UK gilts dip, Aussie Dollar struggles after RBA

EU Mid-Market Update: UK gilts dip, Aussie dollar struggles after RBA, and Middle East ceasefire talks stall; UBS becomes first bank to hint rate cut impact.

Notes/observations

- UK gilts yields are lower after declining BRC LFL sales in April; BOE decision on Thurs, widely expected to leave Bank Rate unchanged at 5.25%.

- Aussie dollar underperforms against USD after RBA left rates unchanged as expected, with forecasts that paints a picture of stagflation.

- Still no bilateral agreement between Hamas and Israel on ceasefire proposal. Latest position is that Hamas agrees to what is on the table, while Israel said it is ‘far’ from what they need.

- EU earnings recap: UBS shares climb after posting first profit since the takeover of Credit Suisse, heavily above estimates. Infineon trades higher despite cutting guidance, analysts note the guidance is probably too conservative and had a top and bottom line beat with savings program launched. BP moves lower after EPS misses street estimates and having no change to pace of buyback program.

- Upcoming US premarket earnings: Disney, Duke Energy, Expeditors, Graham, Henry Schein, Jacobs, NRG, Perrigo, Rookwell, Sampra.

- Asia closed mixed with KOSPI outperforming +2.2%. EU indices are +0.4-1.1%. US futures are -0.1% to +0.2%. Gold -0.4%, DXY +0.2%; Commodity: Brent +0.1%, WTI +0.1%; Crypto: BTC -1.4%, ETH -2.4%.

Asia

- Reserve Bank of Australia (RBA) left the Cash Rate Target unchanged at 4.35% (as expected) for its 4th straight pause in the current phase of it tightening cycle. Statement noted inflation remained high and was falling more gradually than expected. Reiterated that Board was not ruling anything in or out. Priority remained returning inflation to target within a reasonable time-frame. Needed to be confident inflation was moving sustainably to target.

- RBA Quarterly Statement on Monetary Policy (SOMP) raised Dec 2024 Trimmed Mean Inflation forecast from 3.1% to 3.4% while maintaining Dec 2025 Trimmed Mean Inflation forecast from 2.8% and maintained Jun 2026 Trimmed Mean Inflation at 2.6%. Projections cut the Dec 2024 GDP growth forecast from 1.8% to 1.6% while maintaining Dec 2025 GDP growth forecast at 2.3%.

- Australia Q1 Retail Sales Q/Q: -0.4% v -0.3%e.

- Japan Apr Final PMI Services: 54.3 v 54.6 prelim (confirms 19th month of expansion).

- Philippines Apr CPI Y/Y: 3.8% v 4.0%e v 3.7% prior.

- Japan top FX diplomat Kanda reiterated if there was excessive volatility in FX market, must take appropriate steps.

Global conflict/tensions

- Israel Prime Min Netanyahu stated that it would continue its Rafah operation to pressure Hamas into releasing hostages. Stated that Hamas' proposal was far from Israel's ceasefire demands.

Europe

- UK Apr LFL BRC Sales Y/Y: -4.4% v +3.2% prior.

Americas

- Fed's Williams (voter) stated that was seeing job growth moderate. Consumers were still spending, expected GDP range in 2024 at 2-2.5%.

- Fed’s Barkin (voter) stated that did not see the economy overheating, but Fed knew how to respond if it did; The economy was moving toward a better balance. Had not yet seen evidence that inflation is on track.

- Fed April Senior Loan Officer Survey (SLOOS): 15.6% of banks reported tighter loan standards in Q1.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.61% at 511.30, FTSE +1.06% at 8,300.57, DAX +0.56% at 18,274.25, CAC-40 +0.31% at 8,021.69, IBEX-35 +0.59% at 10,981.50, FTSE MIB +0.95% at 34,309.00, SMI +0.95% at 11,435.41, S&P 500 Futures +0.11%].

Market Focal Points/Key Themes: European indices open higher across the board, but shaved off some of the gains through the early trading hours; FTSE 100 outperforming as it plays catch-up following holiday yesterday; Cyprus still closed for holiday; among sectors leading to the upside are consumer discretionary and financials; while health care and materials sectors among the laggards; construction subsector under pressure after Bouygues earnings disappoint; Banco Sabadell rejects BBVA’s takeover offer; earnings expected in the upcoming US session include Leonardo, Perrigo, Jacobs and Disney.

Equities

- Consumer discretionary: Deutsche Post [DPW.DE] +0.5% (earnings), Ubisoft [UBI.FR] +6.0% (analyst upgrade) - Consumer staples:

- Energy: bp [BP.UK] -0.5% (earnings, misses estimates, maintains buyback pace), Uniper [UN01.DE] +5.5% (earnings) - Financials: UBS [UBSG.CH] +8.5% (earnings, beat estimates), Unicredit [UCG.IT] +3.0% (earnings) - Healthcare: Siemens Healthineers [SHL.DE] -4.5% (earnings, below estimates), Sandoz Group [SDZ.CH] -0.5% (earnings), Fresenius Medical Care [FME.DE] -1.0% (earnings, below estimates).

- Technology: Infineon Technologies [IFX.DE] +7.0% (earnings, beats estimates but cuts outlook), TeamViewer [TMV.DE] -8.0% (earnings).

Speakers

- Norway Central Bank (Norges) Gov Bache stated that interest rates were high enough to bring inflation back to target within a reasonable time. Confident that could bring inflation down without a pronounced rise in unemployment.

- Russia Dep PM Novak stated that the possibility of increasing oil production under OPEC+ deal was being analyzed; No need to predict further OPEC+ steps.

- BOJ Gov Ueda stated that he exchanged views on economy and financial markets with PM Kishida on a regular basis. Did discuss FX with PM and reiterated stance that closely monitoring recent FX situation and its impact on prices.

- Japan business lobby Keidanren Chief Tokura stated that was desirable for FX to reflect fundamentals in mid- and long-term. Yen weaker than 150 v USD is too much.

- Thailand Dep Fin Min Paopoom stated that the Govt and BOT only had a difference of opinions; govt had no dispute with central bank. Finance Ministry to discuss with central bank on aligning views.

- S&P affirmed Hong Kong sovereign rating at AA+; outlook stable.

Currencies/fixed income

- FX markets were quiet as the data calendar was light. Focus was turning towards the upcoming rate decisions later in the week. Dealers noted that possibility of Sweden's Riksbank cutting rates on Wednesday should keep the DXY dollar index supported for the time being.

- Some dealers caution that the final mile of the global inflation battle was proving tough.

- USD/JPY holding above 154.40 level. BOJ Gov Ueda stated that he did discuss FX with PM and reiterated stance that closely monitoring recent FX situation and its impact on prices.

- EUR/USD steady at 1.0765.

Economic data

- (NL) Netherlands Apr CPI M/M: 0.7% v 0.5% prior; Y/Y (final): 2.7% v 2.7% prelim.

- (NL) Netherlands Apr CPI EU Harmonized M/M: 1.1% v 1.1% prior; Y/Y: 2.6% v 2.6% prior.

- (CH) Swiss Apr Unemployment Rate: 2.3% v 2.3%e; Unemployment Rate (seasonally adj): 2.3% v 2.3%e.

- (DE) Germany Mar Factory Orders M/M: -0.4% v +0.4%e; Y/Y: -1.9% v -0.7%e.

- (DE) Germany Mar Trade Balance: €22.3B v €22.4Be; Exports M/M: 0.9% v 0.3%e; Imports M/M: +0.3% v -1.0%e.

- (UK) Apr Halifax House Price Index M/M: +0.1% v -1.0% prior; Y/Y: 1.1% v 0.3% prior.

- (HU) Hungary Mar Retail Sales Y/Y: 4.2% v 0.8%e.

- (AU) Australia Apr Foreign Reserves (A$): A$89.8B v A$89.7B prior.

- (FR) France Mar Trade Balance: -€5.5B v -€5.6B prior; Current Account: €1.3B v €0.3B prior.

- (FR) France Q1 Preliminary Wages Q/Q: 1.3% v 0.4% prior; Private Sector Payrolls Q/Q: +0.2% v -0.1% prior.

- (CH) Swiss Apr Foreign Currency Reserves (CHF): 720.4B v 715.6B prior.

- (AT) Austria Apr Wholesale Price Index M/M: +0.5% v -0.7% prior; Y/Y: -8.0% v -2.0% prior.

- (CZ) Czech Mar Industrial Output Y/Y: -11.1% v -8.4%e; Construction Output Y/Y: -8.3% v +3.6% prior.

- (CZ) Czech Mar National Trade Balance (CZK): 39.3B v 17.0Be.

- (DE) Germany Apr Construction PMI: 37.5 v 38.3 prior.

- (TW) Taiwan Apr CPI Y/Y: 2.0% v 2.2%e; CPI Core Y/Y:1.8 % v 2.1% prior; PPI Y/Y: 2.1% v 0.5% prior.

- (UK) Apr New Car Registrations Y/Y: 1.0% v 10.4% prior.

- (CZ) Czech Apr International Reserves: $146.3B v $149.1B prior.

- (UK) Apr Construction PMI: 53.0 v 50.4e (2nd month of expansion).

- (HK) Hong Kong Apr Foreign Reserves: $416.4B v $423.6B prior.

- (EU) Euro Zone Mar Retail Sales M/M: 0.8% v 0.7%e; Y/Y: +0.7% v -0.2%e.

- (IS) Iceland Apr Preliminary Trade Balance (ISK): -46.4B v -32.5B prior.

- (SG) Singapore Apr Foreign Reserves: $366.9B v $368.5B prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.454B vs. €4.5-5.5B indicated range in 6-month and 12-month bills.

- (AT) Austria Debt Agency (AFFA) sold total €2.013B vs. €2.013B indicated in 2034 and 2071 RAGB Bonds.

Looking ahead

- (MX) Mexico Banamex Survey of Economists.

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

- 05:30 (CH) Switzerland to sell 6-month Bills; Avg Yield: % v 1.314% prior; bid-to-cover: x v 4.40x prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills; Avg Yield: % v 6.88% prior; bid-to-cover: x v 1.44x prior.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €2.0B in 12-month bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2032, 2037 and 2053 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO) (prior €1.953B with 22 bids recd).

- 06:00 (IL) Israel to sell ILS3.65B in 2027, 2028, 2029, 2033, 2035, 2037 and 2052 bonds.

- 06:00 (RO) Romania to sell 2026 and 2033 bonds.

- 06:30 (TR) Turkey to sell Bonds.

- 06:30 (EU) ESM to sell €1.1B in 3-month bills.

- 08:00 (PL) Poland Apr Official Reserves: No est v $202.4B prior.

- 08:00 (MX) Mexico Apr Consumer Confidence: No est v 47.3 prior.

- 08:00 (MX) Mexico Apr Vehicle Production: No est v 302.0K prior; Vehicle Exports: No est v 286.0K prior.

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

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

- 08:30 (CL) Chile Apr Trade Balance: No est v $1.8B prior; Exports: No est v $8.0B prior; Imports: No est v $6.2B prior; Copper Exports: No est v $4.1B prior.

- 08:30 (CL) Chile Apr International Reserves: No est v $45.7B prior.

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

- 09:00 (CL) Chile Mar Nominal Wage Y/Y: No est v 6.8% prior.

-09:00 (US) Manheim Index.

- 09:00 (ES) ECB’s de Cos (Spain.

- 10:00 (CA) Canada Apr Ivey Purchasing Managers Index (seasonally adj): No est v 57.5 prior.

- 11:00 (CO) Colombia Mar Exports FOB: $3.9Be v $3.8B prior.

- 11:30 (US) Fed’s Kashkari.

- 13:00 (US) Treasury to sell 3-Year Notes.

- 15:00 (US) Mar Consumer Credit: $15.0Be v $14.1B prior.

- (MX) Mexico Banamex Survey of Economists.

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

- 21:00 (PH) Philippines Mar Trade Balance: -$4.1Be v -$3.6B prior; Exports Y/Y: -1.9%e v +15.7% prior; Imports Y/Y: -5.3%e v +6.3% prior.

- 21:00 (PH) Philippines Mar Unemployment Rate: No est v 3.5% prior.

- 23:00 (ID) Indonesia Apr Foreign Reserves: No est v $140.40B prior.

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