FOREX

Equities Rebound Following Thursday’s Rout

Notes/Observations

  • Session seemed to focus on pending substantial rebound of major parts of the advanced economies; risk of second wave of Covid-19 sidelined for the time being and sentiment back to believing the worst is probably over for the advanced world
  • UK Apr GDP slumped over 20% due to lockdown measures
  • UK will formally rule out an extension to the Brexit transition period beyond December 31st
  • German Cabinet formally approved its €130B stimulus which included lower VAT rates
  • Japan passed its ¥31.9T second extra budget (as expected); BOJ said to expand its corporate support program for financing for coronavirus-hit companies to over ¥100T

Asia:

  • China People Liberation Army (PLA) Major Xin Wang was arrested by US officials due to allegations related to visa fraud

Coronavirus:

– advertisement –
  • Total global cases 7,502,278 (+1.9% d/d); total deaths: 421.0K (+1.2 d/d%)
  • Singapore Minister: Expecting entire economy will be open under phase 2 reopening; Mass travel will take “some time”
  • Tokyo lifted the city’s virus alert and moved into the next and final phase of its reopening roadmap

Europe:

  • Brexit negotiations to intensify, with weekly talks throughout July and into early August in the hope of a breakthrough. High-level talks between UK and the EU involving PM Johnson and EU’s Van der Leyen reportedly to take place June 15th –
  • UK govt said to formally rule out extending Brexit deadline in meeting on Friday
  • UK Brexit Negotiator Frost retweeted message Transition ends on 31 December this year. We will not ask to extend it. If the EU asks we will say no
  • UK govt said to implement a temporary ‘light-touch’ customs checks program with the EU beginning in 2021. expected to apply much less rigorous EU border checks on imports that originally planned after Brexit transition period

Americas:

  • Treasury Sec Mnuchin stated that US believed China was in process of meeting its obligation but added US was keeping close watch on China living up to trade agreement. Suggested that the US may restrict capital flows through Hong Kong

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +1.10% at 356.96, FTSE +1.12% at 6,144.50, DAX +1.09% at 12,101.05, CAC-40 +1.77% at 4,900.86, IBEX-35 +1.39% at 7,379.00, FTSE MIB +1.29% at 19,049.50, SMI +0.44% at 9,871.60, S&P 500 Futures +1.76%]
  • Market Focal Points/Key Themes: European indices opened lower across the board but turned around to be broadly higher as the session progressed; sectors leading to the downside include healthcare and telecom; better performing secotrs include consumer discretionary; reportedly Italian government will decide on autostrade concessions in a couple of weeks; focus on covid cases over the weekend marking 14 days since start of nation-wide George Floyd protests; no major earnings releases expected in the upcoming US session

Equities

  • Consumer discretionary: Informa [INF.UK] +10% (trading update), EasyJet [EZJ.UK] +4% (Ryanair, Easyjet and British Airways launching legal action against UK quarantine rules)
  • Telecom: Helios Towers [HTWS.UK] -13% (placement)
  • Materials: Koninklijke DSM [DSM.NL] +2% (acquistion; cancels buyback)

Speakers

  • ECB SSM chief Enria: Only a few od the largest banks are expected to use its capital buffer by the end of 2020
  • German Cabinet said to formally approve its stimilus package which included a VAT reduction (as expected)
  • Germany Fin Min Scholz called for consumers to be optimistic and start shopping. He later added that the govt looked to agree on a supplementary budget during the week of Jun 15th
  • Italy PM Conte noted that any decision on whether to use credit lines linked to European Stability Mechanism (ESM) would likely to take place in July
  • Bank of Italy Dep Gov Franco: Must target primary surplus to put debt on a downward trajectory
  • Germany Chancellor Merkel Adviser Feld: Domestic economy should prepare for possible 2nd wave of infections, but need to avoid another lockdown should it occurs
  • Hungary PM Orban: reluctantly supports EU recovery Fund
  • Japan Chief Cabinet Sec Suga noted that any further fiscal measures to be decided appropriately (*8Note: comments made after Japan passed its ¥31.9T second extra budget (as expected)
  • BOJ said to plan expanding its corporate support program for financing for coronavirus-hit companies to over ¥100T (**Note: The expansion of the program would come in the aftermath that the Japanese government recently passed a record ¥31.9T extra budget)

Currencies/Fixed Income

  • Optimism on the global recovery overshadowed any concerns about a potential 2nd wave of the coronavirus outbreak. More stimulus measures being announced and approved by global govts aided sentiment
  • EUR/USD back above the 1.13 level as German Cabinet formally approved its €130B stimulus which included lower VAT rates and a renewed belief that the worst was probably over for the advanced world
  • GBP/USD shook off a dismal 20% contraction in its April monthly GDP reading. GBP/USD higher by 0.3% to test 1.2630. Brexit negotiations remain a headwind for the pair as the risk of a no-deal outcome remains in play. USD/JPY higher by 0.5% to trade above 107.35 in the session. Yen weaker as equity markets rebound from Thursday’s steep sell-off. More talk that BOJ will take additional measures to help the corporate front in the aftermath of the virus impact.

Economic Data

  • (FI) Finland Apr Current Account Balance: -€0.3B v -€1.2B prior
  • (UK) Apr Monthly GDP M/M: -20.4% v -18.7%e; 3M/3M: -10.4% v -10.0%e
  • (UK) Apr Industrial Production M/M: -20.3% v -15.0%e; Y/Y: -24.4% v -19.3%e
  • (UK) Apr Manufacturing Production M/M: -24.3% v -15.6%e; Y/Y: -28.5% v -19.9%e
  • (UK) Apr Construction Output M/M: -40.1% v -25.0%e; Y/Y: -44.0% v -31.3%e
  • (UK) Apr Index of Services M/M: -19.0% v -20.0%e; 3M/3M: %-9.9 v -10.2%e
  • (UK) Apr Visible Trade Balance: -£7.5B v -£11.0Be v -£12.5B prior; Overall Trade Balance: +£0.3B v -£5.5Be; Trade Balance Non EU: -£2.7B v -£4.4Be
  • (RO) Romania May CPI M/M: 0.1% v 0.1%e; Y/Y: 2.3% v 2.4%e
  • (FR) France May Final CPI M/M: 0.1% v 0.0%e; Y/Y: 0.4% v 0.2%e; CPI Ex-Tobacco Index: 103.95 v 103.76e
  • (FR) France May Final CPI EU Harmonized M/M: 0.2% v 0.0%e; Y/Y: 0.4% v 0.2%e
  • (ES) Spain May Final CPI M/M: 0.0% v 0.0%e; Y/Y: -0.9% v -1.0%e
  • (ES) Spain May Final CPI EU Harmonized M/M: 0.1% v 0.0%e; Y/Y: -0.9% v -0.9%e
  • (ES) Spain May CPI Core M/M: 0.1% v 1.1% prior; Y/Y: 1.1% v 1.1% prior
  • (TR) Turkey Apr Current Account Balance: -$5.1B v -$4.4Be
  • (TR) Turkey Apr Industrial Production M/M: -30.4% v -10.5%e; Y/Y: -31.4% v -23.3%e
  • (CN) Weekly Shanghai copper inventories (SHFE): 128.1K v 139.9K tons prior
  • (IT) Italy Q1Unemployment Rate: 8.9% v 8.8%e
  • (UK) May BoE/TNS Inflation Survey Next 12-Months: 2.9% v 3.0% prior
  • (HK) Hong Kong Q1 Industrial Production Y/Y: -4.6% v -0.5% prior
  • (HK) Hong Kong Q1 PPI Y/Y: 1.3% v 1.1% prior
  • (EU Euro Zone Apr Industrial Production M/M: -17.1% v -18.5%e; Y/Y: -28.0% v -28.8%e

Fixed Income Issuance

  • (IN) India sold total INR340B vs. INR300B indicated in 2025, 2034 and 2050 bonds

Looking Ahead

  • 05:30 (ZA) South Africa to sell combined ZAR1.04B in I/L 2025, 2033 and 2045 Bonds
  • 06:00 (IE) Ireland Apr Trade Balance: No est v €9.0B prior
  • 06:00 (PT) Portugal May Final CPI M/M: No est v -0.4% prelim; Y/Y: No est v -0.7% prelim
  • 06:00 (PT) Portugal May Final CPI EU Harmonized M/M: No est v -0.2 prelim; Y/Y: No est v -0.6% prelim
  • 06:00 (UK) DMO to sell £3.5B in 1-month, 3-month and 6-month bills (£0.5B, £1.0B and £2.0B respectively)
  • 06:45 (US) Daily Libor Fixing
  • 07:30 (IN) India Weekly Forex Reserve w/e Jun 5th: No est v $493.5B prior
  • 08:00 (IS) Iceland May Unemployment Rate: No est v 17.8% prior
  • 08:00 (IN) India May CPI Y/Y: 5.5%e v 5.8% prior
  • 08:00 (IN) India Apr Industrial Production Y/Y: -45.0%e v -16.7% prior
  • 08:00 (RO) Romania Central Bank May Minutes
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (IN) India announces upcoming bill issuance (held on Wed)
  • 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
  • 08:30 (US May Import Price Index M/M: +0.6%e v -2.6% prior; Y/Y: -6.4%e v -6.8% prior; Import Price Index (ex-petroleum) M/M: -0.2%e v -0.5% prior
  • 08:30 (US May Export Price Index M/M: +0.5%e v -3.3% prior; Y/Y: No est v -7.0% prior
  • 08:30 (CA) Canada Q1 Capacity Utilization Rate: 80.0%e v 81.2% prior
  • 10:00 (US) Jun Preliminary University of Michigan Confidence: 69.0e v 72.3 prior
  • 11:00 (CO) Colombia Apr Manufacturing Production Y/Y: -30.0%e v -8.9% prior
  • 11:00 (CO) Colombia Apr Retail Sales Y/Y: -30.5%e v -4.8% prior
  • 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Norway and Luxembourg Sovereign Debt; S&P on Slovenia Sovereign Debt; Fitch on Spain Sovereign Debt; Canadian rating agency DBRS on United Kingdom Sovereign Debt
  • 12:00 (US) FED Reports Q1 Household Change in Net Worth: No est v $3.148T prior
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 13:00 (MX) Mexico May Total Formal Job Creation: No est v -555.2K prior
  • 15:00 (CO) Colombia Apr Industrial Production Y/Y: No est v -7.7% prior

Source

Related Posts