Risk aversion sentiment continues

Notes/Observations

- Brexit issues coming back to the front burner.

- Risk aversion sentiment aids USD as safe haven flows dominate.

- Focus on upcoming US CPI data (due Wed) and stress the need for Fed to continue with aggressive tightening.

Asia

- China Apr Trade balance: $51.1B v $51.9Be; Exports Y/Y: 3.9% v 2.7%e; Imports Y/Y: 0.0% v -3.0%e.

- China Apr Foreign Reserves registered its largest monthly decline since late 2016 ($3.1197T v $3.130Te).

- China Premier Li said to have cautions on "complicated and grave" employment situation amid Covid curbs.

- South Korea President Yoon formally took office on Monday, May 9th.

- North Korea fired ballistic missile from submarine Saturday (May 7th).

Russia/Ukraine

- EU envoys meeting on Sunday (May 8th) said to resulted in no agreement on 6th package of sanctions against Russia; Hungary continues to block proposals, while Greece, Cyprus and Malta have raised concerns.

- EU Foreign Policy Chief Borrell stated that EU should seize Russia reserve assets to rebuild Ukraine.

- Japan PM Kishida said to have agreed that Japan would ban Russia Crude Oil Imports in principle in alignment with G7 aims to counteract Russia Invasion into Ukraine.

- G7 Leaders’ statement on Ukraine reassured Ukraine Pres Zelenskyy of continued readiness to undertake further commitments to help Ukraine secure its free and democratic future.

Europe

- ECB's Holzmann (Austria, hawk) said it would be appropriate to take at least 2 or even 3 steps on interest rates in 2022.

- ECB’s Rehn (Finland): Believes ECB will raise rates in July to reach zero in course of Autumn and be in positive territory by year end.

- ECB publishes interview with President Lagarde: Reiterates stagflation is not currently our baseline.

Speakers/Fixed incomeE/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -1.20% at 424.74, FTSE -0.86% at 7,324.55, DAX -0.94% at 13,544.29, CAC-40 -1.18% at 6,184.76, IBEX-35 -0.60% at 8,271.95, FTSE MIB -1.15% at 23,205.00, SMI -1.01% at 11,612.21, S&P 500 Futures -1.35%].

Market Focal Points/Key Themes: European indices open lower across the board, but after staging a slight recovery in early trading, dropped substantially lower as the session wore on; all sectors trading in the red; least negative sectors include utilities and consumer discretionary; sectors among those leading to the downside are materials and technology; Ideagen to be acquired by Hg; Telefonica to By BE-Terna; reportedly Morrison’s wins bid to take over McColl’s; focus on upcoming presentation by Macron and von der Leyen on Future of Europe at EU Parliament; earnings expected during the upcoming Americans session include BioNTech, Excelon, AECOM and Duke Energy.

Equities

- Industrials: Leonardo [LDO.IT] +4% (analyst action), PostNL [PNL.NL] -13% (earnings), Hochtief [HOT.DE] -0.5% (earnings).

- Technology: Ideagen [IDEA.UK] +46% (offer to be acquired), Infineon [IFX.DE] -2.5% (earnings; raises Rev outlook).

Speakers

- Ireland PM Martin stated that EU had been flexible on Northern Ireland Protocol and stressed that the Protocol would not be removed.

- EU envoy to UK stated that was open to start talks again on Northern Ireland protocol after election campaign period but would not renegotiate the protocol. Needed to find a joint resolution to issue.

- Russia President Putin stated during the WWII Victory parade speech in Moscow that Russian troops were fighting for security of Russia and Donbas at this time. West was preparing for invasion of our land (**Note: Putin did not use the occasion to make any special announcement on Ukraine).

- Ukraine adviser and negotiator Podolyak stated that NATO countries were not going to attack Russia; Ukraine did not plan to attack Crimea; The Russia was not defending their country but trying to occupy another.

- Russia negotiator Medinsky stated that peace talks with Ukraine had not stopped, they were being held remotely.

Currencies/Fixed Income

- USD began the week on a firm tone as upcoming US April CPI data to highlight the need for the FOMC to raise the funds rate significantly further.

- EUR/USD retested the 1.05 level which is seen as key support to avoid any plunge towards parity.

- USD/JPY back above the 131.30 level for fresh 20-year highs as central bank divergence between Fed and BOJ remained the catalyst.

- GBP facing some headwinds as Brexit concerns were simmering once again.

Economic data

- (SE) Sweden SEB May Housing-Price Indicator: 18 v 39 prior.

- (NO) Norway Mar Industrial Production M/M: +2.2% v -0.7% prior; Y/Y: 3.0% v 1.6% prior.

- (NO) Norway Mar Manufacturing Production M/M: +0.6 v -2.1% prior; Y/Y: -2.2% v -1.9% prior.

- (NO) Norway Q1 Average Monthly Earnings Y/Y: 3.3% v 3.9% prior.

- (ZA) South Africa Apr Gross Reserves: $60.3B v $58.2B prior; Net Reserves: $54.6B v $55.4B prior.

- (DK) Denmark Mar Current Account Balance (DKK): 25.3B v 21.2B prior; Trade Balance: 7.3B v 4.4B prior.

- (FR) France Mar Trade Balance: -€12.4B-€11.2Be; Current Account Balance: -€3.2B v -€1.1B prior.

- (CZ) Czech Mar National Trade Balance (CZK): -13.8B v -5.5Be.

- (CZ) Czech Mar Industrial Output Y/Y: +0.3% v -2.6%e; Construction Output Y/Y: 8.2% v 18.9% prior.

- (HU) Hungary Mar Preliminary Trade Balance: -€0.5B v -€0.2Be.

- (CZ) Czech Apr Unemployment Rate: 3.3% v 3.4% prior.

- (TW) Taiwan Apr Trade Balance: $4.9B v $4.7Be; Exports Y/Y: 18.8% v 12.1%e; Imports Y/Y: 26.7% v 18.0%e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 750.9B v 744.4B prior; Domestic Sight Deposits: 665.3B v 667.1B prior.

- (CZ) Czech Apr International Reserves: $179.1B v $173.7B prior.

- (EU) Euro Zone May Sentix Investor Confidence: -22.6 v -21.6e.

- (IS) Iceland Apr Preliminary Trade Balance (ISK): -13.8B v -13.1B prior.

- (HU) Hungary Apr YTD Budget Balance (HUF): -2.636T v -2.310T prior.

- (SG) Singapore Apr Foreign Reserves: $365.2B v $379.7B prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: 1.00% v 1.17% prior; bid-to-cover: 2.78x v 1.38x prior.

Looking ahead

- (DE) France President Macron to meet German Chancellor Scholz in Berlin.

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

- 05:30 ((DE) Germany to sell €3.0B in 6-month BuBills.

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

- 06:00 (IE) Ireland Mar Industrial Production M/M: No est v 2.4% prior; Y/Y: No est v -15.4% prior.

- 06:00 (IE) Ireland Apr Live Register Monthly Change: No est v +17.0K prior; Live Register Level: No est v 181.9K prior.

- 07:00 (MX) Mexico Apr CPI M/M: 0.6%e v 1.0% prior; Y/Y: 7.7%e v 7.5% prior.

- 07:00 (MX) Mexico Apr CPI Core M/M: 0.7%e v 0.7% prior; Y/Y: 7.2%e v 6.8% prior.

- 07:00 (MX) Mexico Apr Vehicle Production: No est v 306.0K prior; Vehicle Exports: No est v 262.5K prior.

- 06:00 (IL) Israel to sell bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 07:00 (TR) Turkey to sell Bonds.

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

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

- 08:30 (CL) Chile Apr Trade Balance: -$1.5Be v $1.3B prior; Total Exports: No est v $9.5B prior; Total Imports: No est v $8.2B prior; Copper Exports: No est v $5.0B prior.

- 08:30 (CL) Chile Apr International Reserves: No est v $48.3B prior.

- 08:30 (CA) Canada Mar Building Permits M/M: No est v 21.0% prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €4.4-5.6B in 3-month, 6-month and 12-month bills.

- 10:00 (US) Mar Final Wholesale Inventories M/M: 2.3%e v 2.3% prelim; Wholesale Trade Sales M/M: 1.8%e v 1.7% prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 16:00 (US) Weekly Crop Progress Report.

- 18:00 (NZ) New Zealand Apr Heavy Truckometer M/M: No est v 1.8% prior.

- 18:45 (NZ) New Zealand Apr Total Card Spending M/M: No est v 1.6% prior; Retail Card Spending M/M: No est v -1.3% prior.

- 19:00 (KR) South Korea Mar Current Account Balance: No est v $6.4B prior; Balance of Goods (BoP): No est v $4.3B prior.

- 19:00 (AU) Australia Apr Household Spending M/M: No est v 9.2% prior; Y/Y: No est v 5.7% prior.

- 19:01 (UK) Apr BRC Sales Like-For-Like Y/Y: No est v -0.4% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 90.7 prior.

- 19:30 (JP) Japan Mar Household Spending Y/Y: -3.3%e v +1.1% prior.

- 21:30 (AU) Australia Apr Business Confidence: No est v 16 prior; Business Conditions: No est v 18 prior.

- 21:30 (AU) Australia Q1 Retail Sales Q/Q: 1.0%e v 8.2% prior.

- 23:00 (TH) Thailand Apr Consumer Confidence: No est v 42.0 prior; Economic Confidence: No est v 35.9 prior.

- 23:00 (ID) Indonesia Apr Foreign Reserves: No est v $139.1B prior.

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