UK wage data beats expectations

Notes/Observations

- Markets watching for further developments in the U.S.-China trade war after President Trump threatened to raise tariffs

- UK wage data beats expectations

Asia:

- China PBOC to sell bills in Hong Kong later in June in order to improve yuan bond yield curve in Hong Kong, no amount given

- China said to have issued notice related to local government special bonds issuance and project financing; to encourage financial firms and individuals to invest in local gov't bonds. To allow local governments to use the proceeds from special bonds as capital for qualified major projects.

Europe/Mideast:

- BOE's Saunders stated that interest rates might need to rise faster than curve implied; BOE did not need to wait for Brexit resolution to act. BOE would likely need to return to neutral policy stance sooner than markets expected

- Italy PM Conte and the heads of the ruling parties (Salvini and Di Maio) reiterated stance to seek to avert a disciplinary action from the EU against Italy

- Italy Dep PM Salvini (League): stated that meeting with PM went 'well' . Reiterated stance that coalition govt wanted to avert EU disciplinary action and reiterated stance of ruling out deficit cutting measures and tax increases.

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 +0.70% at 380.90, FTSE % at #, DAX +1.13% at 12,181.74, CAC-40 +0.50% at 5,409.63, IBEX-35 +0.11% at 9,303.86, FTSE MIB +0.63% at 20,613.50, SMI +0.82% at 9,829.50, S&P 500 Futures +0.32%]

Market Focal Points/Key Themes: European Indices trade higher once again continuing the recent positive momentum on trade optimism, with export names, particularly in Germany outperforming as it plays catch up following closure for Whit Monday. Asian Indices continued the recent positive tone, while US Index futures also are higher this morning. On the corporate front, shares of Systemair trades sharply higher on a strong rise in profits, with NCC Group, Oxford Instruments, Halma and Crest Nicholson among other names rising on earnings and updates. Meanwhile Ted Baker declines over 25% after a profit warning after an extremely difficult start to the year, with Quiz, Carclo and Trifast among other names declining on earnings. In other news Evotec gains following a partnership with the Bill & Melinda Gates foundation; Saga rises sharply after announces a partnership with Marcus by GS, while AMG Advanced Metallurgical gains as the company explore the IPO of its technology segment. Looking ahead notable earners include H&R block, Chico Fas and HD Supply holding.

 

Equities

- Consumer discretionary: Ted Baker [TED.UK] -25% (profit warning), QUIZ [QUIZ.UK] -30% (earnings)

- Financials: Commerzbank [CBK.DE] +2% (ING reportedly drops its interest), Crest Nicholson [CRST.UK] +1.5% (earnings)

- Healthcare: Evotec [EVT.DE] +3.5% (partnership)

- Industrials: Halma [HLMA.UK] +2% (earnings), Systemair [SYSR.SE] +10% (earnings)

- Technology: Taptica [TAP.UK] -20% (legal filing), Saga PLC [SAGA.UK] +7.5% (partnership), NCC Group [NCC.UK] +8% (trading update), Atari [ATA.FR] +10% (partnerships)

- Materials: AMG Advanced Metallurgical [AMG.NL] +4.5% (exploring unit IPO)

 

Speakers

- ECB's Rehn (Finland) stated that low inflation expectations to hamper achievement of price stability. Reiterated Council stance that ECB was ready to act in case of further weakening of economic activity. ECB could strengthen its forward guidance, cut rates or introduce mitigating measures from negative rates and relaunch QE if necessary. Lastly he added that US-China trade war would unlikely to subside anytime soon

- BOE's Saunders reiterated MPC view that could see more rate hikes if Brexit was smooth. Reiterated view that markets might be underestimating the pace of rate hikes

- BOE's Vlieghe stated that wage growth pick had been very slow. Would have expected economic improvement already if it was not for trade and Brexit uncertainties

- Czech Central Bank Gov Rusnok stated that he saw no change of trend with May CPI acceleration, higher reading attributed to volatile factors

- Japan Govt issued its Mid-year policy guidelines which expected BOJ to promote monetary easing to achieve 2% price target asap. To implement flexible macroeconomic policy if risks to economy materialized. To raise sales tax to 10% in October (as planned) to support social security for all generations

- Japan Econ Min Motegi reiterated domestic recovery was continuing as fundamentals were solid. Confirmed that US-Japan trade talks would be conducted this week as he would meet with USTR's Lighthizer on Thursday, Jun 13th in Washington

- China Foreign Ministry spokesperson Geng Shuang reiterated if US insisted on escalating trade tension than China would respond with firm resolve. Reiterates stance that China did not want a trade war with U.S. but was not afraid of one. Stressed that dialogue was welcomed to move forward.

 

Currencies/Fixed Income

- GBP/USD was firmer in the session after UK wage data beat expectations. The data reinforced some BOE members view that markets might be underestimating the pace of rate hikes if the Brexit process was smooth. GBP/USD higher by 0.3 at 1.2720 just ahead of the NY morning.

- EUR/USD was steady at 1.1315 and currently capped by some ECB speak that ECB seemed determined to act in case of a further weakening of economic activity and lingering concerns about low inflation expectations in the region.

 

Economic Data

- (NO) Norway May CPI M/M: -0.3% v +0.1%e; Y/Y: 2.5% v 2.9%e

- (NO) Norway May CPI Underlying M/M: -0.2% v +0.1%e; Y/Y: 2.3% v 2.6%e

- (NO) Norway May PPI (including Oil) M/M: -1.0% v +0.7% prior; Y/Y: 0.4% v 2.6% prior

- (DK) Denmark May CPI M/M: -0.1% v +0.2%e; Y/Y: 0.7% v 1.0%e

- (DK) Denmark May CPI EU Harmonized M/M: 0.0% v 0.3% prior; Y/Y: 0.7% v 0.9% prior

- (JP) Japan May Preliminary Machine Tool Orders Y/Y: -27.3% v -33.4% prior

- (FR) Bank of France May Industrial (Business) Sentiment: 99 v 100e

- (CZ) Czech May CPI M/M: 0.7% v 0.4%e; Y/Y: 2.9% v 2.7%e

- (CZ) Czech Apr Export Price Index Y/Y: 3.1% v 2.6% prior; Import Price Index Y/Y: 3.4% v 2.8% prior

- (MA) Malaysia end-May Foreign Reserves: $102.3B v $102.8B prior

- (NO) Norway May Region Output Survey past 3-months): 1.51 v 1.40e; Output Survey (next 6-months): 1.57 v 1.42e

- (CH) Swiss Weekly Total Sight Deposits (CHF): 578.1B v 578.2B prior; Domestic Sight Deposits: 469.1B v 474.3B prior

- (UK) May Jobless Claims Change: +22.2K v +19.1K prior; Claimant Count Rate: 3.1% v 3.0% prior

- (UK) Apr Average Weekly Earnings 3M/Y: 3.1% v 3.0%e; Weekly Earnings (ex Bonus) 3M/Y: 3.4% v 3.2%e

- 04:30 (UK) Apr ILO Unemployment Rate: 3.8% v 3.8%e; Employment Change 3M/3M: +32K v+4Ke

- (EU) Euro Zone Jun Sentix Investor Confidence: -3.3 v +2.5e

- (US) May NFIB Small Business Optimism Index: 105.0 v 102.0e

**Fixed Income Issuance**

- (ID) Indonesia to sell EUR-denominated 7-year note; guidance seen +175bps to mid-swaps

- (ES) Spain Debt Agency (Tesoro) sold €5.035B vs. €4.5-5.5B indicated range in 6-month and 12-month Bills

 

Looking Ahead

- 05:30 (UK) Weekly John Lewis LFL Sales data

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)

- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills

- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.4-1.8B in 3-month and 12-month bills

- 06:00 (TR) Turkey to sell Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (ZA) South Africa Apr Manufacturing Production M/M: 0.4%e v 0.8% prior; Y/Y: 1.3%e v 1.2% prior

- 07:00 (BR) Brazil Jun IGP-M Inflation (1st Preview): No est v 0.6% prior

- 07:00 (CZ) Czech Central Bank to comment on CPI data

- 07:45 (US) Weekly Chain Stores Sales data

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

- 08:00 (RU) Russia announces upcoming OFZ Bond issuance

- 08:30 (US) May PPI Final Demand M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 2.2% prior

- 08:30 (US) May PPI Ex Food and Energy M/M: 0.2%e v 0.1% prior; Y/Y: 2.3%e v 2.4% prior

- 08:30 (US) May PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.4% prior; Y/Y: No est v 2.2% prior

- 08:30 (CL) Chile Central Bank Economists Survey

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

- 09:00 (RU) Russia Apr Trade Balance: $15.8Be v $15.5B prior; Exports: $37.0Be v $36.5B prior; ; Imports: $21.6Be v $21.0B prior

- 09:00 (MX) Mexico Apr Industrial Production M/M: +0.5%e v -1.3% prior; Y/Y: -2.4%e v -0.1% prior; Manufacturing Production Y/Y: 0.4%e v 2.8% prior

- 10:00 (MX) Mexico Weekly International Reserve data

- 10:30 (CA) Canada to sell 3-month, 6-month and 12-month Bills

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

- 16:30 (US0 Weekly API Oil Inventories