Notes / observations
- The initial optimism of the EU Recovery Fund spread to the realism that the Fund still faces obstacles in the coming “difficult” negotiations
- UK reveals new global tariff regime after Brexit – German May ZEW study painted a mixed picture but optimism prevails
Asia:
- The RBA May protocols reiterated an attitude that would not increase cash rates until progress was made towards full employment and inflation targets. The policy package worked as expected.
- RBNZ Dep Gov Bascand stated that greater security for the virus situation was expected within 3 months and then reassesses whether to do more or take the foot off the pedal. Be able to further expand and expand the asset purchase program
coronavirus:
– advertising –
- President Trump sent a letter to the World Health Organization (WHO) threatening to permanently freeze funding related to the organization
Europe:
- German Chancellor Merkel and French President Macron’s statement: confirmed a proposal for the EU 500F EU Coronavirus Recovery Fund. The proposal authorizes the European Commission to finance the recovery by borrowing through financial markets in the EU’s name
- German Chancellor Merkel noted that the European Recovery Fund should grant grants, not loans to Member States
America:
- President Trump: I started taking hydroxychloroquine a few weeks ago; have not been exposed to COVID-19; so far I think OK
SPEAKERS / FIXED INCOME / FX / COMMODITIES / ERRATUM
Equities
- Index [Stoxx600 -0.63% at 339.42, FTSE -0.27% at 6,032.19, DAX -0.49% at 11,002.55, CAC-40 -0.59% at 4,471.71, IBEX-35 -1.30% at 6,690.00, FTSE MIB -0.88% at 17,247.50, SMI -0.04% at 9,737.00, S&P 500 Futures -0,38%]
- Market Focal Points / Key Themes: European indexes open higher everywhere but later returned to trading slightly negative; consumers’ discretionary and economic sectors with better health care performance, leading among underperformers; reportedly set the UK to lower tariffs after the end of Brexit; Earnings expected in the upcoming US session include Home Depot, Walmart and Urban Outfitters
Equities
- Consumer discretion: DCC [DCC.UK] + 5% (earnings)
- Consumer Staples: Imperial Brands [IMB.UK] -5% (earnings)
- Industries: Thyssenkrupp [TKA.DE] + 6% (looking for partners), Renew Holdings [RNWH.UK] + 12% (earnings), Renault [RNO.FR] -4%, PSA [UG.FR] -5% (EU car registrations)
- Technology: Microfocus [MCRO.UK] + 10% (trading update)
speakers
- UK Govt said to schedule £ 30B in tariffs after Brexit of supply chain goods (** Reminder: UK plans to leave on December 31, 2020)
- France Fin Min Le Maire: EU Recovery Fund probably not available until 2021, admitting that the fund still faces obstacles in “difficult” negotiations in the coming weeks
- The German ZEW commented that optimism grew that there would be an economic reversal from the summer onwards, with economic growth expected to pick up again in Q4 2020. Only in 2022 would economic production return to the level in 2019
- The Central Bank of Norway (Norway) Gov Olsen reiterated the view not to imagine further interest rate cuts at this time. Inflation expectations seemed to be firmly rooted. Measures implemented could not prevent the pandemic from having a serious financial impact. It will take time before unemployment falls back
- The Swedish National Debt Office (NDO) updated its loans that raised issues for both 2020 and 2021. High 2020 Net borrowing from SEK14B to SEK 402B and 2021 Net borrowing from SEK14B to SEK76B
- German Chamber of Commerce (DIHK) saw 2020 exports -15% y / y – Indonesia’s Central Bank (BI) policy statement noted that it had room for further interest rate cuts due to low inflation and the need to support GDP growth. To continue to monitor the market dynamics
- Indonesia’s Central Bank (BI) Gov Warjiyo Pre-rate decision press conference noted that data from April showed that the economic slowdown continued. Saw growth in 2020 as under forecasts with 2021 growth rebounding. inflation remained subdued due to low demand. Reiterated the view that IDR currency (Rupiah) as undervalued with opportunity to gain further; for continuous interventions
- China’s government said to target Australian wine and dairy products due to virus dispute (** Note: Tensions had escalated between the two countries in the wake of Australian government calls for an investigation into the origin of the Covid-19 virus)
Currencies / fixed income
- The foreign exchange markets saw the USD remain soft to the largest pairs
- EUR / USD approached the mid-1.09 area of optimism over the Franco-German recovery plan, but was well contained in the 3-month trading area. Mixed ZEW data did little to awaken the price measure
- GBP / USD was higher and pulled out of a dismal UK Employment Change report
- The initial optimism of the EU Recovery Fund spread to the realism that they are still facing obstacles in the upcoming “difficult” negotiations. The Italian 10-year-old BTP saw yields initially fall by 10 bps, but withdrew after comments from French Fin Min that negotiations on fund would be difficult in the coming weeks.
Economic data
- (EU) EU27 Apr New car registration: -76.3v -55.1% before (fourth straight monthly decline and record low)
- (UK) Apr. Unemployed changes in claims: +856.5 v + 5.4 K prior (mostly on record); Complaints: 5.8% vs. 3.5% in advance
- (UK) Mar average weekly earnings 3M / Y: 2.4% v 2.7% e; Weekly earnings (ex-bonus) 3M / Y: 2.7% v 2.6% e
- (UK) Mar ILO Unemployment rate: 3.9% v 4.3% e; Employment change 3M / 3M: + 210K v + 30KeKe
- (ID) Indonesia Central Bank (BI) left 7-day reverse repo rate unchanged at 4.50% (not expected)
- (ES) Spain Mar Trade Balance: – € 2.0B v – € 2.1B before
- (HK) Hong Kong Apr Unemployment rate:% v 4.6% e
- (DE) Germany can ZEW study of current situation: -93.5 v -86.6e; Expectation Survey: 51.0 v 30.0e
- (EU) Eurozone May ZEW Expectation Survey: 46.0 v 25.2 in advance
- (EU) Eurozone Mar Construction Output M / M: -14.1% v -0.5% in advance; Y / Y: -15.4% v + 0.2% in advance
Issue of fixed income
- (BE) Belgium’s Debt Agency (BDA) opened a book to sell $ 1.0B in 10-year bonds; guidance seen + 37bps for mid-swaps
- (UK) DMO opened its book to sell 0.5% plated October 2061; guidance seen 0 (flat) to + 0.5 bps until Jan 2060 Gilded
- (RO) Romania sells 5-year and 10-year bonds in euros
Look forward to
- (IT) 2nd day of BTP Italia issue
- 05:30 (ZA) South Africa Feb Total mine production M / M: -0.6% e v + 6.0% in advance; Y / Y: 4.8% or 7.5% in advance; Gold Productions: No est = 4.9% before; Platinum production: No est v 10.2% in advance
- 05:30 (HU) Hungary’s Debt Agency (AKK) for sale of 3-month bills
- 05:30 (EU) ECB allocation in 7-day main refinancing offer (MRO)
- 05:30 (ZA) South Africa to sell combined ZAR6.1B in 2023, 2030 and 2035 bonds
- 05:40 (UK) BOE weekly allocation in 6-month GBP-enhanced liquidity repurchase (ILTR)
- 06:00 (PT)) Portugal Apr PPI M / M: No est v -0.4% before; Y / Y: No est v -3.4% previously
- 06:30 (EU) ESM to sell € 2.0B in 6-month bills
- 06:30 (EU) ECB allocation in weekly fixed-rate 3-month LTRO operation (advance € 6.8 B with 52 bids recd)
- 6:45 (USA) Daily Libor Fixing
- 07:00 (ZA) South Africa Mar Manufacturing Production M / M: -0.9% e v + 2.5% in advance; Y / Y: -2.1% e v -2.0% before
- 07:00 (RU) Russia’s announcement of upcoming OFZ bond issue (fully on Wed)
- 7:45 AM (US) Goldman Economist Chain Store Sales
- 07:45 (UK) BOE to buy £ 1.5B in APF Gilt buying operation (3-7 years); bid-to-cover: x
- 08:00 (UK) Daily Baltic dry mass index
- 08:30 (US) Apr Housing Starts: 900Ke v 1,216M before; Building permits: 1.00Me v 1.350M in advance (revised from 1.353M)
- 08:45 (UK) BOE to buy £ 1.5B in APF Gilt purchase transaction (7-20 years); bid-to-cover: x
- 08:55 (US) Weekly Redbook LFL Sales Data
- 09:00 (RU) Russia Q1 Advance GDP Y / Y: 1.8% vs. 2.1% in advance
- 09:00 (EU) Weekly ECB Forex Reserve
- 9:45 AM (UK) BOE buys £ 1.5B in APF Gilt purchase transaction (20+ years)
- 10:00 AM (USA) Fed Chief Powell with Treasury Sec Mnuchin
- 10:00 AM (US) Fed Kashkari (deaf)
- 10:00 (IE) ECB’s Lane (Ireland, Chief Economist) webinar
- 11:30 a.m. (U.S.) Treasury to sell 52-week bills
- 14:00 (USA) Fed Rosengren (hawk)
- 16:30 (US) Weekly API Oil Stocks
- 18:45 (NZ) New Zealand Apr Food prices M / M: No est v 0.7% in advance
- 19:50 (JP) Japan Q1 Mortgage Loan: No est 2.8% up front
- 19:50 (JP) Japan Mar Core Machine orders M / M: -6.7% e v 2.3% in advance; Y / Y: -8.9% or -2.4% in advance
- 20:30 (AU) Australia Apr Westpac Leading Index M / M: No est v -0.8% before
- 21:00 (AU) Australia Apr Qualified vacancies M / M: No est v -5.3% in advance
- 21:30 (CN) China PBoC Monthly LPR fixing: Expected to remain unchanged: Current 1-year loan priority of 3.85%; Current 5-year loan priority of 4.65%
- 21:30 (KR) South Korea’s Central Bank to sell KRW 2.3T in 2-year bond
- 23:00 (CN) China sells 1-year and 10-year updated government bonds
- 23:00 (KR) South Korea Q1 Household credit: No est v KR1600.1T in advance
- 23:30 (HK) Hong Kong to sell 2-year notes
- 23:35 (JP) Japan sells 20-year JGB bonds