Yields remain in focus

Notes/Observations

- China's economic rebound easing as activity indicators missed expectations; likely motivate Beijing to keep its accommodative fiscal and monetary policies in place for longer.

- Covid remained a concern in several Far East countries (Taiwan and Singapore saw restrictions tightened. new infections continuing to rise in Japan as tougher restrictions go into effect in more prefectures.

- Inflation and rates remain in focus with policymakers likely to continue rhetoric that the pick-up in inflation seen as transitory.

Asia:

- China Apr Retail sales YoY: 17.7% v 25.0%e.

- China Apr Industrial Production YoY: 9.8% v 10.0%e.

Coronavirus:

- Taiwan tightened its COVID measures to most restricted to date.

- Recent poll showed that >80% of Japanese public were against hosting Olympics this summer.

Europe:

- UK Brexit Min Frost reiterated stance that EU needed to soften checks at ports on the Irish Sea, otherwise UK would look at options which included possibly suspending the checks under Article 16 of the protocol.

- Italy 5-Star Party Leader Salvini stated that PM Draghi would probably have a hard time passing needed reforms required by EU because his Govt was too divided over the issues.

Americas:

- US Treasury said to be planning to remove large number of pre-Brexit financial rules, since the EU has yet to reach an agreement with the UK. US officials appeared to give up hope that Brussels will grant the City widespread access to the Single Market.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

Indices [Stoxx600 +1.15% at 442.34, FTSE -0.28% at 7,023.85, DAX +0.04% at 15,422.80, CAC-40 -0.12% at 6,377.28, IBEX-35 +0.15% at 9,159.00, FTSE MIB +0.37% at 24,858.50, SMI +0.12% at 11,132.93 , S&P 500 Futures -0.20%].

Market Focal Points/Key Themes: European indices open modestly higher across the board but later slipped to trade generally mixed; better performing sectors include consumer discretionary and telecom; sectors trending to the downside include energy and materials; Israel and Norway closed for holidays; Stellantis and Foxconn announce partnership, details to be released tomorrow; GSK and Sanofi announce positive Phase II results in covid vaccine trial; Immunodiagnostic Systems to be acquired by PerkinElmer; reportedly Casino looking to spin-off GreenYellow; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Ryanair [RYA.UK] +1% (earnings).

- Healthcare: Immunodiagnostic Systems Holdings [IDH.UK] +45% (to be acquired), Sanofi [SAN.FR] +1%, Glaxosmithkline [GSK.UK] +1% (vaccine candidate data).

- Industrials: Diploma [DPLM.UK] +7% (earnings).

Speakers

- EU's Vestager noted that it was too early to consider a 2nd economic recovery package for the region.

- Hungary Central Bank Dep Gov Virag stated that saw many signs of inflation in the economy with upward risks rising. MPC to be proactive in addressing inflation and stressed that maintenance of price stability would be key. Saw inflation back within range by summer.

- Poland Central Bank's Lon stated that saw no need for FX intervention at this time.

- Russia Central Bank Dep Gov Zabotkin stated that monetary policy should return to neutral (**Note: Neutral level for rates seen between 5.0-6.0% area with the One-Week Auction Rate currently standing at 5.00%).

- China Finance Ministry: To extend tariff exemptions for some US products from May 19th.

- Iran Oil Min Zanganeh to retire after Jun elections.

Currencies/Fixed Income

- USD tried to muster some strength as new COVID-19 restrictions in Asia coupled with mixed economic data in China encouraged some safe-haven flows. Dealers continued to expect the greenback to weaken as other economies reopen. Key focus will be Purchasing Manager Index survey data due out on Friday.

- GBP/USD hovered around the 1.41 area as further easing of UK lockdown rules went into effect today. Dealers noted that the next stage of the UK reopening will add fuel to the unleashing of pent-up demand. UK CPI data was due out mid-week.

- Italy's 10-year bond yield hits 1.10% level (highest since July 2020).

- Continued volatility in cryptocurrencies after reports circulated that TSLA could sell, or had sold, its Bitcoin holdings (later refuted by Musk). Bitcoin tested 3-month lows initially.

Economic data

- (DK) Denmark Apr PPI M/M: 0.8% v 0.7% prior; Y/Y: 7.5% v 5.8% prior.

- (DK) Denmark Q1 GDP Indicator Q/Q: -1.5% v +0.6% prior.

- (JP) Japan Apr Preliminary Machine Tool Orders Y/Y: 120.8% v 65.1% prior.

- (IN) India Apr Wholesale Prices (WPI) Y/Y: 10.5% v 9.4%e.

- (CH) Swiss Apr Producer & Import Prices M/M: 0.7% v 0.6% prior; Y/Y: +1.8% v -0.2% prior.

- (CZ) Czech Apr PPI Industrial M/M: 0.8% v 0.4%e; Y/Y: 4.6% v 4.2%e.

- (ES) Spain Mar Trade Balance: -€0.4B v -€1.1B prior.

- (IT) Italy Apr Final CPI M/M: 0.4% v 0.4% prelim; Y/Y: 1.1% v 1.1% prelim; CPI Index (ex-tobacco): 103.7 v 103.3 prior.

- (IT) Italy Apr Final CPI EU Harmonized M/M: 0.9% v 0.9% prelim; Y/Y: 1.0% v 1.0% prelim.

- (CH) Swiss weekly Total Sight Deposits (CHF): 707.8B v 705.0B prior; Domestic Sight Deposits: 631.1B v 634.1B prior.

- (TR) Turkey Apr Central Gov't Budget Balance (TRY): -16.9B v 23.8B prior.

Fixed income Issuance

- (SK) Slovakia Debt Agency (Ardal) sold a total of €528.7M in 2025, 2030, 2032, and 2047 bonds.

Looking Ahead

- (EU) Euro-Area Finance Ministers (Eurogroup) meeting.

- 05:20 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell combined €6.0B in 6-month and 12-month Bulls.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
Bonds.

- 06:00 (RO) Romania to sell RON500M in 4.15% 2030 Bonds.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (BR) Brazil May FGV Inflation IGP-10 M/M: 2.7%e v 1.6% prior.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (PL) Poland Apr CPI Core M/M: 0.6%e v 0.7% prior; Y/Y: 3.7%e v 3.9% prior.

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) announces size of issuance for upcoming auctions (bills and bonds).

- 08:15 (CA) Canada Apr Annualized Housing Starts: 290.0Ke v 335.2K prior.

- 08:30 (US) May Empire Manufacturing: 24.0e v 26.3 prior.

- 08:30 (CA) Canada Mar Int'l Securities Transactions (CAD): No est v 8.5B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €B in 3-month, 6-month, and 12-month bills.

- 09:00 (CA) Canada Apr Existing Home Sales M/M: -2.8%e v +5.2% prior.

- 09:45 (EU) ECB weekly QE bond-buying update.

- 10:00 (US) May NAHB Housing Market Index: 83e v 83 prior.

- 11:00 (PE) Peru Apr Unemployment Rate: No est v 15.3% prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:00 (RU) Russia Q1 Advance GDP Y/Y: -1.2%e v -1.8% prior.

- 16:00 (US) Mar Total Net TIC Flows: No est v $72.6B prior; Net Long-term TIC Flows: No est v $4.2B prior.

- 16:00 (US) Weekly Crop Progress Report.

- (PE) Peru Mar Economic Activity Index (Monthly GDP) Y/Y: No est v -4.2% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 111.6 prior.

- 19:50 (JP) Japan Q1 Preliminary GDP Q/Q: -1.2%e v +2.8% prior; GDP Annualized Q/Q: -4.5%e v +11.7% prior; GDP Nominal Q/Q: -1.3%e v +2.3% prior.

- 21:30 (AU) RBA May Minutes.

- 23:00 (NZ) New Zealand Apr Non-Resident Bond Holdings: No est v 51.5% prior.

- 23:00 (TH) Thailand Central Bank to sell 3-month bills.

- 23:30 (HK) Hong Kong to sell 3-month and 6-month bills.