European service PMIs slump to record low levels

Notes/Observations

- Major European PMI Service slump to record low readings for Mar (Spain, Italy, France, Germany and Euro Zone all at record low readings)

- OPEC+ said to be prepared to hold a conference call on Monday, Apr 6th to discuss possible production cuts (6-10M range rumored). Russia likely to only come onboard if US joins in cutting supply)

- China PBoC announces another targeted RRR cut for small banks

Asia:

- Australia Feb Retail Sales M/M: 0.4% v 0.5%e

- China Mar Caixin PMI Services: 43.0 v 39.0e (2nd consecutive contraction and 2nd weakest reading on record)

- China PBOC Vice Gov Liu stated that the benchmark deposit rate was bedrock of PBOC toolbox but further consideration was needed before changing deposit rate. He added that a deposit rate cut was constrained by high CPI and Yuan (CNY) depreciation risk

- Japan PM Abe reiterated stance that govt not hesitate to declare state of emergency when necessary; had just been holding up in fight against coronavirus

- Japan Econ Min Nishimura stated that would decide on economic stimulus next week

Coronavirus:

- Global cumulative cases: 1,015,709 (+8.4%); cumulative deaths 53.1K (+12.4%)

- Detail of various countries: US 230.1K (+13.5%), Italy 115.2K (+4.2%), Spain 75.0K (+4.0%), Germany 87.8K (+8.7%), France 42.0K (-2.8%), UK 31.1K (+13.6%), Japan 2,.1K (+12.2%), South Korea 3.9K (-2.8%)

Americas:

- S&P affirmed United States sovereign rating at AA+; Outlook remained stable

Mid-East/Energy:

- White House reportedly calling for 10-15M bbl oil production cut after speaking with the Saudis and Russians

- President Trump: Saudi Arabia and Russia may cut oil by more than 10M barrels/day

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx600 -0.74% at 309.80, FTSE -1.03% at 5,423.50, DAX -0.44% at 9,529.00, CAC-40 -0.94% at 4,181.37, IBEX-35 -0.12% at 6,566.00, FTSE MIB -1.45% at 16,589.50, SMI -0.16% at 9,256.50, S&P 500 Futures -1.17%]

Market Focal Points/Key Themes: European indices open generally negative and remained slighly lower during the session, with IBEX notable exception; consumer discretionary among better performers; financials among underperformers; energy stocks among worse performers after rebound yesterday; reportedly Saudi Arabia supported call for OPEC meeting; reportedly Italy's new stimulus package at €40B; France and Italy considering extension of lockdowns; upcoming earnings expected in the US session include Constellation Brands

 

Equities

- Consumer discretionary: H&M [HMB.SE] +8% (earnings)

- Energy: Tullow Oil [TLW.UK] +27% (liquidity update)

- Healthcare: Siemens Healthineers [SHL.DE] +4% (COVID-19 test kit)

- Industrials: Aston Martin Lagonda Global Holdings [AML.UK] -17% (placement)

 

Speakers

- ECB's Rehn (Finland): Pendemic Bond Buying Fund (PPEP) was the central pillar of ECB's response to virus crisis. OMT bond buying scheme was part of ECB's tool box. He reiterated Council that Euro Area needed a strong fiscal response to complement monetary policy; need to coordinate policy and that coronabonds were one option

- Italy PM Conte said to have to EU President Von Der Leyen that region must be bold in its decision to address the current crisis. Italy reiterated its stance that EU needed coronavirus bonds, ESM bonds were not sufficient

- EU's Dombrovskis stated that was open to all options on toolkit - including eurobonds noted that the use of ESM bailout fund was logical for current crisis because the entity was already capitalized

- Sweden Central Bank (Riksbank) Gov Ingves stated that it had implemented forceful measures but prepared to do more to get the economy out of crisis

- Japan Senior Ruling LDP official Kishida stated that reached an agreement with PM Abe to offer ¥300K in cash payments per household that suffered certain degree of income declines from the coronavirus pandemic [vs ¥200-300K speculated]

- Japan LDP official Amari: Tax changes to be a part of stimulus package that was expected to be unveiled next week but would NOT fund the economic package with tax hikes

- S&P affirmed Japan's sovereign rating at A+; outlook positive

- Thailand Dep PM Somkid stated that upcoming economic measures to account for approx 10% of GDP and be financed by fiscal budget and borrowings

- Singapore PM Lee announced lockdown to combat the coronavirus; to tighten restrictions on movement and gatherings; effective from Sunday Apr 5th. To close schools, most workplaces to stop virus spread. Clinics, supermarkets and hospitals to remain open. Stressed that Singapore had enough food supply

- China PBoC to cut RRR in a targeted move for smaller banks by 100bps in two phases

- OPEC+ said to be preparing for meeting as soon as next week (Apr 6-10th period) and to discuss possible 10Mbpd production cut. Russia said to be unlikely to join any deepening of production cuts IF US did not participate in cuts (**Note: US and Canadian official invited to participate in Monday's webinar)

 

Currencies/Fixed Income

- USD continued its form tone against the major pairs as participants continued to favor safe-haven assets as disappointing economic data continued to come in from other G7 members. The greenback benefits as global recession fears terrify markets.

- EUR/USD back at multi-week lows as the pair moved below 1.08th the dismal PMI Services data for Europe acting as a headwind for the Euro

- GBP/USD lower by 0.8% testing the 1.23 area and USD/JPY higher by 0.4% and back above the 108 handle.

 

Economic Data

- (RU) Russia Mar PMI Services: 37.1 v 45.8e (1st contraction in 9 months); PMI Composite: 39.5 v 50.9 prior

- (SE) Sweden Mar PMI Services: 46.9 v 56.7 prior (1st contraction in 3 months); PMI Composite: 45.9 v 55.7 prior

- (FR) France Feb YTD Budget Balance: -€35.2B v -€20.0B prior

- (ES) Spain Feb Industrial Output NSA Y/Y: +0.1% v -3.8% prior; Industrial Output SA Y/Y: -1.3% v -1.0%e; Industrial Production M/M: 0.0% v 0.0% prior

- (TR) Turkey Mar CPI M/M: 0.6% v 0.5%e; Y/Y: 11.9% v 11.8%e; CPI Core Index Y/Y: 10.5% v 10.5%e

- (TR) Turkey Mar PPI M/M: 0.9% v 0.5% prior; Y/Y: 8.5% v 9.3% prior

- (HU) Hungary Feb Retail Sales Y/Y: 11.3% v 6.3%e

- (ES) Spain Mar Services PMI: 26.7 v 25.8e (1st contraction in 77 months and record low); Composite PMI: 23.0 v 30.8e

- (ZA) South Africa Mar PMI (whole economy): 44.5 v 47.0e (11th straight contraction and record low)

- (IT) Italy Mar Services PMI: 17.4 v 22.5e (1st contraction in 14 months); Composite PMI: 20.2 v 25.0e

- (FR) France Mar Final Services PMI: 24.9 v 29.0e (confirmed 1st contraction in 12 months and a record low reading); Composite PMI: 28.9 v 30.1e

- (DE) Germany Mar Final Services PMI: 31.7 v 34.2e (confirmed 1st contraction in 81 months and lowest reading since series began); Composite PMI: 35.0 v 36.8e

- (EU) Euro Zone Mar Final Services PMI: 26.4 v 28.2e (confirmed 1st contraction in 82 months and lowest reading since series began) Composite PMI: # v 31.4e

- (NO) Norway Mar Unemployment Rate: 10.7% v 13.0%e

- (IT) Italy Q4 YTD Budget Deficit to GDP Ratio: 1.6% v 3.1% prior

- (UK) Mar Final Services PMI: 34.5 v 34.8e (confirmed 2nd month of contraction and record low); Composite PMI: 36.0 v 36.0e

- (UK) Mar Official Reserves Changes: $2.2B v $1.8B prior

- (NG) Nigeria Mar PMI: 53.8 v 55.0 prior

- (EU) Euro Zone Feb Retail Sales M/M: 0.9% v 0.1%e; Y/Y: 3.0% v 1.6%e

- (CN) Weekly Shanghai copper inventories (SHFE): 332.4K v 377.3K tons prior

Fixed Income Issuance

- None seen

 

Looking Ahead

- 05:30 (ZA) South Africa to sell combined ZAR1.04B in I/L 2022, 2025 and 2050 Bonds

- 06:00 (UK) DMO to sell £7.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £4.0B respectively)

- 06:45 (US) Daily Libor Fixing

- 06:30 (IN) India Weekly Forex Reserve w/e Mar 27th: No est v $469.9B prior

- 07:30 (IS) Iceland to sell 2021 and 2026 RIKB Bonds

- 08:00 (MX) Mexico Mar Consumer Confidence: 39.9e v 43.9 prior

- 08:00 (UK) Daily Baltic Dry Bulk Index

- 08:00 (IN) India announces upcoming bill issuance (held on Wed)

- 08:30 (US) Mar Change in Nonfarm Payrolls: -100Ke v +273K prior; Change in Private Payrolls: -123Ke v +228K prior; Change in Manufacturing Payrolls: -10Ke v +15K prior

- 08:30 (US) Mar Unemployment Rate: 3.8%e v 3.5% prior; Underemployment Rate: No est v 7.0% prior; Labor Force Participation Rate: 63.3%e v 63.4% prior

- 08:30 (US) Mar Average Hourly Earnings M/M: 0.2%e v 0.3% prior; Y/Y: 3.0%e v 3.0% prior; Average Weekly Hours: 34.2e v 34.4 prior

- 09:00 (BR) Brazil Mar PMI Services: No est v 50.4 prior; PMI Composite Mar: No est v 50.9 prior

- 09:00 (SG) Singapore Mar Purchasing Managers Index: 47.0e v 48.7 prior; Electronics Sector Index: No est v 47.6 prior

- 09:00 (RU) Russia Q1 Consumer Confidence Index: No est v -13 prior

- 09:45 (US) Mar Final Markit Services PMI: 38.5e v 39.1 prelim; Composite PMI: No est v 40.5 prior

- 10:00 (US) Mar ISM Non-Manufacturing Index: 43.0e v 57.3 prior

- 11:00 (EU) Potential sovereign ratings after European close (Moody's on Iceland and Slovenia sovereign debt; S&P on France and Germay sovereign debt; Fitch on Belgium ad Cyprus sovereign debt; Canadian rating agency DBRS on Sweden sovereign debt)

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

- (MX) Citibanamex Survey of Economists

 

Sat data

- 13:00 (CO) Colombia Mar CPI M/M: 0.5%e v 0.7% prior; Y/Y: 3.7%e v 3.7% prior

- 13:00 (CO) Colombia Mar CPI Core M/M: No est v 0.6% prior; Y/Y: No est v 3.3% prior