China builds on support for housing to avoid structural collapse

Notes/observations

- China continues support for housing with an adjustment of interest rates for commercial housing loans and cut to mortgage floor rates. Later on in a PBOC housing meeting, provided details of several measures to help prop up the market. Announcement buoyed housing stocks in China.

- French unemployment was in line. Euro Zone Apr Final CPI was unrevised at 2.4% YoY and 2.7% for core (ECB target is 2%).

- Focus is on speaker schedule, with Fed’s Waller, Kashkari and Daly to speak. CME futures are pricing 9% chance of cut at next meeting on June 12th and about 65% chance for a cut by Sept’s meeting.

- Norway market is closed today, ahead of several European closures on Monday.

- Reminder Dow Jones (DJIA) hit 40,000 for the first time yesterday, but failed to close above; Oil edges higher on back of more positive inflation data and Fed rate cut expectations, copper consolidates recent gains at 4.937 +1.2%.

- Asia closed mixed with Shanghai outperforming +1.0%. EU indices are -0.4% to +0.7%. US futures are -0.1%. Gold +0.4%, DXY +0.3%; Commodity: Brent +0.1%, WTI 0.0%; Crypto: BTC -0.2%, ETH +0.6%.

Asia

- China Apr New Home Prices M/M: -0.6% v -0.3% prior.

- China Apr Industrial Production Y/Y: 6.7% v 5.5%e.

- China Apr Retail Sales Y/Y: 2.3% v 3.7%e.

- China Apr YTD Fixed Urban Assets Y/Y: 4.2% v 4.6%e.

- China Apr YTD Property Investment Y/Y: -9.8% v -9.6%e.

- China Apr Surveyed Jobless Rate: 5.0% v 5.2% prior.

- New Zealand Q1 PPI Input Q/Q: 0.7% v 0.9% prior; PPI Output Q/Q: 0.9% v 0.7% prior.

- South Korea Apr Unemployment Rate: 2.8% v 2.8% prior.

- BOJ Gov Ueda reiterated that no immediate plans to sell BOJ ETF holdings.

- China's Vice Premier He Lifeng: Local govts can purchase some homes for affordable housing at reasonable prices; China must effectively ensure delivery of.

- China PBoC adjust interest rates for commercial housing loans; scraps nationwide interest rate floor for 1st and 2nd homes.

Global conflict/tensions

- North Korea fired multiple short-range missiles off its eastern coastal town of Wonsan on Friday.

Europe

- ECB's Schnabel (Germany, hawk) said to be open to a June rate cut, but urged caution thereafter. Path beyond June was much more uncertain.

- Upcoming G7 Finance Ministers meeting in Italy said to back a EU plan to use the income from frozen Russian assets to help Ukraine's war effort. G7 looking to revive an international agreement on how to share taxing rights on large corporations.

Americas

- Fed’s Bostic (hawk, voter) stated that was pleased with inflation progress but more work needed to be done. Watching May, June inflation to make sure it did not revert.

- Fed's Mester (voter) stated that would take longer to gain confidence that inflation was moving to 2% target; Prudent to keep rates on hold for longer.

- US Sec Defense Austin to meet with China counterpart in Singapore later this month (**Note: Would be the 1st in person meeting in two years).

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.40% at 521.40, FTSE -0.36% at 8,408.36, DAX -0.41% at 18,649.40, CAC-40 -0.53% at 8,144.96, IBEX-35 +0.19% at 11,320.50, FTSE MIB -0.05% at 35,394.00, SMI +0.56% at 12,013.70, S&P 500 Futures -0.10%].

Market focal points/key themes: European indices open generally slightly lower and remained sluggish through the early trading hours; Norway closed for holiday; among better performing sectors are energy and telecom; sectors tending to the downside include consumer discretionary and technology; luxury subsectors supported following improved earnings from Richemont; GSK completes divestment of Halion stake; International Distribution Systems’ postal workers union issues strike notice following improved takeover offer from EP Group; Novartis reaches threshold to acquire Morphosys; no major earnings expected in the upcoming US session.

Equities

- UK Chancellor of the Exchequer (Fin Min) Hunt [CFR.CH] +5.5% (earnings; China retail sales data), International Distributions Services [IDS.UK] +0.5% (Postal Worker's Union issues strike notice warning to Czech billionaire Kretinsky).

- Consumer staples: Sainsbury [SBRY.UK] +0.5% (signs AI tools deal with Microsoft), Unilever [UNA.NL] +0.5% (first tranche of share buyback program).

- Financials: HSBC [HSBC.UK] -0.5% (Ping An considering selling additional shares of HSBC as it seeks to trim its $13B stake), Land Securities Group [LAND.UK] -2.0% (FY earnings), Scor [SCR.FR] -8.5% (Q1 results).

- Healthcare: Bayer [BAYN.DE] +0.5% (trial data), Haleon [HLN.UK] -0.5% (GSK sells Haleon shares - post close).

- Utilities: Engie [ENGI.FR] -2.0% (earnings) - Materials: BHP Group [BHP.UK] +1.0% (China cuts interest rates for housing loans and allow govt to purchase unsold homes), Lanxess [LXS.DE] -4.5% (analyst downgrade).

Speakers

- ECB's Holzmann (Austria, hawk) commented that inflation must be on path to target before rate cuts. Moving too early risked refueling inflation.

- ECB’s de Guindos (Spain, voter) stated tat inflation was seen moving towards target in 2025.

- Sweden Central Bank (Riksbank) Gov Thedeen commented that inflation was close to target; Reiterated could cut rates two more times in H2 if outlook held.

- Eurogroup Chief Donohoe (Ireland) stated that the ECB's approach was the correct one.

- UK Chancellor of the Exchequer (Fin Min) Hunt commented that would cut NI payroll tax in autumn if able to.

- China Housing Vice Minister Dong noted it would promote the alleviation of difficulties and debt reduction of real estate enterprises. Would deal with issue of land that was not being built on. Land could be bought back or returned to the market. Banks should lend to property projects on whitelist.

- PBOC Dep Gov Tao Ling stated that would set up CNY300B in relending scheme for cheap housing which would drive CNY500B in related finance. Encouraged local govt to buy unsold homes via SOEs.

Currencies/fixed income

- USD continued to consolidate after earlier losses in the week. EU session on Friday was quiet but dealers awaited the next key data releases next week. Fed speak remained cautious in reading too much into any specific data release. Fe likely would need a couple of weaker rounds of key data before flashing the green light for interest-rate cuts

- EUR/USD at 1.0840 as ECB members remained cautious on additional rate cut hopes after the likely Jun cut.

- USD/JPY drifting back towards the 156 neighborhood as markets continued to probe the Japanese govt rhetoric on FX thresholds.

Economic data

- (FR) France Q1 ILO Unemployment Rate: 7.5% v 7.5%e; Mainland Unemployment Rate: 7.3% v 7.3%e.

- (IN) India Forex Reserve w/e May 10th: $644.2B v $641.6B prior.

- (CH) Swiss Q1 Industrial Output Y/Y: -3.1% v -0.5% prior; Industry & Construction Output Y/Y: -3.3% v -0.6% prior.

- (AT) Austria Apr Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 3.5% v 3.5% prelim.

- (TR) Turkey Central Bank (TCMB) May Inflation Expectations Survey: Next 12-months: 33.2% v 35.2% prior.

- (TH) Thailand May Foreign Reserves w/e May 10th: $224.1B v $223.5B prior.

- (RU) Russia Narrow Money Supply w/e May 10th (RUB): 18.32T v 18.25T prior.

- (HK) Hong Kong Q1 Final GDP Q/Q: 2.3% v 2.3% advance; Y/Y: 2.7% v 2.7% advance.

- 04:30 (PT) Portugal Mar Current Account Balance: €B v €0.1B prior.

- (EU) Euro Zone Apr Final CPI Y/Y: 2.4% v 2.4% advance; CPI Core Y/Y: 2.7% v 2.7% advance; CPI M/M: 0.6% v 0.6% advance.

- (CY) Cyprus Apr CPI Harmonized M/M: 1.4% v 0.8% prior; Y/Y: 2.1% v 1.6% prior.

Fixed income issuance

- (IN) India sold total INR310B vs. INR310B indicated in 2034 and 2064 bonds.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa to sell combined ZAR1.0B in I/L 2038, 2043 and 2050 Bonds.

- 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).

- 07:30 (IS) Iceland to sell 2027 RIKB Bonds.

- 07:30 (IN) India announces upcoming bill issuance (held on Wed).

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

- 08:20 (EU) ECB’s Vasle (Slovenia).

- 08:30 (CA) Canada Mar Int'l Securities Transactions (CAD): No est v -8.8B prior.

- 08:30 (CL) Chile Central Bank Traders Survey.

- 10:00 (US) Apr Leading Index: -0.3%e v -0.3% prior.

- 10:15 (US) Fed's Waller with member Kashkari.

- 11:00 (EU) Potential sovereign ratings after European close.

- 12:00 (RU) Russia Apr CPI M/M: 0.5%e v 0.4% prior; Y/Y: 7.8%e v 7.7% prior.

- 12:00 (RU) Russia Apr CPI Core M/M: No est v 0.6% prior; Y/Y: No est v 7.8% prior.

- 12:15 (US) Fed's Daly.

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