruling Coalition: Supports extension of OPEC supply cuts

- Russia Energy Ministry spokesperson reiterated view that was too early to consider OPEC cut agreement extension but leaning towards extension of cuts

 

Currencies

- The USD remains soft against the G10 FX pairs that started with last Fiday’s soft retail sales and CPI data from the States.

- Political developments remain in focus for Europe. Overall price action has seen a reduced political uncertainty in the UK while significant uncertainties remain within the Euro Zone

- GBP/USD recovered from Wed’s decline and remained above the 1.28 level. GBP supported by the view that early elections in the UK diminished prospects of a messy exit from the European Union

- EUR/USD back at a 3-week highs and above the 1.0770 area on some buy-stops being elected to offload shorts positions

- NZD currency (Kiwi) was firmer after New Zealand Q1 CPI annual reading remained within the target range for the 2nd straight month and highest level since Q3 2011

 

Fixed Income

- Bund futures trade at 162.74 down 51 ticks breaking 163 to the downside on Equity strength and auctions out of Spain and France. Following the break of 163 futures target support at 162.59 initially followed by 162.25. Resistance moves to 163.47 followed by 163.99.

- Gilt futures trade at 128.21 down 30 ticks falling in sympathy with Bunds. Support moves to 127.94 followed by 127.82. A move higher targets 128.76 initially followed by 129.14. Short Sterling curve is steepening slightly with Jun17/Jun18 spread widening marginally to 10.5/11bp.

- Thursday's liquidity report showed Wednesday's excess liquidity fell to €1.566T a fall of €4B from €1.570T prior. Use of the marginal lending facility fell to €206M from €254M prior.

- Corporate issuance saw $12B come to market via 4 issuers led once again by financial names with Bank of America $6.75B 4 part issuance following their earnings and Morgan Stanley $1.75B 7 year issuance accounting for the bulk of the issuance. In the pipeline China Southern Power and State Grid Corp of China have appointed book runners to raise debt. Issuance for the week stands at $23.8B and monthly issuance $56.2B.

 

Looking Ahead

- (BR) Brazil Apr CNI Industrial Confidence: No est v 54 prior

- (ID) Indonesia Central Bank (BI) Interest Rate Decision: Expected to leave Reverse Repo Rate unchanged at 4.75%

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills

- 05:30 (HU) Hungary Debt Agency (AKK) to sell Floating Bonds

- 05:30 (UK) DMO to sell £2.75B in 0.5% 2022 Gilts

- 05:50 (FR) France Debt Agency (AFT) to sell €0.75-1.25B in I/L 2021, 2025 and 2047 Bonds (Oatei)

- 06:00 (CZ) Czech Republic to sell 6-month Bills

- 06:00 (PT) Portugal Monthly Economic Survey

- 06:00 (IL) Israel Q4 Final GDP Annualized: No est v 6.5% prelim

- 06:45 (US) Daily Libor Fixing

- 08:00 (PL) Poland Mar Sold Industrial Output M/M: +13.3%e v -0.9% prior; Y/Y: 7.4%e v 1.2% prior, Construction Output Y/Y: +1.0%e v -5.4% prior

- 08:00 (PL) Poland Mar PPI M/M: 0.0%e v 0.0% prior; Y/Y: 4.7%e v 4.4% prior

- 08:00 (PL) Poland Mar Retail Sales M/M: +15.4%e v -2.7% prior; Y/Y: 8.6%e v 7.3% prior, Real Retail Sales Y/Y: 6.6%e v 5.2% prior

- 08:00 (BR) Brazil Mid-Apr IBGE Inflation IPCA-15 M/M: 0.3%e v 0.2% prior; Y/Y: 4.5%e v4.7% prior

- 08:00 (US) Fed's Powell (moderate, voter)

- 08:15 (UK) Baltic Dry Bulk Index

- 08:30 (US) Apr Philadelphia Fed Business Outlook: 25.5e v 32.8 prior

- 08:30 (US) Initial Jobless Claims: 240Ke v 234K prior; Continuing Claims: 2.02Me v 2.028M prior

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 14th: No est v $395.7B prior

- 09:00 (BE) Belgium Apr Consumer Confidence: No est v 0 prior

- 10:00 (US) Mar Leading Index: 0.2%e v 0.6% prior

- 10:00 (EU) Euro Zone Apr Advance Consumer Confidence: -4.8e v -5.0 prior

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

- 11:00 (CO) Colombia Feb Trade Balance: -$0.7Be v -$0.8B prior, Total Imports: $3.6Be v $3.5B prior

- 11:00 (BR) Brazil to sell 2023 LFT

- 11:00 (BR) Brazil to sell 2018, 2019, 2020 LTN Bills LTN

- 13:00 (US) Treasury to sell 5-Year TIPS

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

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