Hello
EUROPE: There is little in the way of an overnight lead from Asia on Monday,
with both China and Japan closed for national holidays. However, there is a full
calendar on both sides of the Atlantic. German April flash HICP numbers are due
for release, although there is no scheduled time for release. Flash HICP
inflation data should ease any Germanic qualms about the inflationary risks of a
rate cut, given recent falls in crude and commodity prices. Analysts are looking
for a number of -0.1% m/m and 1.7% on year. Spanish flash HICP numbers are
expected at 0700GMT, along with the release of the Spanish March retail sales
numbers.At 0730GMT, the Swedish Riksbank monetary policy minutes from the April
meet will cross the wires. The Italian Apr ISTAT business survey numbers will be
released at 0800GMT. At 0830GMT, the German Export and Wholesale Association
will release their export forecasts, in Berlin. Eurozone April consumer
confidence and business climate indicator numbers are due at 0900GMT, ECB
Executive Board member Joerg Asmussen is slated to speak at the International
Institute of Finance meeting in Berlin.
At 1245GMT, German Finance Minister Wolfgang Schaeuble and Spanish Economics
Minister Luis de Guindos will give a joint press conference, in Loja, Spain.
EUROPE: The centre-right won the Icelandic elections at the weekend, in a
crushing defeat for the nation's first left wing government.
ITALY: A new Italian government was sworn in at the weekend, with a
three party coalition built around new PM Enrico Letta. The government faces
confidence votes in both house chambers on Monday, although the coalition should
win them comfortably.
RATINGS: Moody's Investors Service affirmed Italy's Baa2 sovereign bond
ratings late Friday and also maintained the negative outlook. The Baa2 rating
is 2 notches above junk status and 1 notch ahead of S&P & Fitch Ratings. Moody's
said it would consider downgrading Italy's government debt rating in the event
of "additional deterioration in the country's economic prospects, a decrease in
its primary surplus and/or a need for a significant recapitalisation of banks by
the government". A deterioration in the sovereign's funding conditions would
also put downward pressure on Italy's rating. More specifically, should Italy's
ability to access to public debt markets become constrained and the country were
to require external assistance, Moody's would likely downgrade Italy's sovereign
rating, possibly by more than one rating notch.
ITALY: Goldman Sachs recommends going long Italian 10-year benchmark BTP bons
against their French counterparts (OATs), given "the big macro valuation gap
existing between them". GS notes that the spread closed at 231bps on Friday, and
says it would set its initial target at 180bp, and stops on a close above 260bp.
"Short positioning has amplified the rally in French bonds following the
announcement by the BoJ to expand its bond purchase program. But the long-end of
France is now in a vulnerable position: the spread pick-up in the 10-year area
does not reflect its relative fundamental picture (it trades close to two
standard deviations 'rich' on our valuations), and could attract fresh shorts
should the broader market take a negative turn. Whereas, if the trend towards
EMU-spread compression continues, as we expect, Italy should be one of the main
beneficiaries, as the 10-/30-year part of the BTP curve now stands out as one of
the cheapest among the most liquid EMU markets, when judged against macro and
fiscal factors", wrote GS.
FRANCE: French President Hollande is set to "woo" biog business with plans to
"slash" capital gains tax, the FT reports.
GREECE: The Greek parliament approved midnight Sunday a multi-reform bill that
paves the way for lay-offs in the public sector. After just one day of debate
and with 168 votes in favor and 123 against, the bill passed with comfortable
majority. More on MNI main wire.
INDUSTRY NEWS: The FT says Europe's money market fund industry will be "killed
off" by tough new regulations from Brussels.
UK PRESS: Lending to UK companies is expected to rise 3% in 2013, the latest
Ernst & Young Item Club quarterly report says. The report suggests the uptick in
lending could come as companies seek funds for new investments as confidence
increases, the paper notes.
UK PRESS: The Independent says the London property market is showing signs of
demand not seen since the start of the GFC, with average selling times now at
4.6 weeks - the lowest since October 2007.
US:At 1230GMT, US Personal income is released and is forecast to rise 0.4% in
March, as payrolls rose only 88,000 and hourly earnings were flat, though the
average workweek was 0.1 hour longer at 34.6 hours. PCE is expected to hold
steady, as retail sales fell 0.4% both including and excluding motor vehicle
sales. There were declines in a variety of retail categories. The core price
index is expected to post a 0.1% rise.
The calendar across the pond continues at 1330GMT, with the release of the MNI
Capital Goods Index for the April 26 week.
At 1400GMT, the March NAR Pending Home Sales numbers will cross the wires, while
the MNI Retail Trade Index for the April 27 numbers are expected.
At 1430GMT, the April Dallas Fed Manufacturing Survey is set for release.
US PRESS: Profits at China's major industrial firms rose by 5.3% y/y in March,
down sharply from a rise of 17.2% in the first two months of this year, The Wall
Street Journal reported at the weekend citing the National Bureau of Statistics.
FOREX (CFTC): Speculative accounts increased their net euro short position but trimmed
their net yen short position as of April 23, according to U.S. CFTC data
released late Friday. The CFTC's COT report - non-commercial, futures-only
section, excluding options - showed speculators had a net euro short position of
-34,275 contracts as of Tuesday, compared to last week's net euro short of
-29,764 and the net short of -65,701 contracts seen the week ending April 2,
which was the largest net euro short position since November 27. Spec accounts
had a net yen short of -79,730 contracts as per April 23, versus the prior
week's net yen short of -93,411 contracts, which was very close to the yen short
of -94,401 contracts from Dec 11, which was the largest net yen short position
since July 2007. The record net yen short of -188,077 contracts was seen June
26, 2007. The euro closed near $1.2996 and dollar-yen at Y99.48 April 23, which
compared to closing levels Friday at $1.3025 and Y98.23.
EURO SUMMARY: Closed in NY Friday at $1.3030 after rate had recovered off
intraday lows of $1.2991 with the dollar under pressure following the release of
softer than forecast US Q1 GDP data. The GDP data, along with Jon Hilsenrath's
comment in the WSJ that the Fed is likely to continue their easy money policies,
acted to weigh further on the dollar into Asia, with Italy forming a government
over the weekend was also mentioned as euro-dollar picked up early demand. The
early move triggered stops through $1.3060/65 taking the rate on to $1.3068
($1.3069 76.4% $1.3094-1.2989) before momentum faltered. Macro/real money
accounts were sellers off the highs as rate slipped back to $1.3032, settling
between $1.3045/55 through the Asian afternoon.
Thursday's ECB rate decision
remains in focus with many suggesting a 25bp rate cut, with interest to see if
further credit easing schemes are suggested. Ahead of this we have FOMC
Wednesday, recent data likely to have put talk of early tapering on the back
burner, US NFP due up Friday. Offers $1.3070-80, stronger interest noted into
$1.3100. Support $1.3030-20, more toward $1.3000 ahead of recent lows between
$1.2991-89. Stops $1.2980, further demand $1.2960 with larger stops below.
STERLING SUMMARY: Cable closed in NY Friday $1.5473 after rate had failed to
take out barrier interest at $1.5500 on two attempts, easing off session highs
of $1.5499, though underlying tone into the close remained buoyant.
The pound
continued to feel the positive effects from Thursday's release of stronger than
forecast Q1 GDP, and with dividend related demand (oil company interest rolls
over into today along side HSBC dividend demand at around 1000GMT) expected to
support this underlying positive tone, with the large Verizon-Vodafone buy out
bubbling away in the background. Rate edged higher into early Asia and had an
early look at the $1.5500 level, backed away to $1.5478 before stronger demand
emerged to take rate on to $1.5525, extending to an eventual high of $1.5527
before momentum faded. Rate settled around $21.5520 ahead of the European open.
Focus this week will be on UK PMI's (Wed-Thu-Fri) to see if this more forward
looking data supports last Thursday's GDP data and this trend can be sustained.
Cable offers seen into $1.5530, a break to open a move on toward $1.5550 ahead
of $1.5570/80 ($1.5574 100-dma), though some already suggesting room for for a
move on to $1.5610. Support $1.5475/70 ahead of $1.5450 and $1.5420.
EURO-STERLING: Rate closed in NY at stg0.8418 having seen lows on the day at
stg0.8398. This recovery continued into Asia, the rate pushing up to stg0.8439
in opening trade before drifting off to stg0.8406 ahead of the European open.
Rate currently trades around stg0.8418 in opening Europe trade. Bids remain in
place between stg0.8400-0.8395 with stops placed through stg0.8390. Resistance
stg0.8440/50.
YEN SUMMARY: Dollar-yen closed in NY Friday at Y98.05 after rate had traded with
a heavy tone through Friday's session, the release of weaker than forecast US
GDP data adding further weight that took rate to lows of Y97.56 (after Friday's
option cut). Rate recovered to Y98.33 before slipping back into the week's
close. Early buying into Asian trade saw rate push up to Y98.12 before settling
just above the figure into the main Asian open (Japan closed).
Dollar continued
to hold soft following Friday's GDP, with WSJ Hilsenrath comments expecting the
Fed to continue easy monetary policies and FT note that Japanese investors are
bringing money back onshore, acted to take rate through Y97.50, with triggered
stops extending the move to Y97.35. Rate recovered through the balance of the
session, trading around Y97.70 into Europe. Euro-yen tracked dollar-yen moves,
touched an early high of Y128.04 before turning lower. Rate took out NY lows of
Y127.15 before basing at Y127.06, recovering to Y127.50 into Europe. Dollar-yen
offers Y98.10/20, Y98.50-70 then Y99.00. Support Y97.35 ahead of stronger
interest into Y97.00.
A reminder that markets in China and Japan are closed today for holidays.
Chinese markets are closed until Wednesday. Japanese markets are open Tuesday to
Thursday and close again on Friday and May 6.
OPTIONS: FX: Option expiries for today's 1000ET cut,
* Euro-dollar; $1.2850, $1.2900
* Dollar-yen;
Y96.50(large), Y97.50, Y98.00,
Y98.30(large), Y98.80, Y100.00
* Euro-Sterling; stg0.8600, stg0.8640
* Aussie; $1.0200, $1.0260, $1.0280, $1.0285/95, $1.0300, $1.0365, $1.0450
* Aussie-yen; Y102.00
* Kiwi; $0.8350
* Dollar-Canada; C$1.0340
EUROZONE T-BILL ISSUANCE: Eurozone Sovereign T-bill issuance for this week are
planned from Germany, France, and Belgium. Supply is estimated to be around
E13.0bln, down from E21.294bln issued last week. First up on Monday will be
Germany with plans to issue new 12-month Apr 30, 2014 Bubill for up to E3.0bln.
In the afternoon France plan to issue new 3-month Aug 1 BTF for between
E3.6-E4.0bln, re-open 6-month Oct 3 BTF for between E1.6-E2.0bln and issue new
12-month Apr 30, 2014 BTF for between E1.6-E2.0bln. On Tuesday, Belgium plan to
tap 3-month Jul 18, 2013 T-bill and tap 6-month Oct 17, 2013 T-bill for
indicative amount of between E1.5bln and E2.0bln. In terms of T-bill redemptions
for this week, we have France E8.397bln, Netherlands E7.18bln, and Italy E9.2bln
giving potential positive net cash flow of E11.7bln.
GERMAN T-BILL AUCTION PREVIEW: The Deutsche Finanzagentur is planning to issue
up to E3.0bln of a new 12-month Bubill maturing Apr 30, 2014 on Monday. Current
12-month Bubill yield has gradually moved lower and into negative territory
during April on safe haven buying as concerns over EU growth re-surface
following weakening EMU data, and increase market expectations of an ECB rate
cut. For comparison at the last 12-month T-bill auction back on Mar 25, the
treasury allotted E2.915bln at an average yield of 0.017%, cover of 1.5 times,
and with only E85mln or 2.8% retained for secondary market operations. At last
months sale, the 12-month Eonia rate was around 0.104%, therefore giving a
spread of -8.7bps, currently 12-month Eonia is seen around 0.078% level. There
will be no Bubill redemption this week, therefore leaves net cash negative to
the tune of E3.0bln.
Results due to be announced shortly after 0930GMT.
FRANCE T-BILL AUCTION PREVIEW: France's Agence France Tresor (AFT) plan to issue
new 3-month Aug 1, 2013 BTF for between E3.6-E4.0bln, re-open 6-month Oct 3,
2013 BTF for between E1.6-E2.0bln, and issue new 12-month Apr 30, 2014 BTF for
between E1.6-E2.0bln on Monday. The BTF yield curve has continued to bull
flatten last week, as market expectations for a rate cut by the ECB have
increased. There will be a BTF redemption this week of E8.397bln, leaving net
cash flow positive to the tune of E397mln seen as supporting demand. For
comparison on Apr 22, the AFT sold E3.995bln 3-month BTF at an average yield of
0.003% with cover of 2.64 times, E1.992bln 6-month BTF at an average yield of
0.024% with cover of 3.29 times, and E1.995bln 12-month BTF at an average yield
of 0.054% with cover of 3.75 times.
Results due to be announced around 1255GMT.
EUROZONE: Timeline of key events in the eurozone for next few weeks:
- Apr 29 Italy sells 5-/10-year benchmark BTP bonds for up to E6.0bln
- Apr 29 EMU Apr business climate/consumer confidence
- Apr 30 Eurozone flash HICP
- Apr 30 Italy T-bill redemption for E8.0bln
- Apr 30 Spain bond redemption for 2.30% Bono for E14.94bln
- Mar 01 European PMI manufacturing survey
- May 02 ECB Governing Council meeting, Draghi press conference
- May 03 EU releases Spring Economic Forecasts
- May 06 ECB Draghi speaks at LUISS Guido Carli in Rome
- May 08 ECB start of reserve maintenance period
- May 09 Spain bond auction
- May 10/11 G8 FinMin & central bank governors meeting
- May 13 Eurogroup meeting
- May 13 Italy BTP auctions
- May 14 EcoFin meeting
US: Timeline of key events in the US over the next few days:
- Apr 29 UST announces 4 wk at 1100ET
- Apr 29 UST auctions 3/6m bills at 1130ET
- Apr 29 Outright Tsy Cpon Purc Feb 15 2036-Feb 15 2043 $1.25-$1.75B
- Apr 29 USTsy financing needs at 1500ET
- Apr 30 Outright Tsry Cpon Purc Apr 30 2017-Dec 31 2017 $4.25-$5.25B
- Apr 30 UST auctions 4wk, 52wk at 1130ET
- Apr 30 Tentative outright Tsy op schedule release at 1400ET
- Apr 30-May 01 FOMC policy meeting
- May 01 UST refunding announcement, 3-10-30y at 0900ET
- May 01 FOMC policy statement at 1400ET
- May 01 Tsy Miller at Investment Co Inst in Washington 1530ET
- May 02 Fannie Mae to announce Benchmark Note issuance
- May 02 UST announces 3/6m bills at 1100ET, Money Supply (M2) at 1630ET
- May 02-04 Pres Obama travels to Mexico & Costa Rica
- May 03 April Nonfarm Payrolls, est +160k at 0830ET
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