Price action quiet heading into G20 and Doha meetings

Notes/Observations

- Plethora of Chinese data overnight highlights the country economic situation was stabilizing but official still warn of strong headwinds

- BOJ might return to QQE for easing rather than push rates deeper into negative territory at its April meeting

- Oil prices are off recent highs but are holding firm into Sunday's Doha meeting of major crude producers

 

Overnight news

Asia:

- China Q1 GDP in-line with expectations but still a 7-year low (Y/Y: 6.7% v 6.7%e)

- Other Chinese data shows sign of stabilization Mar New Yuan Loans (CNY): 1.37T v 1.10Te; Industrial Production Y/Y: 6.8% v 5.9%e; Retail Sales Y/Y: 10.5% v 10.4%e)

- BOJ said to be receptive to increasing ETF purchases as BoJ next easing more likely to involve move to increase asset purchases rather than cut interest rates at the next policy meeting

- BOJ Gov Kuroda: recent excessive yen currency gains have somewhat corrected in the last few days

- RBA Semi-Annual Financial Stability Review deemed financial system to be in good condition albeit with some risk to banks from New Zealand dairy and housing exposure

Americas:

- Brazil Supreme court votes 8-2 against Brazil govt appeal of Apr 17th impeachment vote in the lower house of Congress; Rejects govt motion to suspend the vote

 

Economic data

- (JP) Japan Final Feb Industrial Production M/M: -5.2%t v -6.2% prelim; Y/Y: -1.2 v -1.5% prelim, Capacity Utilization M/M: -5.4% v +2.6% prior

- (IT) Italy Feb Total Trade Balance: €3.9B v €0.0B prior; Trade Balance EU: €1.3B v €0.5B prior

- (NO) Norway Mar Trade Balance (NOK): 9.1B v 9.5B prior (lowest surplus since 1999)

- (EU) Euro Zone Feb Trade Balance (Seasonally Adj): €20.2B v €21.5Be; Trade Balance NSA (Unadj): €19.0B v €6.2B prior

Fixed Income Issuance:

- None seen

 

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Index snapshot (as of 10:00 GMT)

Indices [Stoxx50 -0.3% at 3,050, FTSE -0.3% at 6,349, DAX -0.6% at 10,037, CAC-40 -0.4% at 4,492, IBEX-35 -0.4% at 8,830, FTSE MIB -0.6% at 18,216, SMI -0.2% at 8,005, S&P 500 Futures -0.2%]

Market Focal Points/Key Themes: European equity indices opened lower as market participants await this weekends highly anticipated meeting between major oil producers to discuss a potential output freeze in Doha, Qatar; Brent and WTI trading slightly lower in the morning session despite both contracts maintaining its stance above the $40/bbl handle, creating mixed sentiment across the commodity and mining stocks; BHP Billiton leading the gains in the FTSE 100, whilst shares of Anglo American and Glencore currently trading lower; Shares of French supermarket giant Carrefour leading the gains in the Eurostoxx after releasing its Q1 sales results; upcoming scheduled US earnings include Citigroup, First Horizon National, Regions Financial, and Charles Schwab (pre-market).

 

Equities (as of 09:45 GMT)

- Consumer Discretionary: [Accor AC.FR -1.5% (analyst downgrade), Carrefour CA.FR +3.2% (Q1 results), Elis ELIS.FR -3.9% (Eurazeo divests 17.1M shares at €16.45/shr), OVS OVS.IT +5.9% (FY15 results), Rational RAA.DE -4.6% (analyst downgrade), Zumtobel ZAG.AT -23.9% (Cuts FY16 outlook, analyst downgrades)]

- Consumer Staples: [Poundland PLND.UK -6.7% (analyst downgrade)]

- Energy: [GALP Energia GALP.PT -0.7% (Q1 production)]

- Financials: [Man Group EMG.UK +5.0% (Q1 results)]

- Industrials: [Aker Solutions AKSO.NO +0.3% (awarded contract), Faurecia EO.FR -4.8% (Q1 sales, analyst downgrade)]

- Materials: [Clariant CLN.CH -3.1% (analyst downgrade)]

- Technology: [ACAL ACL.UK +6.9% (Trading update), DOCdata DOCD.NL -1.6% (Receives take over offer from D.E. Kat at €0.85/share)]

- Telecom: [Elisa OYJ ELI1V.FI +3.1% (Q1 results)]

 

Speakers

- EU said to count on US intervention to reach a deal on Greece. EU close to an agreement with Greece on its stance and sought an agreement soon. Some within EU favor IMF involvement at a later stage. Hawkish members within EU reject auto debt re-profiling for Greece

- Spain Industry Minister Soria resigned due to effects from leaked Panama papers

- ECB Spokesman: Greece EFSF bonds are on the QE elegible list

- Finland Fin Min Stubb: Worst of Euro crisis is behind us

- Czech Central Bank's Rusnok: Bank could use negative rates to protect FX commitments if other central banks move further into negative territory

- Romania Central Bank Dep Gov Voinea: GDP growth seen above 4.0% in both 2016 and 2017

- German Chancellor Merkel and France President Hollande reiterates view that Ukraine must accelerate promised reforms and implement commitments from Minsk agreement

- China PBoC's Sheng: Rise in money supply data show that liquidity is ample and shows stable trend in economy

- China PBoC said to revise rules on credit card business to help to encourage domestic consumption. Set upper limit on credit card rate on overdrawal balance and raised limit on ATM cash withdrawal

- Indonesia Central Bank confirmed introduction of new reference rate; effective Aug 19th and to use 7-day Reverse Repo Rate as new policy tool. It added that new rate would not change its monetary policy stance

- Iran confirms that OPEC Gov Kazempour said to attend Doha meeting in place of Oil Min Zanganeh

 

Currencies

- FX session was relatively quiet marked by lack of any significant data releases. Dealers were cautious in putting fresh positions ahead of the G-20 meeting

- EUR/USD consolidated around the 1.1250 area after falling the prior three sessions

- USD/JPY probed towards the critical 110 neighborhood during Asia on reports that BOJ might return to QQE for easing rather than push rates deeper into negative territory at its April meeting. BOJ said to be receptive to increasing ETF purchases as it had concerns about cutting rates and buying bonds due to diminishing returns on Abenomics

Fixed Income:

- Bund futures trade at 163.69, up 20 ticks on quiet European trade as European indices give back some ground. Futures trade within the recent 163.15 to 164 range, with resistance remaining at 164.07 followed by 164.35 with a break testing 164.60 contract highs. Analysts see support at 163.07-15 region, with further momentum seeing 162.22 capping the move.

- Gilt futures trade at 121.11 up 21 ticks in quiet trade with less then 20K contracts traded so far. A move above yesterday's high of 121.23 targets 121.58 before testing contract highs at 122.13 with a move above eyeing 122.44. A move below 120.63 low targets 120.52 then 120.22. Short Sterling futures trade flat to 1bp higher across the strip. Interest is low with below average volume so far. Mar17Mar18 spread is trades at 14/15 up marginally from yesterdays lows following the BoE rate decision.

- Friday's liquidity report showed Thursday's excess liquidity fell to €741.6B a fall of €11.7B from €753.3B prior. This was primarily due to AFs and MonPol portfolios rising to €337.5B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility rose to €512M from a prior €491M.

- Corporate issuance saw 1 domestic deal today, with Bank of America selling $5.0B in a 3 part offering, following its Q1 results. This brings the weeks issuance excluding SSA to $18.5B, with one session remaining. IG issuance is expected to continue to slow as the market focuses on earnings. For the week ended April 14 Lipper US fund flows reported IG Net inflows of $824M bring YTD inflows to $1.33B, High yield funds net inflows $84.6M bring YTD inflows to $8.96B.

 

Looking Ahead

- 06:00 (IE) Ireland Feb Trade Balance: No est v €5.0B prior

- 06:00 (UK) DMO to sell combined £4.0B in 1-month, 3-month and 6-month Bills (£0.5B, 1.5B and £2.0B respectively)

- 06:00 (IS0 Iceland to sell 6.25% 2020 Bonds

- 06:45 (US) Daily Libor Fixing

- 07:00 (IL) Israel Mar CPI M/M: -0.1%e v -0.3% prior; Y/Y: -0.6%e v -0.2% prior

- 07:30 (TR) Turkey Central Bank TCMB Survey of Expectations

- 07:30 (IN) India Weekly Forex Reserves

- 08:00 (IS) Iceland Mar Unemployment Rate: No est v 2.9% prior

- 08:00 (ES) Spain Debt Agency (Tesoro) announces specific SPGB bonds to be issued in next week auction

- 08:00 - (BE) Belgium Debt Agency (BDA) announces size for upcoming 2021, 2026, 2031 and 2035 OLO bond auction

- 08:15 (US) Baltic Dry Bulk Index

- 08:30 (US) Apr Empire Manufacturing: 2.00e v 0.62 prior

- 08:30 (CA) Canada Feb Manufacturing Sales M/M: -1.5%e v +2.3% prior

- 08:30 (CA) Canada Mar Teranet/National Bank HPI M/M: No est v 0.6% prior; Y/Y: No est v 6.5% prior, House Price Index: No est v 178.40 prior

- 09:00 (CA) Canada Mar Existing Home Sales M/M: No est v 0.8% prior

- 09:00 (PL) Poland Mar YTD Budget Balance Level (PLN): No est v No prior; Budget Balance Performance YTD: No est v no prior

- 09:00 (BE) Belgium Feb Trade Balance: No est v €0.0B prior

- 09:00 (IT) Bank of Italy (BOI) Quarterly Economic Bulletin

- 09:15 (US) Mar Industrial Production M/M: -0.1%e v -0.5% prior; Capacity Utilization: 75.3%e v 75.4% prior (revised from 76.7%); Manufacturing Production: 0.1%e v 0.1% prior (revised from 0.2%)

- (EU) EUs Juncker speech at World Bank in Washington

- 10:00 (US) Apr Preliminary University of Michigan Confidence: 92.0e v 91.0 prior

- 11:00 (EU) Potential sovereign ratings after European close (Slovakia Sovereign Debt to be rated by Moody's; Czech Rupublic, Luxembourg, Norway, Russia by Fitch

- 12:30 (US) Fed's Evans (dove, non-voter)

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

- 16:00 (US) Feb Long-term TIC Flows: No est v -$12.0B prior; Total Net TIC Flows: No est v -$118.4B prior

Weekend:

- Doha meeting of major crude producers