EU confidence data improves as vaccination rates rise
Notes / Observations
- EU confidence data is improving as vaccinations reopen the region’s economies (Germany, Sweden and Italy during the session).
- USTR Tai held the first trade call with his Chinese counterpart, Vice Premier Liu He; awaited further discussions.
- The US PCE deflator needs to be watched more closely to reinforce expectations that the Fed may be on track to introduce a cut later this year.
- The Bank of Korea (BOK) maintained its policy with a unanimous decision. Reiterated to maintain an accommodating political position. Raised its growth and inflation forecasts for 2021. Need to adjust extraordinary measures according to the economy. Whether or not a rate hike happened this year depended on growth; normalization should not be too fast or too late
- Chinese Vice Premier Liu He Liu confirmed having had frank and constructive talks with his US counterpart and agreed to continue talks. The parties agreed that bilateral trade was important.
- France Fin Min Le Maire noted that the government would present to parliament an additional COVID stimulus plan of 15 billion euros.
- The Swiss government decided not to sign the EU framework agreement, preferred to continue with the existing agreements.
- Trade Rep Tai: The Phase 1 trade deal between the United States and China was very important, but was only part of the overall relationship with Beijing. The United States continues to face very great challenges and a complex relationship with China.
- President Biden has said he is ready to extend negotiations on infrastructure. Prepare to end discussions within two weeks. Watch then to start focusing on what it will take to pass a bill in an online party vote.
Speakers / Fixed income / FX / Commodities / Erratum
- The clues [Stoxx600 +0.11% at 445.70, FTSE -0.02% at 7,025.85, DAX -0.40% at 15,388.85, CAC-40 +0.37% at 6,415.53, IBEX-35 +0.16% at 9,212.00, FTSE MIB +0.24% at 24,837.50, SMI +0.12% at 11,362.28, S&P 500 Futures -0.28%].
- Market focal points / key themes: European indices open in a mixed fashion and failed to gain direction as the session progressed; the most successful sectors are industry and real estate; while the health and finance sectors are on the decline; Airbus increases its production targets; Augean receives a preliminary takeover approach; Kering cuts its stake in Puma; Sulzer abandons applicator systems; Bayer lower after US court rejected Roundup settlement; BW sells shares of BW LPG; Fraser not to make offers for Hugo Boss; earnings expected in the next US session include Medtronic, Best Buy and Sanderson Farms.
- Consumer discretionary: Norwegian Air [NAS.NO] -55% (new president).
- Consumer Staples: Tate & Lyle [TATE.UK] -5% (gains).
- Energy: BW LPG [BWLPG.NO] -7% (placement).
- Finances: Augean [AUG.UK] + 17% (offer possible), Aviva [AV.UK] + 3% (commercial update).
- Health: Bayer [BAYN.DE] -4% (plan to effectively deal with potential future Roundup complaints), Sanofi [SAN.FR] -1%, GSK [GSK.UK] -1% (Sanofi and GSK launch a phase 3 global clinical efficacy study of the COVID-19 vaccine candidate).
- Industrial: Airbus [AIR.FR] + 6% (production update).
- De Cos (Spain) of the ECB reiterates the Council’s position that the increase in inflation in the EU is seen as transitory.
- France Fin Min Le Maire told the government to keep its GDP growth forecast for 2021 at 5.0%; the pandemic is behind us but must remain cautious.
- The Central Bank of Sweden (Riksbank) Skingsley noted that price pressures remained low; began to approach the exit cautiously. Closely monitored the risks associated with commercial property; the rise in house prices was due to structural problems. Reforms in tax policy and housing are needed.
- Central Bank of Russia (CBR) Gov Nabiullina: Growth could return to pre-pandemic levels by mid-2021.
- Chinese Ministry of Commerce (MOFCOM) spokesman Geo Feng said he had nothing more to say about recent trade talks between the United States and China. China and the United States should create the conditions for the implementation of phase 1.
- Chinese Foreign Ministry Spokesman Zhao Lijian: Refuse to provide any specific telephone conversations between the United States and China on trade. The United States should create the conditions for the implementation of the Phase 1 agreement. Repeated position that the United States was trying to scapegoat China on the coronavirus.
Currency / Fixed Income
- The USD was more flexible in lackluster trading, but contained with tight ranges during the session. Dealers looked at data from the US PCE deflator later today to perhaps reinforce expectations that the Fed may be on track to introduce tapering later this year.
- EUR / USD initially returned above the 1.22 level as EU confidence data improved as vaccinations reopened the region’s economies. The ECB’s comments by De Cos caught the euro a bit by reminding that inflation was seen as transitory.
- GBP / USD at 1.4125 as data showed vaccines mitigated the threat of the UK summer wave of Covid.
- The currency CNY (Yuan) tested its highest since March 2016 against a basket of currencies.
- (FI) Finland May Consumer confidence: 2.7 vs. 3.8 before; Confidence in business: 13 against 10 before.
- (DE) Germany Jun GfK Consumer confidence: -7.0 versus -5.2e (15th consecutive negative reading).
- (CH) Swiss trade balance in April (CHF): 3.3 billion against 5.8 billion before; Real exports M / M: 0.1 against 5.1% before; Real imports M / M: 2.2 against 3.7% before; Look at Y / Y exports: 446.1% vs. 37.4% before.
- (ES) Spain Mar Total Y / Y mortgage loans: + 25.4% vs. -33.1% before; Y / Y house mortgage approvals: + 35.1% vs. -13.8% before.
- (SE) Sweden May Consumer confidence: 112.3 against 103.5 before; Manufacturing confidence: 126.0 against 120.7 before; Economic Trends Survey: 119.3 v 114.8e.
- (HU) Hungary Apr Unemployment rate: 4.4% vs. 4.0% e.
- (SE) Sweden’s trade balance in April (SEK): 1.8 billion against 2.9 billion before.
- (IT) Italy May Consumer confidence index: 110.6 against 104.0th; Manufacturing confidence: 110.2 against 106.0e; Economic sentiment: 106.7 against 97.9 before.
- (AT) Austria May Manufacturing PMI: 66.4 against 64.7 before (11th consecutive expansion and record).
- (TW) Taiwan tracking indicator Apr: 41 v 40 before.
- (HK) Hong Kong April trade balance (HKD): -31.8B vs. -19.4Be; A / A exports: 24.4% v 25.9% e; A / A imports: 25.2% against 24.4% e.
- (IS) Iceland May CPI M / M: 0.4% vs. 0.7% before; Y / Y: 4.4% against 4.6% before.
Issue of fixed income securities
- (SE) Sweden sold a total of SEK 1.25 billion in I / L 2030 and 2032 bonds.
- (IT) The Italian debt agency (Tesoro) sold 6.0 billion euros in 6-month notes; Average return: -0.504% against -0.481% before; Bid-to-cover: 1.34xv 1.34x front.
- (EU) ECB Daily Liquidity Statistics.
- 05:30 (ZA) South Africa PPI M / M April: 0.9% ev 1.3% before; Y / Y: 6.7% ev 5.2% before.
- 05:30 (HU) The Hungarian Debt Agency (AKK) will sell HUF in 12 month bills; Average yield:% v 0.69% before; submission to cover: xv 2.04x front.
- 05:45 (ES) From Guindos of the ECB (Spain).
- 05:50 (HU) Hungary Central Bank week-long deposit rate tender.
- 06:00 (CA) Canada May CFIB Business Barometer: No est v 63.4 before.
- 06h00 (NL) Elderson of the ECB (Netherlands; member of the SSM).
- 6:00 a.m. (RO) Romania will sell RON 600 million in 2.5% 2027 bonds.
- 06:45 (United States) Daily Libor fixing.
- 07:00 (MX) Mexico Apr Unemployment rate NSA (unadj): 4.2% ev 3.9% before.
- 07:00 (UK) Vlieghe from BOE.
- 08:00 (BR) Brazil Mar National unemployment rate: 14.6% ev 14.4% before.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 8:30 am (US) Q1 Preliminary annualized GDP (2nd reading) Q / Q: 6.5% ev ahead of 6.4%; Personal consumption: 11.0% ev 10.7% before.
- 8:30 am (US) Preliminary first quarter GDP price index: 4.1% ev advance of 4.1%; Core PCE Q / Q: 2.3% ev 2.3% advance.
- 8:30 am (US) April Preliminary durable goods orders: 0.8% ev 0.8% forward; Durable goods (excluding transport): 0.8% ev 1.9% before; Capital goods orders (non-defense / ex-aircraft): 1.0% ev 1.2% before; Shipments of capital goods (non-defense / ex-aircraft): 0.8% ev 1.6% before.
- 8:30 am (United States) Initial jobless claims: 425Ke vs. 444K before; Continuing complaints: 3.68Me against 3.751M before.
- 8:30 a.m. (US) USDA Weekly Net Export Sales.
- 9:00 a.m. (UK) Russia’s gold and Forex reserve with May 21: not estimated vs. $ 593.9 billion before.
- 09:00 (DE) ECB Schnabel (Germany) at the forum.
- 10:00 am (US) Apr Pending home sales M / M: 0.5% ev 1.9% before; O / Y: none is v 25.3% before.
- 10:00 a.m. (MX) Central Bank of Mexico (Banxico) May Minutes.
- 10:30 a.m. (US) EIA weekly natural gas inventory.
- 11:00 a.m. (US) May Kansas City Fed Manufacturing Activity Index: 30th vs. 31 before.
- 11:00 (DE) ECB Schnabel (Germany) at the Global Solutions Summit.
- 11:30 a.m. (United States) Treasury to sell 4 and 8 week bills.
- 1:00 p.m. (United States) Treasury to sell 7-year notes.
- 1:30 p.m. (BR) Brazil Apr Central government budget balance (BRL): 9.4Be vs. 2.1B before.
- (AR) Argentina May Consumer Confidence Index: No is v 35.3 before.
- 18:00 (NZ) New Zealand May Consumer Confidence Index: No est v 115.4 prior.
- 19:01 (UK) May Lloyds Business Barometer: No is v 29 before.
- 19:30 (JP) Japan Unemployment rate in April: 2.7% ev 2.6% before; Job-candidate ratio: 1.10xv 1.10x before.
- 19:30 (JP) Japan May Tokyo CPI Y / Y: -0.5% ev -0.6% before; CPI (excluding fresh products) Y / Y: -0.2% ev -0.2% before; CPI (excluding fresh food / energy) Y / Y: -0.1% ev 0.0% before.
- 9:10 pm (JP) BOJ firm bond purchase operation for 3 to 5 years; Maturity of 5 to 10 years.
- 11:30 p.m. (JP) Japan will sell 3-month coupons.