Stocks drive lower – UK employment collapses with stubborn wages

EU mid-market update: Stocks drive lower; UK employment collapses with stubborn wages; Central banks concerned over US dollar strength.

Notes/observations

- Poor UK job figures saw higher unemployment and moderated wage growth. Hawks will call earnings sticky as they came in above estimates, but with wages still declining compared to last month's figures and overwhelming weakness in job numbers, expectations for BOE rate cuts increased. Plethora of UK corporate trading updates noted weakness.

- Overall, broad selloff continues across global equities amid a stronger US dollar and higher US treasury yields. Aiding by some technical levels as SP500 closed below 3 standard deviations.

- FX intervention talk remains in focus, as USD/JPY targets 155. Dealers noting yen could even weaken to 160. Intervention seen from India, Indonesia and China (via state-owned banks), with FX concerns expressed by officials in Philippines and South Korea.

- Asia closed lower with KOSPI underperforming -2.3%. EU indices are -1.2% to -1.4%. US futures are -0.1%. Gold -0.5%, DXY +0.1%; Commodity: Brent +0.1%, WTI +0.0%; Crypto: BTC -4.3%, ETH -4.7%.

Asia

- China Q1 GDP Q/Q: 1.6% v 1.5%e; Y/Y: 5.3% v 4.8%e.

- China Mar Industrial Production Y/Y: 4.5% v 6.0%e; Industrial Production YTD Y/Y: 6.1% v 6.6%e.

- China Mar Retail Sales Y/Y: 3.1% v 5.0%e; Retail Sales YTD Y/Y: 4.7% v 5.4%e - 22:00 (CN) China Mar YTD Fixed Urban Assets Y/Y: 4.0%e v 4.2% prior.

- China Mar YTD Property Investment Y/Y: -9.5% v -9.2%e.

- China Mar New Home Prices M/M: -0.3% v -0.4% prior.

- China Mar Surveyed Jobless Rate: 5.2% v 5.2%e.

- Japan Fin Min Suzuki reiterated stance that was closely watching FX moves; would take all measures as needed; did not comment on whether FX moves were excessive or too rapid.

- USD remaining on form footing reports of FX intervention from India, Indonesia and China (via state-owned banks), with FX concerns expressed by officials in Philippines and South Korea.

Global conflict/tensions

- Israel Military Chief of Staff Halevi stated that Israel would respond. He provided no details.

- Iran said to be willing to exercise restraint, had no intention of further escalation.

- Iran Foreign Min Hossein Amir-Abdollahian noted to the UK Foreign Min that Tehran did not favor increased tension, but it would respond instantly and stronger than before if Israel retaliated.

Europe

- Portugal's new Govt forecasted 2024 GDP growth at 1.5% (in line with November's guidance).

Americas

- Fed's Daly (voter) noted that recent inflation data and "bumps along the way" were not particularly surprising. Worst thing to do was act urgently when urgency was not necessary. Inflation was above target, needed to be confident it was on the way to target before we can react.

- House to pass aid bills to Israel and Ukraine; Also offering bill regarding Tiktok ban (**Reminder: Senate passed a $95B aid package two months ago that included $14B for Israel and $60B for Ukraine, but the House Republican leadership had not taken up the bill). Speaker Johnson said to be planning separate US House votes this week on new aid to Israel and Ukraine.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -1.41% at 498.80, FTSE -1.51% at 7,844.99, DAX -1.34% at 17,761.93, CAC-40 -1.29% at 7,940.96, IBEX-35 -1.51% at 10,525.50, FTSE MIB -1.66% at 33,392.00, SMI -1.46% at 11,229.60, S&P 500 Futures -0.03%]

Market focal points/key themes: European indices open lower across the board and trended lower through the early part of the session; all sectors start the day in the red; risk off sentiment dominating with higher yields and inflation concerns; among less negative sectors are utilities and telecom; sectors leading to the downside include materials and industrials; mining subsector under pressure following lower commodity prices; Amundi proposes strategic partnership with Victory Capital; DS Smith confirms to be acquired by International Paper; reportedly Media for Europe lining up financing for bid for Prosiebensat; earning expected in the upcoming US session include UnitedHealth, Johnson & Johnson, Bank of America and Morgan Stanley.

Equities

- Consumer discretionary: Lufthansa [LHA.DE] -3.0% (prelim results), Superdry [SDRY.UK] -22.5% (confirms proposed restructuring, equity raise and delisting), Dr. Martens [DOCS.UK] -27.5% (FY24 trading update, new CEO), Hays [HAS.UK] -3.5% (trading update) - Healthcare: DocMorris [DOCM.CH] -5.0% (Q1 results) - Energy: Engie [ENGI.FR] +0.5% (acquires new biomethane units in Netherlands)

- Financials: UBS [UBSG.CH] -4.0% (Swiss Finance Min mulls requiring additional capital requirements), Plus500 [PLUS.UK] +2.5% (Q1 results) - Materials: ArcelorMittal [MT.NL] -6.0% (analyst downgrade) - Industrials: DS Smith plc [SMDS.UK] -2.5% (International Paper confirms to acquire DS Smith) - Technology: Wise plc [WISE.UK] -7.0% (trading update), Alphawave IP [AWE.UK] -28.0% (trading update, cuts guidance, weak FY24 and FY25 guidance) - Telecom: Ericsson [ERICB.SE] +5.5% (Q1 results)

Speakers

- ECB’s Rehn (Finland) commented that a June cut was possible if inflation headed toward 2% target; Rate cut assumed there would be no further setbacks. Geopolitical situation posed the biggest risk to rate cuts. Reiterated that ECB did not pre-commit to any rate path.

- ECB’s Makhlouf (Ireland) commented that a rate cut of 25bps in June was possible if CPI trend persisted.

- German ZEW Economists commented that a global recovery was boosting expectations for Germany.

- China Financial Regulator commented that would push for more credit support for manufacturing.

- Fitch lowered the outlook on China State banking sector from Stable to Negative; affirmed rating (**Reminder: On Apr 9th Fitch cut China Sovereign Outlook to Negative from Stable).

Currencies/fixed income

- USD continued its firm tone as EUR/USD pair fell to a low of 1.0603 and USD/JPY reached 154.625.

- GBP/USD was initially higher after UK wage data continued to grow faster than expectations. Initially market participants believed it could nudge the BOE to wait until August to start cutting interest rates. However, higher unemployment data released alongside the wages painted a different picture.

-Recent greenback surge brought forth reports of FX intervention from India, Indonesia and China (via state-owned banks), with FX concerns expressed by officials in Philippines and South Korea.

Economic data

- (FI) Finland Feb GDP Indicator Y/Y: +0.8% v -0.3% prior.

- (DE) Germany Mar Wholesale Price Index M/M: +0.2% v -0.1% prior; Y/Y: -3.0% v -3.0% prior.

- (UK) Mar Jobless Claims Change: +10.9K v +4.1K prior; Claimant Count Rate: 4.0% v 4.0% prior; Payrolled Employees (monthly change): -67K v +20Ke.

- (UK) Feb Average Weekly Earnings 3M/Y: 5.6% v 5.5%e; Weekly Earnings (ex-bonus) 3M/Y: 6.0% v 5.8%e.

- (UK) Feb ILO Unemployment Rate: 4.2% v 4.0%e; Employment Change 3M/3M: -156K v +74Ke.

- (TR) Turkey Feb Retail Sales Y/Y: 25.1% v 13.7% prior.

- (IT) Italy Mar Final CPI M/M: 0.0% v 0.1% prelim; Y/Y: 1.3% v 1.3% prelim.

- (IT) Italy Mar Final CPI EU Harmonized M/M: 1.2% v 1.2% prelim; Y/Y: 1.2% v 1.3% prelim.

- (DE) Germany Apr ZEW Current Situation Survey: -70.2 v -76.0e; Expectations Survey: 42.9 v 35.5e.

- (EU) Euro Zone Apr ZEW Expectations Survey: 43.9 v 33.5 prior.

- (EU) Euro Zone Feb Trade Balance: €17.9B v €21.8Be; Trade Balance (unadj): €23.6B v €11.4B prior.

- (IT) Italy Feb Total Trade Balance: €6.0B v €2.5B prior; EU Trade Balance: -€0.9B v -€0.5B prior.

Fixed income issuance

- (NL) Netherlands Debt Agency (DSTA) opened its book to sell 2% Jan 2054 DSL Bonds via; DDA auction; guidance seen +18.0-18.5bps to Aug 2054 Bund; order book over €20B.

- (ES) Spain Debt Agency (Tesoro) sold total €2.05B vs. €1.5-2.5B indicated range in 3-month and 9-month bills.

- (UK) DMO sold £1.5B in 0.75% Nov 2033 inflation-lnked Gilts; Real Yield: 0.440% v 0.634% prior; bid-to-cover: 3.40x v 2.97x prior.

Looking ahead

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

- 05:30 (CH) Switzerland to sell 3-month Bills; Avg Yield: % v 1.342% prior; bid-to-cover: x v 4.38x prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills; Avg Yield: % v 6.65% prior; bid-to-cover: x v 1.50x prior (Apr 9th 2024).

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2032, 2035 and 2044 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €1.382B with 22 bids recd).

- 06:00 (IL) Israel Q4 Final GDP (3rd reading) Y/Y: No est v -20.7% prelim.

- 06:00 (IE) Ireland Feb Trade Balance: No est v €8.8B prior.

- 06:00 (FI) Finland to sell €1.0-1.5B in 2029 and 2055 RFGB bonds.

- Sells €M vs. €750M indicated in 2.875% Apr 2029 RFGB bonds.

- Sells €M vs. €750M indicated in 2.95% Apr 2055 RFGB bonds.

- 06:30 (EU) ESM to sell €1.1B in 6-month Bills.

- 06:30 (TR) Turkey to sell bonds (2 tranches).

- 07:00 (BR) Brazil Apr FGV Inflation IGP-10 M/M: -0.2%e v -0.7% prior; Y/Y: No est v -3.8% prior.

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

- 08:00 (PL) Poland Mar Core CPI M/M: 0.5%e v 0.5% prior; Y/Y: 4.6%e v 5.4% prior.

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

- 08:15 (CA) Canada Mar Annualized Housing Starts: 241.8Ke v 253.5K prior.

- 08:30 (US) Mar Housing Starts: 1.482Me v 1.521M prior; Building Permits: 1.510Me v 1.524M prior (revised from 1.518M); Housing Starts M/M: -2.6%e v +10.7% prior; Building Permits M/M: -0.9%e v 2.4% prior (revised from 1.9%).

- 08:30 (CA) Canada Mar CPI M/M: 0.7%e v 0.3% prior; Y/Y: 2.9%e v 2.8% prior; CPI Core-Trim Y/Y: 3.2%e v 3.2% prior; CPI Core-Median Y/Y: 3.0%e v 3.1% prior; Consumer Price Index: 159.9e v 158.8 prior.

- 08:30 (US) Apr New York Fed Services Business Activity: No est v +0.6 prior.

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 IMF Updates World Economic Outlook (WEO).

- 09:00 (US) Fed’s Jefferson.

- 09:15 (US) Mar Industrial Production M/M: 0.4%e v 0.1% prior; Capacity Utilization: 78.5%e v 78.3% prior; Manufacturing Production: 0.2%e v 0.8% prior.

- 11:30 (US) Treasury to sell 52-Week Bills.

- 12:30 (US) Fed’s Williams.

- 12:30 (FR) ECB’s Villeroy (France).

- 13:00 (UK) BOE Gov Bailey at IMF meeting in DC.

- 13:15 (US) Fed chief Powell with Bank of Canada (BOC) Gov Macklem.

- 14:00 (EU) ECB’s Vujcic (Croatia).

- 16:30 (US) Weekly API Oil Inventories.

- 18:45 (NZ) New Zealand Q1 CPI Q/Q: 0.6%e v 0.5% prior; Y/Y: 4.0%e v 4.7% prior- 19:50 (JP) Japan Mar Trade Balance: +¥345.5Be v -¥377.8B prior (revised from -¥379.4B); Adjusted Trade Balance: -¥302.5Be v -¥451.6B prior; Exports Y/Y: +7.0%e v +7.8% prior; Imports Y/Y: -5.1%e v +0.5% prior.

- 20:00 (AU) Australia to sell A$800M in 4.50% Apr 2033 bond.

- 20:30 (SG) Singapore Mar Non-oil Domestic Exports M/M: +4.2%e v -4.8% prior; Y/Y: -7.4%e v -0.1% prior; Electronic Exports Y/Y: No est v 5.2% prior.

- 20:30 (AU) Australia Mar Westpac Leading Index M/M: No est v 0.1% prior.

- 23:00 (NZ) New Zealand Mar Non Resident Bond Holdings: No est v 62.6% prior.