Sentiment is mixed after BoC surprise hike puts eyes towards Fed and ECB rate decisions next week

EU mid-market update: Sentiment is mixed after BoC surprise hike puts eyes towards Fed and ECB rate decisions next week; Euro Zone Q1 GDP revision tips it into contraction.

Notes/observations

- India Central Bank (RBI) left the Repurchase Rate unchanged as expected, following the surprise hike by Bank of Canada (BoC) yesterday. The surprise shifted sentiment significantly, causing a selloff in the rate-sensitive technology sector and lifting USD and treasury yields. EU technology sector experiencing weakness at the open.

- CME futures indicate market is now pricing 60/40 chance of Fed pause, down from 80/20 just 1 day prior. Minority view is for a 25bps hike.

- Euro Zone Q1 final GDP revised lower and registered 1st contraction QoQ since 2021.

- Little macro news so far in the session. Sentiment seemingly unable to find direction as markets enter a 'wait and see' feeling ahead of next week's US CPI and Fed/ECB rate decisions.

- Asia closed mixed with Nikkei225 under-performing at -0.9%. EU indices are -0.3% to +0.7%. US futures are flat. Gold +0.4%, DXY -0.2%; Commodity: Brent -0.6%, WTI -0.6%, TTF +5.4%; Crypto: BTC -1.6%, ETH -1.9%.

Asia

-India Central Bank (RBI) left Repurchase Rate unchanged at 6.50%, as expected.

-Chinese press sees likely Loan Prime Rate (LPR) cut following bank deposit rate drop [China PBOC normally sets the LPRs around the 20th of the month (Tues)] - financial press.

-Philippines Central Bank (BSP) Gov Medalla: Cutting RRR by 250bps to 9.50% for universal and commercial banks, effective June 30th (Reserve Requirement Ratio).

-Japan PM Kishida reiterated to manage finances so markets do not lose confidence.

-South Korea Fin Min Choo said 2023 GDP growth might be below the forecast of 1.6%; Not considering extra budget for now, will not do so for 'a while'.

- China CSRC Chairman Yi Huiman: China's internal vitality not yet strong, while global economy's uncertainty has increased markedly.

-India Foreign Minister: China and India have to find a way of disengaging [Note: apparently referring to border tensions between the two countries] - press.

-Japan Chief Cabinet Sec Matsuno: Conveyed strong concern to China regarding Chinese Navy's intrusion into Japan's waters near Yakushima Island on Thu.

Ukraine conflict

- China Foreign Ministry spokesperson: China vows to do everything it can to help Ukraine; On Japan concerns about China-Russia joint air patrols - the patrols conform with international norms and law; Not targeted at certain countries.

- US Treasury Official said to see more sanctions against Russia [timing uncertain].

-Former NATO Sec General Rasmussen: Group of NATO countries may be willing to put troops on the ground in Ukraine if member states do not provide tangible security guarantees to Ukraine at NATO's summit in Vilnius in July 2023.

Europe

- Finland Foreign Min Haavisto to enter 2024 presidential race.

- Norway FSA: Urge banks to be cautious on dividends and buybacks.

- EU reportedly sues Poland over Russian influence law - press.

- Turkish state banks reportedly support Turkish lira (TRY) following longest losing streak since Oct 1996 - press.

Americas

- India said to be in talks with US for exemption on steel and aluminum tariffs - press.

- Canada PM Trudeau said hundreds of American firefighters have arrived in Canada to fight the wildfires; Spoken to US Pres Biden about critical support from the US.

- US Treasury Sec Yellen to meet with US-China Business Council's Board at 16:30ET.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.01% at 460.76, FTSE -0.26% at 7,604.85, DAX +0.08% at 15,973.55, CAC-40 +0.14% at 7,213.15, IBEX-35 +0.45% at 9,401.99, FTSE MIB +0.62% at 27,222.00, SMI -0.11% at 11,335.50, S&P 500 Futures +0.03%].

Market focal points/key themes: European indices stat the day generally mixed; better performing sectors include energy and financials; sectors trending lower include technology and consumer discretionary; earnings expected in the upcoming US session include Signet Jewelers and Designer Brands.

Equities

- Consumer discretionary: FirstGroup [FGP.UK] +16.0% (FY23 results, buyback), Wizz Air [WIZZ.UK] +2.0% (earnings; outlook), RWS Holdings [RWS.UK] +10.5% (earnings; buyback), Mitie [MTO.UK] -1.0% (FY22/23 results).

- Consumer staples: Clas Ohlson [CLASB.SE] -4.5% (Q4 results).

- Energy: Orsted [ORSTED.DK] +5.5% (provides mid-long targets - post close).

- Financials: Unicredit [UCG.IT] -1.0% (reports UniCredit could be interested in OTP's Romania unit valued up to €400M), Crest Nicholson [CRST.UK] -4.0% (H1 results).

- Healthcare: Innate Pharma [IPH.FR] +4.5% (IPH6101 receives FDA fast track designation in US for the treatment of hematological malignancies), Evotec [EVT.DE] +7.5% (analyst action - raised to buy at Citigroup).

- Industrials: Saint-Gobain [SGO.FR] +0.5% (CMD), Systemair [SYSR.SE] -6.0% (earnings).

Speakers

-Malaysia Central Bank (BNM) Gov Nor said it is the BNM's role to make sure the MYR does not swing too far or too much.

-Bank of Korea (BOK) Official reiterated does not regard interest rate rises as over.

-Thailand Central Bank outgoing Dep Gov Mathee: Low domestic inflation in May is seen as temporary; Inflation may quicken in coming months.

-China Pres Xi: China sticks to economic opening.

Currencies/Fixed Income

- USD faded lower overnight after an initial bid from surprise Bank of Canada (BOC) decision. With the slight weakness, GBP/USD is 0.3% higher at 1.247, EUR/USD also 0.3% higher at 1.073. USD/JPY below notable 140 resistance level at 139.8.

- USD/TRY remaining around record highs at 23.4.

Economic data

- (EU) Euro Zone Q1 Final GDP Q/Q: -0.1% v0.0%e; Y/Y: 1.0% v 1.2%e (1st QoQ contraction since Q1 2021).

-(ZA) South Africa Q1 Current Account (ZAR): -66B v -182Be.

-(HU) Hungary May YTD Budget Balance (HUF): -2.763T v -2.710T prior.

-(CZ) Czech May Unemployment Rate: 3.5% v 3.5%e.

- (MY) Malaysia end-May Foreign Reserves: $112.7B v $114.7B prior.

-(HU) Hungary Apr Preliminary Trade Balance: €0.3B v €0.9B prior.

-(HU) Hungary May CPI M/M: -0.4% v +0.5%e; Y/Y: 21.5% v 22.3%e.

-(RO) Romania Q1 Preliminary GDP (2nd of 3 readings) Q/Q: 0.1% v 0.1%e; Y/Y: 2.3% v 2.3%e.

-(NO) Norway Q1 Current Account (NOK): 279.7B v 359.3B prior.

-(SE) Sweden May Budget Balance (SEK): 39.1B v 12.7B prior.

-(FR) France Q1 Final Private Sector Payrolls Q/Q: 0.4% v 0.2%e.

-(JP) Japan May Eco Watchers Current Survey: 55.0 v 55.0e; Outlook Survey: 54.4 v 56.1e.

-(TH) Thailand May Consumer Confidence: 55.7 v 55.0 prior.

-(JP) Japan May Tokyo Avg Office Vacancies: 6.2% v 6.1% prior.

-(AU) Australia Apr Trade Balance (A$): 11.2B v 13.7Be.

-(JP) Japan May Bank Lending Y/Y: 3.4% v 3.2% prior.

-(JP) Japan Apr Current Account: ¥1.9T v ¥1.650Te.

- (JP) Japan Q1 Final GDP Q/Q: 0.7% V 0.5%E; GDP Annualized Q/Q: 2.7% V 1.9%E.

- (CO) Colombia May CPI M/M: 0.4% v 0.7%e; Y/Y: 12.4% v 12.6%e; CPI Core M/M: 0.8% v 1.0% prior; Y/Y: 11.6% v 11.5% prior.

Fixed income issuance

- (NZ) New Zealand sells total NZ$400M v NZ$400M indicated in 2030, 2033 and 2037 nominal bonds.

- (IE) Ireland Debt Agency (NTMA) sells total €1.25B vs. €1.0-1.25B in 2033 and 2050 IGB bonds.

Looking ahead

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

- 06:00 (IE) Ireland May CPI M/M: No est v 0.5% prior; Y/Y: No est v 7.2% prior.

- 06:00 (IE) Ireland May CPI EU Harmonized M/M: No est v 0.3% prior; Y/Y (final) No est v 5.4% prelim.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (ZA) South Africa Apr Manufacturing Production M/M: -1.4%e v +4.0% prior; Y/Y: +2.0%e v -1.1% prior.

- 08:00 (CL) Chile May CPI M/M: 0.3%e v 0.3% prior; Y/Y: 8.9%e v 9.9% prior.

- 08:00 (CL) Chile May CPI (ex-volatile items) M/M: No est v 0.7% prior; Y/Y: No est v 10.3% prior.

- 08:00 (MX) Mexico May CPI M/M: -0.2%e v -0.0% prior; Y/Y: 5.9%e v 6.3% prior.

- 08:00 (MX) Mexico May CPI Core M/M: 0.3%e v 0.4% prior; Y/Y: 7.4%e v 7.7% prior.

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

- 08:30 (US) Initial Jobless Claims: 235Ke v 232K prior; Continuing Claims: 1.80Me v 1.795M prior.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 2nd: No est v $586.3B prior.

- 10:00 (US) Apr Final Wholesale Inventories M/M: -0.2%e v -0.2% prelim; Wholesale Trade Sales M/M: +0.9%e v -2.1% prior.

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

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

- 12:00 (US) Q1 Financial Account Household Change in Net Worth: No est v $2.927T prior.

- 15:00 (AR) Argentina Apr Industrial Production Y/Y: No est v 3.1% prior; Construction Activity Y/Y: No est v 1.2% prior.

- 15:25 (CA) Bank of Canada (BOC) Beaudry.

- 19:00 (KR) South Korea Apr Current Account: No est v $0.3B prior; Balance of Goods (BOP): No est v -$1.1B prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave rates unchanged at 7.75%.

- 19:50 (JP) Japan May M2 Money Supply Y/Y: No est v 2.5% prior; M3 Money Supply Y/Y: No est v 2.1% prior.

- 21:00 (PH) Philippines Apr Unemployment Rate: No est v 4.7% prior.

- 21:00 (PH) Philippines Apr Trade Balance: -$4.7Be v -$4.9B prior; Exports Y/Y: -9.0%e v -9.1% prior; Imports Y/Y: -8.2%e v -2.7% prior.

- 21:30 (CN) China May CPI Y/Y: 0.2%e v 0.1% prior; PPI Y/Y: -4.3%e v -3.6% prior.

- 22:35 (CN) China to sell 3-month and 6-month bills.

- 23:00 (ID) Indonesia May Foreign Reserves: No est v $144.2B prior.

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