EU mid-market update: ASML results spooked AI chip momentum; UK inflation moved in right direction but slower than BOE would like; Biden to call for tripling of tariffs on Chinese steel.

Notes/observations

- UK CPI came in marginally above estimates but below prior month, with 'last mile' of inflation fight proving tricky. Food and non-alcoholic beverages declined, while housing and housing services increased. Bid in GBP (sterling) as timing of BOE rate cuts is pushed back slightly, from June to mid-late summer, on assumptions BOE will need to wait longer for CPI to reign in.

- Key EU earnings: ASML dragged down chip and tech stocks after bookings and orders comps missed estimates, spiking fear about weakening demand. LVMH Q1 reported and organic rev below consensus; Wine and spirits sales were particularly poor. Adidas raised FY24 profit guidance after Q1 rev beat and expanding margins.

- US Premarket Earnings: ABT, TRV, USB.

- Asia closed mixed with Shanghai outperforming +2.1%. EU indices are +0.5-1.0%. US futures are +0.2-0.4%. Gold +0.4%, DXY -0.1%; Commodity: Brent -0.3%, WTI -0.3%; Crypto: BTC +0.3%, ETH -0.1%.

Asia

- New Zealand Q1 CPI printed its weakest quarterly reading since mid-2021 (Q/Q: 0.6% v 0.6%e; Y/Y: 4.0% v 4.0%e).

- Japan Mar Trade Balance ¥366.5B v ¥345.5Be; Exports Y/Y: +7.3% v +7.0%e; Imports Y/Y: -4.9% v -5.1%e.

- Korean Finance Ministry took the unusual step of saying that both it and their counterparts in Japan were ready to intervene by ‘using tools at our disposal’ for FX volatility.

Global conflict/tensions

- Israel Defense Force (IDF) said to have decided how it would counter-strike Iran and its proxies but had not yet settled on the timing.

- US Sec of State Blinken reiterated US support for Israel’s security along with Washington’s desire not to see a regional escalation.

- US official noted it was planning new sanctions in coming days targeting Iran which would include missile and drone programs; allies and partners are also expected to follow suit.

Europe

- ECB Chief Lagarde stated that would cut rates soon barring any major surprises.

- ECB Villeroy (France) stated that expected a June rate cut barring any new shocks. Council would decide based on Euro-area data and outlook; After June meeting there would be need to be more cuts with the pace being data determined.

- UK Chancellor of the Exchequer (Fin Min) Hunt noted that a BOE rate cut would lift UK mood with a possibility of a vote to come in fall.

Americas

- Fed Chair Powell noted that restrictive policy needed further time to work; Would likely take longer for us to gain confidence on inflation following the recent data. Recent data showed lack of further progress on inflation this year.

- Fed’s Barkin (voter) noted that CPI data had not been supportive of a soft landing and would be smart for the Fed to take its time on decision to cut rates.

Energy

- Weekly API Crude Oil Inventories: +4.1M v +3.0M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.54% at 500.90, FTSE % at #, DAX +0.61% at 17,874.55, CAC-40 +1.19% at 8,026.92, IBEX-35 +0.97% at 10,628.67, FTSE MIB +1.02% at 33,734.00, SMI +0.31% at 11,231.91, S&P 500 Futures +0.31%].

Market focal points/key themes: European indices open mixed with a bias to the upside which strengthened through the early part of the session; improvement following yesterday’s drop seen as focus inflation readings raises hopes of monetary policy easing; among better performing sectors are consumer discretionary and financials; sectors inclined to the downside include technology and telecom; tech sector weighed by drop in bookings at ASML; luxury subsector supported following LVMH results; Vinci acquires majority stake in Edinburgh airport; earnings expected in the upcoming US session include First Horizon, Alcoa, US Bancorp and Abbott Laboratories.

Equities

- Consumer discretionary: LVMH [MC.FR] +3.0% (Q1 results), Adidas [ADS.DE] +7.0% (raised profit guidance), Asos [ASC.UK] +9.0% (H1 results), Just Eat Takeaway [JET.UK] -5.0% (Q1 trading update), Entain [ENT.UK] +2.0% (trading update).

- Industrials: Volvo [VOLVA.SA] +1.0% (Q1 results), Continental [CON.DE] -4.0% (prelim Q1, missed estimates).

- Technology: ASML [ASML.NL] -3.0% (Q1 results, missed on orders, attributed mainly to the drop in EUV (lithography systems) bookings), Infineon [IFX.DE] -0.5%, STMicroelectronics [STM.FR] -1.0% (in sympathy with ASML).

- Materials: Antofagasta [ANTO.UK] +1.5% (Q1 production), Rio Tinto [RIO.UK] +0.5% (Q1 production).

Speakers

- Russia Central Bank (CBR) Apr Household inflationary Expectation Survey: 11.0% v 11.5% prior.

- Japan Chief Cabinet Sec Hayashi reiterated govt stance of closely watching FX levels, prepared for full measures.

- Indonesia Central Bank (BI) Dep Gov reiterated that was intervening in market to stabilize IDR currency (rupiah).

- Israel Foreign Min Katz stated that it did have the right to react to recent Iranian attack.

- President Biden said to be expected to propose raising tariffs on Chinese steel and aluminum products to 25% from 7.5% imposed by Trump.

Currencies/fixed income

- Overall the USD consolidated some of its recent gains. Greenback has benefitted as Fed officials continued to dial back rate cut expectations. On Tues, Fed Chair Powell stated that firm inflation called into question whether rates would be cut without signs of an unexpected economic slowdown. Fed futures currently price 15% chance (v 21% d/d) for a rate cut at June 12th's meeting and 43% (v 47% d/d) for a cut by July 31st's meeting after Fed Chair Powell comments.

- GBP/USD moved higher after UK data showed annual inflation eased but was still higher than expectations and casted additional doubt about whether the BOE would cut rates before autumn. Market expectations has narrowed for approx. 33bps in cuts this year now.

- EUR/USD at 1.0650 area by mid-session. Euro Zone CPI reading did little to move the pair.

- USD/JPY at the mid-154 area as Japanese officials continued with its standard rhetoric of watching FX markets ‘closely’.

Economic data

- (UK) Mar CPI M/M: 0.6% v 0.4%e; Y/Y: 3.2% v 3.1%e; CPI Core Y/Y: 4.2% v 4.1%e; CPI Services Y/Y: 6.0% v 5.8%e; CPIH Y/Y: 3.8% v 3.6%e.

- (UK) Mar RPI M/M: 0.5% v 0.4%e; Y/Y: 4.3% v 4.2%e; RPI-X (ex-mortgage interest payments) Y/Y: 3.3% v 3.2%e; Retail Price Index: 383.0 v 382.7e.

- (UK) Mar PPI Input M/M: -0.1% v +0.1%e; Y/Y: -2.5% v -2.7%e.

- (UK) Mar PPI Output M/M: 0.2% v 0.2%e; Y/Y: 0.6% v 0.6%e.

- (AT) Austria Mar Final CPI M/M: 0.5% v 0.5% prelim; Y/Y: 4.1% v 4.2% prelim.

- (CZ) Czech Mar PPI Industrial M/M: -0.1% v +0.3%e; Y/Y: 0.0% v 0.3%e.

- (TR) Turkey Feb Current Account Balance: -$3.3B v -$3.7Be.

- (ZA) South Africa Mar CPI M/M: 0.8% v 0.9%e; Y/Y: 5.3% v 5.4%e.

- (ZA) South Africa Mar CPI Core M/M: 0.7% v 0.8%e; Y/Y: 4.9% v 4.9%e.

- (UK) Feb ONS House Price Index Y/Y: -0.2% v -1.3% prior.

- (EU) Euro Zone Mar Final CPI M/M: 2.4% v 2.4% advance; CPI Core Y/Y: 2.9% v 2.9% advance; CPI M/M: 0.8% v 0.8% advance.

- (CY) Cyprus Mar CPI Harmonized M/M: 0.8% v 0.8% prior; Y/Y: 1.6% v 2.1% prior.

Fixed income issuance

- (DK) Denmark sold total DKK2.9B in 2026 and 2033 DGB bonds.

- (SE) Sweden sold total SEK10.0B vs. SEK10.0B indicated in 3-month and 6-month Bills.

- (NO) Norway sold total NOK3.0B in 2027 and 2032 bonds.

- (UK) DMO sold £3.75B in 4.00% Oct 2031 Gilts; Avg Yield: 4.218% v 4.085% prior; bid-to-cover: 2.97x v 3.00x prior; Tail: 1/4bps v 2.2bps prior.

Looking ahead

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

- 05:30 (DE) Germany to sell combined €2.0B in 2050 and 2053 Bunds.

- 05:30 (PT) Portugal Debt Agency (ICGP) to sell €0.75-1.0B in 3-month and 12-month Bills.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal Mar PPI M/M: No est v 0.4% prior; Y/Y: No est v -2.3% prior.

- 06:00 (IE) Ireland Feb Property Prices M/M: No est v 0.7% prior; Y/Y: No est v 5.4% prior.

- 06:00 (EU) EU Commission to sell combined €3.0B in 3-month and 6-month Bills.

- 06:00 (RU) Russiato sell 2027 and 2034 OFZ Bonds.

- 07:00 (US) MBA Mortgage Applications w/e Apr 12th: No est v +0.1% prior.

- 07:00 (ZA) South Africa Feb Retail Sales M/M: +1.2%e v -3.2% prior; Y/Y: -1.3%e v -2.1% prior.

- 07:00 (UK) Weekly PM Question time in House.

- 08:00 (BR) Brazil Feb Economic Activity Index (Monthly GDP) M/M: 0.4%e v 0.6% prior; Y/Y: 2.7%e v 3.5% prior.

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

- 08:30 (CA) Canada Feb Intl Securities Transactions (CAD): No est v 8.9B prior.

- 08:05 (UK) BOE’s Greene.

- 09:00 (US) Manheim releases the mid-month update.

- 09:00 (IT) ECB’s Cipollone (Italy).

- 10:00 (SE) Sweden Central bank (Riksbank) Floden.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (ES) ECB’s De Cos (Spain).

- 11:45 (DE) ECB’s Schnable (Germany).

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (UK) BOE’s Bailey.

- 12:00 (RU) Russia Mar PPI M/M: No est v 0.9% prior; Y/Y: No est v 19.5% prior.

- 13:00 (US) Treasury to sell 20-Year Bond Reopening.

- 14:00 (US) Federal Reserve Releases Beige Book.

- 14:00 (UK) BOE’s Haskel.

- 16:00 (US) Feb Net Long-term TIC Flows: No est v $36.1B prior; Total Net TIC Flows: No est v -$8.8B prior.

- 17:30 (US) Fed’s Mester.

- 18:30 (US) Fed’s Bowman.

- 21:00 (CN) China Mar Swift Global Payments (CNY): No est v 4.0% prior.

- 21:30 (AU) Australia Q1 Business Confidence: No est v -6 prior.

- 21:30 (AU) Australia Mar Employment Change: +10.0Ke v +116.5K prior; Unemployment Rate: 3.9%e v 3.7% prior; Full Time Employment Change: No est v +78.2K prior; Part Time Employment Change: No est v +38.3K prior; Participation Rate: 66.7%e v 66.7% prior.

- 21:30 (JP) BOJ’s Noguchi.

- 23:30 (JP) Japan to sell 12-Month Bills.

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