UK climbs out of shallow recession – US-Israel pressure eases
|EU mid-market update: UK climbs out of shallow recession; US-Israel pressure eases; TSMC sales jump 60% over last year; Japanese earnings surge.
Notes/observations
- UK on track to exit technical recession after Q1 preliminary GDP beats estimates. Also saw strength in industrial and manufacturing production with smaller than expected trade deficit. Follows BOE leaving Bank Rate unchanged at 5.25% yesterday.
- TSMC’s April monthly sales jumped about 60% Y/Y, notable acceleration from about 34% growth pace last month.
- US attempts to backtrack on ultimatum of pausing weapon shipments if Israel attacks Rafah. White House said they had not made a final determination while a yet-to-be released Israel Conduct report is said to exclude mentioning that Israel broke the rules for weapon usage.
- European and US corporate earnings volume begins to tail off, however today saw a busy session of Japanese earnings after market close. Including major names such as Mazda, Honda and Tokyo Electron.
- Asia closed higher with Hang Seng outperforming +2.3%. EU indices are +0.5-1.1%. US futures are +0.2-0.4%. Gold +1.2%, DXY 0.0%; Commodity: Brent +0.3%, WTI +0.4%; Crypto: BTC +2.6%, ETH +1.6%.
Asia
- Japan Mar Household Spending Y/Y: -1.2% v -2.3%e [13th straight decline].
- Japan Mar Current Account Balance ¥€3.40T v ¥3.455Te.
- Japan Apr Bank Lending Y/Y: No est v 3.2% prior; Bank Lending (ex-trusts) Y/Y: No est v 3.6% prior.
- New Zealand Apr Manufacturing PMI: 48.9 v 46.8 prior (14th straight contraction).
- Japan’s Finance Ministry reported that Japan recorded it’s biggest-ever currency surplus of ¥5.4T this past fiscal year.
Global conflict/tensions
- Biden Admin not sure how to move forward with paused weapon shipments to Israel.
Americas
- Mexico Central Bank (Banxico) left Overnight Rate unchanged at 11.00% (as expected).
- Peru Central Bank (BCRP) cut Reference Rate by 25bps to 5.75% (as expected).
- US set to impose tariffs on China EVs and key sectors after Trade Review.
Speakers/fixed income/FX/commodities/erratum
Equities
Indices [Stoxx600 +0.77% at 520.78, FTSE +0.61% at 8,432.37, DAX +0.79% at 18,826.65, CAC-40 +0.73% at 8,247.13, IBEX-35 +0.53% at 11,108.25, FTSE MIB +0.93% at 34,659.00, SMI +1.02% at 11,720.50, S&P 500 Futures +0.28%].
Market focal points/key themes: European indices open higher across the board and advanced as the session progressed; all sectors start the day in the green; Denmark closed for holiday; among sectors leading the way higher are materials and utilities; while media and consumer discretionary were among the lagging sectors; materials sector supported by broad strengthen in commodities; Leonardo confirms sales of UAS to Fincantieri; focus on release of ECB minutes later in the day; earnings expected in the upcoming US session include Enbridge and Ubiquiti.
Equities
- Consumer discretionary: International Consolidated Airlines [IAG.UK] +1.5% (earnings).
- Materials: CRH [CRH.UK] +3.5% (trading update, affirms guidance).
- Healthcare: Sanofi [SAN.FR] +1.0% (Novavax and Sanofi announce co-exclusive licensing agreement to co-commercialize COVID-19 Vaccine and Develop Novel COVID-19-Influenza Combination Vaccines).
- Industrials: CNH Industrial [CNHI.IT] +1.0% (Iveco results read-across), Iveco [IVG.IT] +7.5% (results, affirms guidance).
- Technology: Infineon Technologies [IFX.DE] +2.0% (TSMC monthly sales).
- Telecom: Vodafone [VOD.UK] +2.5% (UK clears Three deal), Rightmove [RMV.UK] -2.0% (trading update).
Speakers
- Czech Central Bank (CNB) May Minutes noted that the vote was not unanimous (5-2) to cut by 50bps (dissenters sought 75bps cut). Noted that rate reduction process could be paused or terminated at any time. Rate remains atl restrictive levels if inflation, especially its core component, did not develop in line with forecast.
- Czech Central Bank Holub (Chief Economist) stated that could not rule out another 50bps rate cut; Needed to take into account FX level when setting rates.
Currencies/fixed income
- USD was on the defensive on Friday as hopes for a Fed rate cut edged higher given a spate of soft US economic data.
- EUR/USD drifting higher but remained below the 1.08 level. Markets currently see 3 ECB rate cuts this year.
- GBP was firmer following the UK Q1 GDP data that saw the country exit its technical recession. Dealers saw signs that the UK economy would keep growing ahead.
- Norway Apr CPI data came in slightly higher-than-expected but continued its improvement from month ago levels. Dealers noted that lower inflation pointed to lower rates ahead but higher economic activity would lessen the need for rate cuts.
Economic data
- (UK) Mar Monthly GDP M/M: 0.4% v 0.1%e.
- (UK) Q1 Preliminary GDP Q/Q: 0.6% v 0.4%e; Y/Y: 0.2% v 0.0%e.
- (UK) Q1 Preliminary Private Consumption Q/Q: 0.2% v 0.4%e; Government Spending Q/Q: 0.3% v 0.6%e; Gross Fixed Capital Formation Q/Q: +1.4% v -0.3%e; Exports Q/Q: -1.0% v -1.1%e; Imports Q/Q: -2.3% v -0.5%e.
- (UK) Q1 Preliminary Total Business Investment Q/Q: 0.9% v 0.0%e; Y/Y: -0.6% v +2.8% prior.
- (UK) Mar Industrial Production M/M: +0.2% v -0.5%e; Y/Y: 0.5% v 0.3%e.
- (UK) Mar Manufacturing Production M/M: +0.3% v -0.5%e; Y/Y: 2.3% v 1.7%e.
- (UK) Mar Construction Output M/M: -0.4% v +0.5%e; Y/Y: -2.2% v -1.1%e.
- (UK) Mar Index of Services M/M: 0.5% v 0.0%e; 3M/3M: 0.7% v 0.4%e.
- (UK) Mar Visible Trade Balance: -£14.0B v -£14.4Be; Overall Trade Balance: -£1.1B v -£2.1Be.
- (NO) Norway Apr CPI M/M: 0.8% v 0.6%e; Y/Y: 3.6% v 3.5%e.
- (NO) Norway Apr CPI Underlying M/M: 0.9% v 0.8%e; Y/Y: 4.4% v 4.2%e.
- (NO) Norway Apr PPI including Oil M/M: 3.4% v 2.7% prior; Y/Y: -4.5% v -6.9% prior.
- (SE) Sweden Mar Private Sector Production M/M: 0.6% v 0.2% prior; Y/Y: +0.4% v -1.3% prior.
- (SE) Sweden Mar Industrial Orders M/M: 1.8% v 5.1% prior; Y/Y: +1.0% v -3.3% prior.
- (SE) Sweden Mar Industry Production Value Y/Y: +2.9% v -2.5% prior; Service Production Value Y/Y: 0.8% v 0.0% prior.
- (SE) Sweden Mar Household Consumption M/M: 0.5% v -0.2% prior; Y/Y: 1.2% v 0.2% prior.
- (DK) Denmark Apr CPI M/M: 0.1% v 0.0% prior; Y/Y: 0.8% v 0.9% prior.
- (DK) Denmark Apr CPI EU Harmonized M/M: 0.0% v 0.0% prior; Y/Y: 0.5% v 0.8% prior.
- (HU) Hungary Apr CPI M/M: 0.7% v 0.7%e; Y/Y: 3.7% v 3.7%e.
- (AT) Austria Mar Industrial Production M/M: -0.7% v 0.0% prior; Y/Y: -5.4% v -7.6% prior.
- (TR) Turkey Mar Unemployment Rate: 8.6% v 8.7% prior.
- (TR) Turkey Mar Industrial Production M/M: -0.3% v +2,8% prior; Y/Y: 4.3% v 11.2% prior.
- (CZ) Czech Apr Unemployment: 3.7% v 3.7%e.
- (TH) Thailand May Gross International Reserves w/e May 3rd: $223.5B v $221.5B prior.
- (CN) Weekly Shanghai copper inventories (SHFE): 290.4K v 288.3K tons prior.
- (IT) Italy Mar Industrial Production M/M: -0.5% v +0.3%e; Y/Y: -3.5% v -3.3% prior; Industrial Production NSA (unadj) Y/Y: -10.6% v 0.3% prior.
- (GR) Greece Mar Industrial Production Y/Y: -0.6% v +1.6% prior.
Fixed income issuance
- (IN) India sold total INR200B vs. INR200B indicated in 2030 and 2053 bonds.
- (IT) Italy Debt Agency (Tesoro) sold total €9.25B vs. €7.5-9.25B indicated range in 3-year, 7-year and 50-year BTP Bonds (5 tranches).
Looking ahead
- 05:25 (EU) Daily ECB Liquidity Stats.
- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2033, 2046 and 2058 Bonds.
- 06:00 (PT) Portugal Mar Trade Balance: No est v -€2.4B prior.
- 06:00 (IT) Italy Feb Industrial Sales M/M: No est v -3.1% prior; Y/Y: No est v -3.6% prior.
- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£0.5B, £2.0B and £3.5B respectively).
- 07:15 (UK) BOE Pill (chief economist).
- 07:30 (IN) India announces upcoming bill issuance (held on Wed).
- 08:00 (IN) India Mar Industrial Production Y/Y: 5.2%e v 5.7% prior.
- 08:00 (UR) Ukraine Apr CPI M/M: 0.7%e v 0.5% prior; Y/Y: 3.7%e v 3.2% prior.
- 08:00 (IS) Iceland Apr Unemployment Rate: No est v 3.8% prior.
- 08:00 (BR) Brazil Apr IBGE Inflation IPCA M/M: 0.4%e v 0.2% prior; Y/Y: 3.7%e v 3.9% prior.
- 08:00 (MX) Mexico Mar Industrial Production M/M: +0.4%e v -0.1% prior; Y/Y: -2.9%e v +3.3% prior; Manufacturing Production Y/Y: -3.2%e v +2.3% prior.
- 08:00 (UK) Daily Baltic Dry Bulk Index.
- 08:30 (CA) Canada Apr Net Change in Employment: +20.0Ke v -2.2K prior; Unemployment Rate: 6.2%e v 6.1% prior; Full Time Employment Change: No est v -0.7K prior; Part Time Employment Change: No est v -1.6K prior; Participation Rate: 65.3%e v 65.3% prior; Hourly Wage Rate M/M: 4.7%e v 5.0% prior.
- 08:30 (CL) Chile Central Bank Economist Survey.
- 09:00 (US) Fed’s Bowman.
- 09:00 (PL) Poland Central Bank (NBP) Gov Glapinski post rate decision press conference.
- 10:00 (US) May Preliminary University of Michigan Confidence: 76.2e v 77.2 prior.
- 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE).
- 12:00 (EU) Potential sovereign ratings after European close.
- 12:45 (US) Fed's Goolsbee.
- 13:00 (US) Weekly Baker Hughes Rig Count.
- 14:00 (US) Apr Monthly Budget Statement: -$250.0Be v -$236.5B prior.
- 15:00 (AR) Argentina Mar Wages M/M: No est v 13.3% prior.
- 21:30 (CN) China Apr CPI Y/Y: 0.2%e v 0.1% prior; PPI Y/Y: -2.3%e v -2.8% prior.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.