Risk aversion sentiment percolates on China COVID-19 concerns

EU Mid-Market Update: Risk aversion sentiment percolates on China covid concerns; German IFO April Survey rises despite Ukraine conflict.

Notes/Observations

- Risk aversion sentiment percolating as covid outbreak in Beijing prompted fears of a lockdown and its implications on Chinese growth outlook; Chinese govt showing no signs it intends to live with the virus.

- German Apr IFO Survey unexpectedly rose despite Ukraine/Russia conflict.

Asia

- Japan Mar PPI Services Y/Y: 1.3% v 1.2%e.

- Japan will spend 6.2T yen on economic measures to combat high crude oil & other prices.

- Japan Finance Ministry spokesman denied reports that Fin Min Suzuki and Treasury Sec Yellen discussed joint currency intervention.

- Foxconn: said to have suspended production at 2 [out of 4] factories in Kunshan (China), operations at the plants have been suspended since Wed (Apr 20th) – SCMP.

- Covid outbreak in Beijing prompts panic buying and fears of a Lockdown; Beijing recorded daily deaths of 22, highest in 2022; Shanghai recorded 39 death on Saturday.

Russia/Ukraine

- President Putin said to have has lost interest in a diplomatic end to the war with Ukraine and saw no prospect of a settlement with them, Putin appeared intent on seizing as much Ukrainian territory as possible.

- Ukraine said to have turned back numerous Russian assaults along Donbas line of contact. Russia did make some territorial gains, but Ukraine resistance had been strong across all axes.

- Ukraine President Zelensky stated over the weekend that the key questions in negotiations with Russia were Donbas/Crimea. Reiterated that he must meet Putin if the war was to be resolved through diplomacy. When asked if Russia could use nuclear weapons he noted that they could but did not want to believe they would.

- EU's 6th sanctions package against Russia might be presented as soon as Monday, Apr 25th and could be adopted by Friday, Apr 29th; Set to include some form of ban on Russian oil imports.

- EU's Dombrovskis: EU was preparing smart sanctions on Russian oil imports to minimize damage to the Bloc’s economy. Details had not been worked out yet but would include gradual phasing out of Russian oil or imposing tariffs on exports above a price cap.

- EU Foreign Policy Chief Borrell stated that currently did not enough support from EU members state for a Russian oil embargo or to implement a tariff on Russian oil and gas.

Europe

- France’s Macron won Presidential election to become the 1st incumbent to win a second term since Jacques Chirac 20 years ago (defeated Le Pen 58.5% to 41.5%). legislative elections in June 2022 will be key to determine whether the new President would be able to implement its policy agenda.

- ECB chief Lagarde stated that she saw a "high probability" asset purchases to end early Q3; "Strong chance" rates would rise this year; Not seeing any stagflation.

- ECB members reportedly keen to end APP (conventional QE) program at the earliest possible moment and raise interest rates as soon as July but certainly no later than Sept 2022. some ECB members at least two rate hikes possible in 2022, but some argued 3 hikes also possible depending on incoming data.

- ECB Spokesman Declined to comment on timing of ending bond purchases and possible rate rises.

- German govt said to increase borrowing plan by €40B to total €140B in 2022 to cover Ukraine war and energy costs; Announcement expected as soon as Wed, Apr 27th.

- S&P affirmed Italy sovereign rating at BBB; outlook Positive.

- S&P raised Greece sovereign rating from BB to BB+ (one notch), outlook stable.

Energy

- Libya National Oil Corp (NOC): Zawiya oil refinery suffered damage after armed clashes.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 -2.06% at 443.98, FTSE -2.21% at 7,357.35, DAX -1.72% at 13,898.69, CAC-40 -2.35% at 6,426.92, IBEX-35 -1.24% at 8,544.87, FTSE MIB -2.07% at 23,777.00, SMI -1.22% at 12,109.00, S&P 500 Futures -0.91%].

Market Focal Points/Key Themes: European indices start the day significantly lower and fell further as the session wore on; once again all sectors open in the red; less negative sectors include utilities and telecom; sectors among those leading to the downside are materials and health care; health care sector dragged by disappointing results from Philips; British Land divests interest in Paddington Central; BBVA raises offer for Garanti earnings expected in the upcoming US session include Coca-Cola, Activision, Whirlpool, Deutsche Boerse.

Equities

- Energy: TotalEnergies [TTE.FR] -3% (oil price correction; said to have chartered a tanker to load crude from Abu Dhabi in early May for Europe).

- Financials: Turkiye Garanti Bankasi [GARAN.TR] +5.5% (BBVA raises offer).

- Healthcare: Roche [ROG.CH] -2% (sales), BioGaia [BIOGB.SE] +9% (earnings), Koninklijke Philips [PHIA.NL] -10% (earnings).

- Industrials: Rheinmetall [RHM.DE] +0.5% (requested approval from German govt to export 100 old Marder infantry fighting vehicles to Ukraine).

- Technology: Audioboom [BOOM.UK] +1.5% (earnings).

- Telecom: Vivendi [VIV.FR] +0.5% (sales).

Speakers

- German govt said to raise its 2022 CPI outlook from 3.3% to 6.1% and put 2023 CPI at 2.8%.

- German IFO Economists stated that domestic economy was robust in the face of uncertainty following the 1st shock of the Russian invasion of Ukraine.

- Czech Policy Maker Michl stated that he did not support the idea of market interventions to strengthen the CZK currency (koruna) in order to curb inflation.

- Poland PM Morawiecki stated that 2022 budget deficit to GDP seen around 4%. o make sure PLN currency (Zloty) was adequately strong.

- China Foreign Ministry spokesperson Wang Wenbin stated that covid control measures were endorsed by Chinese people; Its covid zero policy was based on science and had saved lives.

- Beijing city suspended group travel due to COVID outbreak.

- US Sec of State Blinken stated from Kyiv that Russia was failing in its war aim while the Ukraine was succeeding, Sovereign, independent Ukraine would be around a lot longer than Russia's Putin on the scene.

Currencies/Fixed income

- USD Index hit a 2-year high ahead of the EU open as risk aversion sentiment percolated aided by safe-haven flows.

- EUR/USD tested 1.0707 before consolidating. Perceived policy divergence between the Fed and ECB keeping the Euro on soft footing.

- GBP/USD hit a 19-month low at 1.2730 as risks of a dovish re-pricing in the BOE rate expectations and potentially some re-emergence of negative Brexit-related headlines posed dome downside risks to the pair.

Economic data

- (FI) Finland Mar PPI M/M: 5.0% v 0.9% prior; Y/Y: 26.7% v 22.4% prior.

- (ES) Spain Mar PPI M/M: 6.6% v 2.1% prior; Y/Y: 46.6% v 41.2% prior (highest annual pace in 5 decades).

- (CZ) Czech Apr Consumer Confidence Index: -26.0 v -25.0 prior; Business Confidence: 16.7 v 11.8 prior; Composite Index (Consumer & Business Confidence): 8.1 v 4.4 prior.

- (TR) Turkey Apr Real Sector Confidence (seasonally adj):107.7 v 108.2 prior; Real Sector Confidence NSA (unadj): 109.7 v 108.5 prior.

- (TR) Turkey Apr Capacity Utilization: 77.8% v 77.3% prior.

- (MY) Malaysia mid-Apr Foreign Reserves: $114.4B v $115.6B prior.

- (DE) Germany Apr IFO Business Climate Survey: 91.8 v 89.0e; Current Assessment Survey: 97.2 v 95.9e; Expectations Survey: 86.7 v 83.5e.

- (CH) Swiss weekly Total Sight Deposits (CHF): 742.6B v 740.1B prior; Domestic Sight Deposits: B v 666.1B prior.

- (TW) Taiwan Mar Industrial Production Y/Y: 2.2% v 7.6%e.

- (TW) Taiwan Mar M1 Money Supply Y/Y: 10.9% v 11.1% prior; M2 Money Supply Y/Y: 8.1% v 7.7% prior.

- (EU) Euro Zone Feb Construction Output M/M: 1.9% v 3.9% prior; Y/Y: 9.4% v 4.4% prior.

- (IS) Iceland Mar Wage Index M/M: 0.2% v 0.3% prior; Y/Y: 7.1% v 7.3% prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills; Avg Yield: % v 0.95% prior; bid-to-cover: 1.38x v 1.63x prior.

Looking ahead

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

- 05:30 ((DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

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

- 05:30 (EU) European Commission to sell €2.5B in 0.4% Feb 2037 green NGEU Bonds.

- 06:00 (UK) Apr CBI Industrial Trends Total Orders: 22e v 26 prior; Selling Prices: 80e v 80 prior; Business Optimism: -15e v -9 prior.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell €2.8-3.8B in 2027, 2032, and 2053 OLO Bonds.

- 06:00 (IL) Israel to sell combined ILS1.0B in 2024, 2026, 2031, 2032 and 2052 bonds.

- 06:30 (IS) Iceland to sell 3-month and 6-month Bills.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (BR) Brazil Apr FGV Consumer Confidence: No est v 74.8 prior.

- 07:00 (MX) Mexico Feb IGAE Economic Activity Index (Monthly GDP) M/M: 0.2%e v 0.4% prior; Y/Y: 2.5%e v 1.8% prior.

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

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

- 08:00 (PL) Poland Mar M3 Money Supply M/M: 1.2%e v 1.2% prior; Y/Y: 7.7%e v 8.0% prior.

- 08:00 (UK) No Daily Baltic Dry Bulk Index.

- 08:30 (US) Mar Chicago Fed National Activity Index: 0.45e v 0.51 prior.

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

- 09:00 (BE) Belgium Apr Business Confidence: No est v 0.4 prior.

- 10:30 (US) Apr Dallas Fed Manufacturing Activity Index: 4.8e v 8.7 prior.

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

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

- 13:00 (IT) ECB’s Panetti (Italy).

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

- 19:00 (KR) South Korea Q1 Advance GDP (1st of 3 readings) Q/Q: 0.6%e v 1.2% prior; Y/Y: 2.9%e v 4.2% prior.

- 19:30 (JP) Japan Mar Jobless Rate: 2.7%e v 2.7% prior; Job-To-Applicant Ratio: 1.22e v 1.21 prior.

- 21:10 (JP) BOJ Outright Bond Purchase Operation for 3~5 Years, 5~10 Years and 25 Years~ maturities.

- 22:30 (KR) South Korea to sell THB700B in 20-year Bonds.

- 23:00 (NZ) New Zealand Mar Credit Card Spending M/M: No est v -2.6% prior; Y/Y: No est v 1.0% prior.

- 23:00 (TH) Thailand Central Bank to sell THB50B in 3-month bills.