UK GDP seen as reason to delay rate cuts

EU mid-market update: UK GDP seen as reason to delay rate cuts; Major US banks to kick off earnings season.

Notes/Observations

- UK Monthly GDP held up in expansion, pointing UK towards exiting recession, and giving less of a reason for BoE to cut rates, similar to Feds issue with inflation. However, in a divergent theme, ECB remains locked in for a cut in June, and as Chief Lagarde noted yesterday in her post-rate decision press conference, incoming data in Apr and May will be important. Multiple ECB speakers this morning reinforcing June rate cut.

- Former Fed Chair Bernanke to release his review in Bank of England (BoE) economic forecasting models, with speculation he will recommend removing current fan chart projections and implementing a ‘Fed-style’ dot plot for rate expectations.

- Chip suppliers Intel and AMD drop in pre-market after China tells telecom carriers to remove foreign processors by 2027.

- US Premarket Earnings: JPM, BLK, PGR, WFC, STT, C.

- Asia closed lower with Hang Seng under-performing at -2.2%. EU indices are +0.6-1.3%. US futures are -0.2% to +0.1%. Gold +1.0%, DXY +0.4%; Commodity: Brent +1.0%, WTI +1.2%; Crypto: BTC -0.3%, ETH -2.2%.

Asia

- Singapore Monetary Authority (MAS) Quarterly Monetary Policy Statement kept its policy steady by maintaining both slope and center of currency. MAS maintained the rate of appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band, with no change to the width of the band or level at which it was centered.

- Singapore Q1 Advance GDP (1st of 3 readings) Q/Q: 0.1% v 0.6%e; Y/Y: 2.7% v 3.0%e.

- Bank of Korea (BOK) left 7-day Repo Rate unchanged at 3.50% (as expected0 for its 10th straight pause in the current tightening cycle.

- BoK Gov Rhee post rate decision press conference noted that the decision to keep policy steady was unanimous; had not signaled for a rate cut.

- South Korea Mar Unemployment Rate: 2.8% v 2.8%e.

- Fitch affirmed Hong Kong sovereign rating at AA-; Outlook Stable.

- New Zealand Mar Manufacturing PMI: 47.1 v 49.3 prior (13th straight contraction).

- Japan Fin Min Suzuki: There is a chance FX will be discussed at next week's G20 meeting.

Global conflict/tensions

- Iran said to be expected to attack Israel in the next 24-48 hours; Israel was preparing for a direct attack on the north or south of the country.

Europe

- Following the April policy decision reports circulated that ECB policymakers reportedly still expected to cut interest rates in June.

Americas

- Fed's Collins (non-voter) stated that expected inflation to continue to moderate; Strong job market reduced urgency for a rate cut; Appropriate to begin rate cuts later this year.

- Peru Central Bank (BCRP) cut the Reference Rate by 25bps to 6.00% (not expected) to resume its easing cycle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +1.18% at 510.48, FTSE +1.25% at 8,022.94, DAX +1.08% at 18,142.35, CAC-40 +1.08% at 8,107.12, IBEX-35 +1.11% at 10,768.05, FTSE MIB +1.18% at 34,113.00, SMI +0.53% at 11,527.00, S&P 500 Futures -0.07%].

Market focal points/key themes: European indices opened higher across the board and remained upbeat through the early part of the session; all sectors start the day in positive territory; markets seen gaining on ECB staying the course for a rate cut in June; the upside is being led by sectors such as technology and real estate; among lagging sectors are financials and telecom; SocGen sells its Marocaine units to Saham Group; Morphosys board recommends Novartis offer; unofficial start of first quarter earnings season with the release of reports from major US banks JPMorgan, Citigroup, Wells Fargo and State Street.

Equities

- Consumer discretionary: Pandora [PNDORA.DK] -1.5% (analyst downgrade).

- Energy: Petrofac [PFC.UK] -28.0% (restructuring discussions), Orsted [ORSTED.DK] +4.5% (analyst upgrade) - Financials: ING [INGA.NL] -1.5% (analyst downgrade) - Healthcare: Evotec [EVT.DE] +6.5% (analyst upgrade), Koninklijke Philips [PHIA.NL] +1.5% (analyst upgrade) - Industrials: ThyssenKrupp [TKA.DE] +3.0% (plans to reduce steel capacity by ~15%), Varta [VAR1.DE] -30.0% (updates restructuring concept), Kendrion [KENDR.NL] +4.0% (divests automotive business in Europe and US to Solero Technologies), Taylor Wimpey [TW.UK] +4.5% (analyst upgrade).

Speakers

- ECB Survey of Professional Forecasters (SPF) maintained it inflation with 2024 HICP (EU Harmonized CPI) at 2.4% and 2025 at 2.0%. SPF cut the 2024 GDP growth forecast from 0.6% to 0.5% but did raise the 2025 GDP growth from 1.3% to 1.4%.

- ECB's Kazaks (Latvia, voter, hawk) noted that a rate cut was near and would cut in June if nothing surprising happened.

- ECB's Stournaras (Greece, dove) reiterated his call for four interest rate cuts in 2024; There was risk that inflation will fall too far below the 2% target.

- ECB's Muller (Estonia, hawk) noted that slower inflation boosted the chance of June rate cut.

- Sweden Central Bank (Riksbank) Breman stated that inflation had fallen from high levels, but risks of setbacks remained. Cautioned that one data point was not the whole story as households' inflation expectations were still at a high level.

- Poland Fin Min Domanski stated that saw end-2024 inflation at 4.0-5.0% (*Note: Mar CPI YoY was 1.9%).

- China to strengthen capital market supervision and strictly control access to listings.

Currencies/fixed income

- USD continued to muster strength aided by escalating geopolitical tensions that amounted to additional safe-haven flows. Greenback rallied during the week as higher-for-longer theme permeated the Fed rate outlook.

- Spot gold tested the $2,400 level for a fresh record high over speculation that Iran was poised to attack Israel and escalate the current mid-east conflict.

- EUR/USD at 1.9680 as divergence between the interest-rate outlooks between ECB and Fed could weigh further on a weak euro sentiment.

- GBP/USD at 1.2515 and price action ignored an improving outlook for the UK economy as the recession likely ended at the end of last year.

- USD/JPY at 153.30 area as markets continue to focus on any comments on the yen from Japanese officials.

- SEK currency was softer after Swedish March inflation data strengthened market’s view that Riksbank would begin its easing cycle at the May meeting.

Economic data

- (NL) Netherlands Feb Trade Balance: 11.7B v €13.3B prior; Exports Y/Y: -3.6% v -3.1% prior; Imports Y/Y: -4.2% v -12.0% prior.

- (FI) Finland Feb Current Account Balance: -€0.6B v -€0.1B prior.

- (DE) Germany Mar Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 2.2% v 2.2% prelim.

- (DE) Germany Mar Final CPI EU Harmonized M/M: 0.6% v 0.6% prelim; Y/Y: 2.3% v 2.3% prelim.

- (UK) Feb Monthly GDP M/M: 0.1% v 0.1%e; GDP 3M/3M: 0.2% v 0.1%e.

- (UK) Feb Industrial Production M/M: 1.4% v 0.0%e; Y/Y: 2.7% v 0.6%e.

- (UK) Feb Manufacturing Production M/M: 1.2% v 0.1%e; Y/Y: 2.7% v 2.1%e.

- (UK) Feb; Construction Output M/M:-1.9 % v -0.4%e; Y/Y: -2.0% v -1.0%e.

- (UK) Feb Visible Trade Balance: -£14.2B v -£14.5Be; Overall Trade Balance:-£2.9B v -£3.0Be.

- (UK) Feb Index of Services M/M: 0.1% v 0.1%e; 3M/3M: 0.2% v 0.1%e.

- (SE) Sweden Mar CPI M/M: 0.1% v 0.4%e; Y/Y: 4.1% v 4.4%e.

- (SE) Sweden Mar CPIF M/M: 0.1% v 0.4%e; Y/Y: 2.2% v 2.6%e.

- (SE) Sweden Mar CPIF (ex-energy) M/M: 0.0% v 0.3%e; Y/Y:2.9 % v 3.2%e; CPI Level: 414.26 v 415.63e.

- (NO) Norway Q1 House Price Index Q/Q: +1.2 v -0.1% prior.

- (FR) France Mar Final CPI M/M: 0.2% v 0.2 prelim; Y/Y: 2.3% v 2.3 % prelim.

- (FR) France Mar Final CPI EU Harmonized M/M: 0.3% v 0.3% prelim; Y/Y: 2.4% v 2.4 % prelim; CPI Index (ex-tobacco): 118.40 v 118.40e.

- (ES) Spain Mar Final CPI M/M: 0.8% v 0.8% prelim; Y/Y: 3.2% v 3.2 % prelim.

- (ES) Spain Mar Final CPI EU Harmonized M/M: 1.4% v 1.3 % prelim; Y/Y: 3.3% v 3.2 % prelim.

- (ES) Spain Mar CPI Core M/M: 0.6% v 0.5% prior; Y/Y (final): 3.3% v 3.3 % prelim.

- (CN) China Mar Trade Balance:$58.6B v $69.1Be v $75.3B prior; Exports Y/Y: -7.5% v -1.9%e; Imports Y/Y: -1.9% v +1.0%e.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 229.7K v 290.2K tons prior (Mar 29th release).

- (IT) Italy Jan Industrial Sales M/M: -0.5% v +1.0% prior; Y/Y: +3.0% v -0.7% prior.

- (CZ) Czech Feb Current Account Balance (CZK): 39..2B v 8.6Be.

- (RU) Russia Narrow Money Supply w/e Apr 5th (RUB): 18.12T v 18.06T prior.

Fixed income issuance

- (IN) India sold total INR300B vs. INR300B indicated in 2030, 2039 and 2053 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2043 and 2050 Bonds.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £3.0B respectively).

- 07:00 (UK) BoE releases Bernanke forecasting report.

- 07:00 (NL) ECB’s Elderson (Netherlands).

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

- 07:30 (IN) India Forex Reserve w/e Apr 5th: No est v $645.6B prior.

- 08:00 (IN) India Mar CPI Y/Y: 4.9%e v 5.1% prior.

- 08:00 (IN) India Feb Industrial Production Y/Y: 6.0%e v 3.8% prior; Manufacturing Production Y/Y: No est v 3.2% prior; Mining Production Y/Y: No est v 5.9% prior.

- 08:00 (PL) Poland Feb Current Account Balance: €0.9Be v €1.2B prior; Trade Balance: €0.6Be v €1.3B prior; Exports: €27.4Be v €27.1B prior; Imports: €26.8Be v €25.8B prior.

- 08:00 (BR) Brazil Feb IBGE Services Volume M/M: 0.2%e v 0.7% prior; Y/Y: 4.9%e v 4.5% prior.

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

- 08:30 (US) Mar Import Price Index M/M: 0.3%e v 0.3% prior; Y/Y: +0.3%e v -0.8% prior; Import Price Index (ex-petroleum) M/M: 0.1%e v 0.2% prior.

- 08:30 (US) Mar Export Price Index M/M: 0.3%e v 0.8% prior; Y/Y: -1.2%e v -1.8% prior.

- 09:00 (CA) Canada Mar Existing Home Sales M/M: No est v -3.1% prior.

- 10:00 (US) Apr Preliminary University of Michigan Confidence: 79.0e v 79.4 prior.

- 12:00 (EU) Potential sovereign ratings after European close.

- 13:00 (US) Weekly Baker Hughes Rig Count.

- 14:30 (US) Fed’s Bostic.

- 15:30 (US) Fed’s Daly.

- 15:00 (AR) Argentina Mar National CPI M/M: 12.1%e v 13.2% prior; Y/Y: 291.8%e v 276.2% prior.