Receding political concerns aids risk sentiment

Asia:

- 3rd round of trade talks between China and US ended without a deal: China official stated that the two sides had made "concrete progress"; any move by the US to impose punitive tariffs would derail the negotiations

- North Korea top three military officials said to have been removed from their posts ahead of Trump/Kim summit.

- China Q2 GDP growth expected to com e in between 6.7-6.8% range (vs. 6.8% in Q1)

- Australia Apr Retail sales M/M: 0.4% v 0.3%e

Europe:

- Spain Socialist leader Pedro Sanchez was sworn in as PM (over the weekend)

- EU's Juncker: European Commission to be at Italy's side on its reform path and on proposals for EU's future. Saw no threat of a new euro crisis despite situation in Italy

- S&P: formation of new government in Italy should have no immediate effect on its credit rating

- S&P affirmed Ireland sovereign debt rating at A+; outlook Stable- Fitch affirmed Portugal sovereign rating at BBB; outlook Stable

- Fitch affirmed Belgium sovereign rating at AA-; outlook Stable

Americas:

- G7 Finance Minister meeting, 6 countries (ex the US) issued a formal statement which expressed their unanimous concern and disappointment with the US steel and aluminum tariffs

- President Trump: We will have the meeting with North Korea's Kim on June 12th in Singapore

- US Commerce Sec Ross said to left China without any firm commitments on imports

Energy:

- OPEC+ Monitoring Committee: Need to maintain cooperation to stimulate adequate investments for a stable oil supply

 

Economic Data:

- (CZ) Czech Q1 Average Real Monthly Wage Y/Y: 6.6% v 6.2%e

- (TR) Turkey May CPI M/M: 1.6% v 1.6%e; Y/Y: 12.2% v 12.2%e; CPI Core Index Y/Y: 12.6% v 12.5%e

- (TR) Turkey May PPI M/M: 3.8% v 2.6% prior; Y/Y: 20.2% v 16.4% prior

- (ES) Spain May Net Unemployment M/M: -83.7K v -101.3Ke

- (SE) Sweden Q1 Current Account Balance (SEK): 21.9B v 37.0B prior

- (CH) SNB Total Sight Deposits for Week Ended Jun 1st (CHF): 576.5B v 576.6B prior

- (UK) May Construction PMI: 52.5 v 52.0e

- (EU) Euro Zone Jun Sentix Investor Confidence: 9.3 v 18.5e

- (GR) Greece Q1 Final GDP Q/Q: 0.8% v 0.3%e; Y/Y: 2.3% v 1.9% prior

- (EU) Euro Zone Apr PPI M/M: 0.0% v 0.2%e; Y/Y: 2.0% v 2.4%e

Fixed Income Issuance:

- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 6-month bills; Avg Yield: 0.71% v 0.61% prior; Bid-to-cover: 2.63x v 1.61x prior

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

EquitiesIndices [Stoxx50 +0.7% at 3,474, FTSE +0.7% at 7,757, DAX +0.2% at 12,750, CAC-40 +0.3% at 5,483; IBEX-35 +1.3% at 9,757, FTSE MIB +0.3% at 22,185, SMI +0.3% at 8,646 , S&P 500 Futures +0.3%]

Market Focal Points/Key Themes: European markets opened higher and continued positive as the session progressed; equities in general buoyed by positive sentiment following resolution of political situation in Italy and Spain; utilities and banks best performers; Ireland closed for holiday DS Smith offers to buy Europac; potential acquisition of Unicredit by SocGen; Accor working on collaboration with Air France-KLM; Delacaux to return to market pricing IPO; earnings expected in the upcoming US session include Dell Technologies and Palo Alto Networks; Colombia and Venezuela closed for holiday; attention turning to upcoming Fed meeting later in the week

 

Equities

- Consumer discretionary: Accor AC.FR -4.2% (potential collaboration with Air France), Air France AIR.FR +5.9% (potential collaboration with Accor), Cybergun CYB.FR -7.8% (potential bond issue)

- Energy: Saipem SPM.IT +0.4% (contract win)

- Financials: Vastned VASTN.NL -0.4% (analyst action), CYBG PLC CYBG.UK +1.5% (progress on Virgin Money deal), Societe Generale GLE.FR +1.8% (potential merger with Unicredit), Unicredit UCG.IT -1.2% (potential merger with SocGen)

- Healthcare: Innate Pharma IPH.FR +4.2% (study results)

- Industrials: DS Smith SMDS.UK +3.3% (acquisition), Europac PAC.ES +8.2% (takeover offer), Fiat Chrysler FCA.IT -1.6% (5-year plan)

- Materials: Sunrise Resources SRES.UK +9.7% (potential sale)

- Technology: STMicroelectronics STM.FR +0.3% (analyst action)

- Utilities: Iberdrola IBE.ES +2.6% (analyst action)

 

Speakers

- Spain PM Sanchez Cabinet said to be ready in a few days

- Spain People's Party (PP) official: Senate group will amend the budget

- Russia Econ Min Orehskin: 2018 GDP growth was seen between 1.6-2.1% range. 2018 average oil price seen between $65-70/barrel

- Russia Central Bank 1st Dep Gov Yudaeva reiterated view that year-end CPI was seen closer towards the 4% inflation target

- Turkey Dep PM Simsek: Top priority was for price stability for sustainable high growth; Inflation could rise further in the short-term. Downtrend in inflation to begin in H2. Monetary and fiscal coordination to continue to increase

- Japan Fin Min Aso: No plans to resign over Moritomo land scandal, altered documents were regrettable. To create new procedure about document handling. Confirmed to return 1-year of his pay due to scandal (as speculated)

 

Currencies

- The USD was softer in the session. Dealers noted that White House Economic Advisor Kudlow made the media rounds over the weekend and warned that trade escalation might weaken the US economy. The US Treasury yield curve has undergone a bear flattening following the release of strong US labor market data last week to also weigh upon the greenback. Dollar unable to make fresh cycle highs despite a beat on the recent payroll data that now priced a 4th hike in 2018

- Emerging market currencies were firmer against the USD. The TUR currency (Lira) was fomer after hotter inflation data suggested that the Turkey Central Bank could again act and show its independence (Next rate decision on Thursday).

 

Fixed Income

- Bund Futures trade 34 ticks lower at 161.05 following Treasuries and as BTPs rise for a fourth consecutive day. Upside targets 163.75 followed by 164.50, while a return lower targets the 160.25 level.

- Gilt futures trade at 123.74 lower by 10 ticks after better than expected construction data. Support continues stands at 123.75 then 123.25, with upside resistance at 125.85 then 127.35.

- Monday’s liquidity report showed Friday’s excess liquidity rose from €1.890T to €1.925T. Use of the marginal lending facility decreased from €145M to €128M.

- Corporate issuance saw 2 issuer raise $0.5B

 

Looking Ahead

- (BR) Brazil Apr CNI Capacity Utilization: No est v 78.2% prior

- (RO) Romania May International Reserves: No est v $37.2B prior

- (UR) National Bank of Ukraine (NBU) Minutes

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills

- 06:00 (SE) Sweden Central Bank (Riksbank) Gov Ingves speech on E-money

- 06:45 (US) Daily Libor Fixing

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

- 08:00 (ES) Spain Debt Agency (Tesoro) announces of upcoming issuance

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)

- 08:05 (UK) Baltic Dry Bulk Index

- 08:55 (FR) France Debt Agency (AFT) to sell combined €4.3-5.5B in 3-month, 6-month and 12-month BTF Bills

- 09:00 (MX) Mexico Apr Leading Indicators M/M: No est v -0.02 prior

- 09:00 (SG) Singapore May Purchasing Managers Index (PMI): 53.0e v 52.9 prior; Electronic Sector: No est v 52.2 prior

- 09:30 (EU) ECB announces Covered-Bond Purchases

- 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

- 10:00 (US) Apr Final Durable Goods Orders: No est v -1.7% prelim; Durables Ex Transportation: No est v 0.9% prelim; Capital Goods Orders (Non-defense/ex-aircraft): No est v 1.0% prelim; Capital Goods Shipments (Non-defense/ex-aircraft): No est v 0.8% prelim

- 10:00 (US) Apr Factory Orders: -0.5%e v +1.6% prior; Factory Orders (Ex-transportation): No est v 0.9% prior

- 10:00 (DK) Denmark May Foreign Reserves (DKK): 467.5Be v 467.5B prior

- 12:00 (IS) Iceland Q1 Current Account Balance (ISK): No est v 3.0B prior

- 16:00 (US) Weekly Crop Progress Report