EU mid-market update: Wet weather once again blamed for poor UK retail sales; Ongoing contest between macro outlook and optimism for AI.

Notes/observations

- Underlying theme of market pulling back excitement over number of Fed rate cuts this year continues, helped by stronger than expected US flash PMIs and Bostic comments about returning to inflation target slowly.

- Opposing UK data saw highest GFK consumer confidence since 2021, while Apr retail sales heavily missed, being attributed to bad weather reducing foot traffic and lowering volumes across most sectors. Elsewhere for data, German GDP was unrevised in final Q1 reading.

- UK energy stocks weaker after energy regulator Ofgem lowered energy price cap by 7% for customers, worsening prospects for corporate revenue but improving inflation outlook.

- Focal corporate news: Speculation SpaceX will offer shares at $108-11/shr but was later refuted by Musk; John Wood Group rejects £2.20/shr takeover offer; AJ Bell founder sells stake, weighing on stock.

- Asia closed lower with Hang Seng underperforming -1.4%. EU indices are -0.2% to -0.6%. US futures are +0.1-0.3%. Gold +0.5%, DXY -0.1%; Commodity: Brent -0.4%, WTI -0.5%; Crypto: BTC -3.5%, ETH -3.7%.

Asia

- Japan Apr National CPI Y/Y: 2.5% v 2.4%e; CPI Ex-Fresh Food (core) Y/Y: 2.2% v 2.2%e.

- New Zealand May ANZ Consumer Confidence: 84.9 v 82.1 prior.

- New Zealand Apr Trade Balance (NZD): 0.1B v 0.5B prior.

- RBNZ Hawkesby stated that no single data point would cause rate hike, watching domestic inflation pressures and expectations.

- RBNZ Silk reiterated MPC stance that was prepared to raise rates if needed.

Europe

- UK May GfK Consumer Confidence: -17 v -18e (highest since Dec 2021).

Americas

- Fed’s Bostic (hawk, voter) stated that the last couple of inflation numbers suggested it's going back to 2%, but it's going slow. Had to be a little more patient, certainly about inflation's path to 2%.

- Chile Central Bank (BCCH) cuts Overnight Rate Target by 50bps to 6.00% (as expected). Expected key rate to continue to decline with size and timing of rates to consider trajectory of inflation and macroeconomic scenario. Have concerns on start of Fed rate cut cycle.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.5% at 519.22, FTSE -0.4% at 8,305, DAX -0.4% at 18,618, CAC-40 -0.2% at 8,085, IBEX-35 -0.7% at 11,236, FTSE MIB -0.4% at 3,370, SMI -0.5% at 11,902, S&P 500 Futures +0.3%].

Market focal points/key themes: European indices open lower across the board and remained under pressure through the early part of the session; among sectors holding on to gains include technology and industrials; the downside is being led by sectors such as financials and consumer discretionary; John Wood rejects third takeover offer from Dar Al-Handasah; reportedly French billionaire Xavier Neil considering taking Millicom private; focus on release of US durable goods later in the day; earnings expected in the upcoming Americas session include Buckle, Booz Allen Hamilton and Molecular Partners.

Equities

- Consumer discretionary:-0.5% (analyst downgrade).

- Energy: John Wood Group [WG.UK] +10.0% (rejects £2.20/shr offer) -0.5% (analyst downgrade).

- Financials: DNB Bank [DNB.NO] +3.0-3.5% (analyst upgrade); AJ Bell [AJB.UK] -1.0% (analyst downgrade).

Speakers

- ECB’s Schnabel (Germany) noted that some elements of inflation were persistent and would caution against moving too fast on rates.

- SNB President Jordan commented that it did not have to follow other central banks on transparency.

- UK Opposition Labour Leader Starmer (ahead in polls) stated that would debate PM Sunak head-to-head; Cost of living was still heavily affecting people.

- China Foreign Ministry Daily Briefing reiterated stance that was confident China would achieve its 2024 economic targets.

Currencies/fixed income

- USD saw some slight retracement as it trimmed gains made on Thursday following ‘hawkish’ Fed May Minutes and strong US PMI data. Markets continued to push back expectations of any near-tern Fed rate cut. Overall trading was subdued in the session ahead of a long weekend due to the US Memorial Day holiday and UK banking holiday on Monday.

- EUR/USD drifted higher to test 1.0820 while GBP/USD shook off dismal retail sales data at trade back above 1.2700.

- USD/CHF at 0.9153 as markets expected SNB to continue its easing at upcoming quarterly meetings.

- USD/JPY holding above 157 with the pivotal 160 resistance coming back into view. Market looking for concrete evidence that BOJ would defend the area.

Economic data

- (UK) Apr Retail Sales (ex-auto/fuel) M/M: -2.0% v -0.8%e; Y/Y: -3.0% v -1.1%e.

- (UK) Apr Retail Sales (including auto/fuel) M/M: -2.3% v -0.5%e; Y/Y: -2.7% v -0.2%e.

- (DE) Germany Q1 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: -0.2% v -0.2% prelim; GDP NSA (unadj) Y/Y: -0.9% v -0.9% prelim.

- (DE) Germany Q1 Private Consumption Q/Q: -0.4% v -0.2%e; Government Spending Q/Q: -0.4% v +0.6% prior; Capital Investment Q/Q: +1.2% v -2.1% prior.

- (SE) Sweden Apr PPI M/M: 0.5% v 0.6% prior; Y/Y: +0.9% v -0.6% prior.

- (HU) Hungary Apr Unemployment Rate: 4.4% v 4.4%e.

- (FR) France May Business Confidence: 99 v 100e; Manufacturing Confidence: 99 v 100e; Production Outlook Indicator: -9 v -7 prior; Own-Company Production Outlook: 1 v 9 prior.

- (ES) Spain Apr PPI M/M: -0.2% v -2.2% prior; Y/Y: -6.6% v -8.2% prior.

- (CZ) Czech May Consumer Confidence: 101.6 v 104.7e; Business Confidence: 95.4 v 96.7e; Composite Confidence: 96.4 v 97.3e.

- (TH) Thailand May Foreign Reserves w/e May 17th: $226.0B v $224.1B prior.

- (RU) Russia Narrow Money Supply w/e May 17th (RUB): 18.31T v 18.32T prior.

- (TR) Turkey Apr Foreign Tourist Arrivals Y/Y: 8.7% v 15.7% prior.

- (TW) Taiwan Apr M2 Money Supply Y/Y: 6.1% v 6.2% prior; M1 Money Supply Y/Y: 4.9% v 5.4% prior.

- (IS) Iceland Apr Wage Index M/M: 0.5% v 2.4% prior; Y/Y: 7.1% v 8.3% prior.

Fixed income issuance

- (IN) India sold total INR290B vs. INR290B indicated in 2027, 2039 and 2073 bonds.

Looking ahead

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

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2038, 2046 and 2050 Bonds.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £3.5B respectively).

- 06:15 (ES) ECB’s de Cos (Spain).

- 07:30 (BR) Brazil Apr Current Account Balance: -$1.5Be v -$4.6B prior; Foreign Direct Investment (FDI): $5.0Be v $9.6B prior.

- 07:30 (IN) India Forex Reserve w/e May 17th: No est v $644.2B prior.

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

- 08:00 (PL) Poland Apr M3 Money Supply M/M: +0.5%e v -0.3% prior; Y/Y: 6.7%e v 6.6% prior.

- 08:00 (MX) Mexico Apr Trade Balance: -$0.6Be v +$2.1B prior.

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

- 08:30 (US) Apr Preliminary Durable Goods Orders: -0.8%e v +0.9% prior (revised from 2.6%); Durables (ex-transportation): 0.1%e v 0.0% prior (revised from 0.2%); Capital Goods Orders (non-defense/ex-aircraft): +0.1%e v -0.2%e prior revised from 0.2%); Capital Goods Shipments (non-defense/ex-aircraft): 0.1%e v -0.1% prior revised from 0.0%).

- 08:30 (CA) Canada Mar Retail Sales M/M: -0.1%e v -0.1% prior; Retail Sales (ex-auto) M/M: +0.3%e v -0.3% prior.

- 09:00 (CL) Chile Apr PPI M/M: No est v 3.0% prior.

- 09:35 (US) Fed’s Waller.

- 10:00 (US) May Final University of Michigan Confidence: 67.7e v 67.4 prelim.

- 11:00 (US) May Kansas City Fed Services Activity: No est v 9 prior.

- 11:00 (MX) Mexico Q1 Current Account Balance: -$7.5Be v $11.7B prior.

- 11:30 (PT) ECB’s Centeno (Portugal).

- 11:30 (EU) Potential sovereign ratings after European close.

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

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