Fed speaker blackout period starts, US House to vote on debt ceiling this week

EU Mid-Market Update: Fed speaker blackout period starts; US House to vote on debt ceiling this week; ECB Wunsch hawkish; German IFO mixed; Q1 corporate earnings to accelerate.

Notes/observations

-Global theme remains on recession likelihood and peak interest rate expectations as bank turmoil seemingly behind us in very near term.

-House of Rep Speaker Kevin McCarthy (R-CA) on Sunday said House would vote on his spending and debt bill this week and noted he was confident of securing enough votes to pass his bill in the chamber.

-US deposits outflows resumed at large banks in the week ending Apt 12th following slight increase during prior week, according to H.8 form, due to drop in Treasury and Agency securities held in credit and decrease in cash assets.

- ECB’s Wunsch stated that terminal rate could easily hit 4.0% from current 3.0% (markets are pricing in 3.8-3.9% ECB deposit rate). The stance follows a wave of hawkish tones from Fed speakers last week (now in blackout period for speakers), lifting FOMC rate expectations for a 25bps instead of pause at next meeting in May. Rhetoric was reinforced by stronger than expected US PMIs on Friday.

-German IFO survey this morning came in mixed and non-impactful on ECB rate expectations.

-Week ahead focused on onslaught of corporate earnings to paint some color on health of the economy and the consumer heal.

-Asia closed mixed with NZX50 outperforming at +0.8%. EU indices are mostly lower by -0.1-0.3%. US futures are -0.3% to -0.4%. Gold +0.1%, DXY -0.2%; Commodity: Brent -0.3%, WTI -0.2%, TTF -2.7%; Crypto: BTC -1.6%, ETH -1.9%.

Asia

-Thailand Central Bank (BOT) noted that rising short term THB currency (baht) volatility was due to global factors.

- China Foreign Ministry spokesperson Mao Ning reiterated China is ready to facilitate peace in Ukraine; On issue of Baltic states sovereignty, China has been objective and impartial.

- Japan ruling LDP party won 4 of 5 seats in Diet by-elections. Analysts believe strong showing likely to lead to calls for him to dissolve the lower house soon.

- China Vice Commerce Minister Wang Shouwen reiterates govt view that uncertainty in external demand remains the biggest constraint on Chinese trade.

Ukraine Conflict

- Russia Dep Chair of Security Council Medvedev (former Pres) said Russia can end the grain deal if G7 banned exports to Russia.

- EU Foreign Policy Chief Borrell said still some disagreement regarding second track on EU plans for more ammunition for Ukraine.

- Finland Foreign Min Haavisto said we have to speed up joint procurement of ammunition for Ukraine; Eagerly awaiting Ukraine Spring offensive.

Europe

- German govt agrees wage deal with Verdi trade union for public-sector workers (>2.5M employees); To pay one-off payment of €3,000 over 15 months and to raise monthly wages by minimum €340 from Apr 1st, 2024-.

- UK Financial Conduct Authority (FCA) issues series of measures to reduce risk of money laundering via UK post office; Puts UK banks on alert.

- French Pres Macron said food inflation would continue to hit France until the fall 2023.

- Italy PM Meloni believed the country needed a sovereign wealth fund to help bring in private investments.

-EU Council Pres Michel said EU/China policy will be on agenda of European Council in June.

- S&P revised UK sovereign outlook to stable from negative.

Americas

- House of Rep Speaker Kevin McCarthy (R-CA): House would vote on his spending and debt bill this week; Confident of securing enough votes to pass his bill in the chamber.

- White House officials said to be privately discussing if the debt ceiling could be increased without Congress approval.

Energy

-Germany said to consider opening the Baltic LNG terminal linked to infrastructure from Russia’s now-defunct Nord Stream gas pipeline network by early 2024.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.09% at 468.56, FTSE -0.16% at 7,901.46, DAX -0.15% at 15,858.45, CAC-40 -0.25% at 7,557.98, IBEX-35 -0.33% at 9,384.18, FTSE MIB -0.97% at 27,478.00, SMI -0.36% at 11,453.90, S&P 500 Futures -0.36%].

Market Focal Points/Key Themes: European indices open mixed with a bias to the downside and moved lower through the early hours of trading; health care and real estate sectors are among the better performers; sectors trending lower include industrials and energy; GAM looking at strategic alternatives; Credit Suisse confirms will not acquire The Klien Group; earnings expected in the upcoming US session include Coca-Cola, Clevland-Cliffs, and Brown & Brown.

Equities

- Consumer discretionary: Basic-Fit NV [BFIT.NL] +1.0% (Q1 update - affirms FY23 guidance), Casino Guichard-Perrachon [CO.FR] -1.0% (capital increase proposal).

- Financials: Credit Suisse Group [CSGN.CH] +1.0% (earnings; comments on outflows), Gam Holding [GAM.CH] +1.0% (in advanced discussions regarding strategic options for the firm), Avanza Bank Holding [AZA.SE] -7.5% (earnings).

- Healthcare: Koninklijke Philips [PHIA.NL] +12.0% (reports Q1, affirms FY23; litigation provisions), Ipsen [IPN.FR] -1.0% (appoints new CMO).

- Industrials: Metso Outotec [MOCORP.FI] -0.5% (winds down of Russia unit completed in Q1; To book €150M non-recurring charge in Q2).

- Technology: Software AG [SOW.DE] +50.0% (received offer to be acquired for €30/shr in cash by PE firm Silver Lake).

Speakers

-ECB's Wunsch (Netherlands) said ECB to keep raising rates unless wage growth slows; would not be surprised if deposit rate goes to 4.0%.

-Poland Central Bank's Tyrowicz stated 2023 average CPI won't be much lower YoY.

-ECB's Stournaras (Greece) said rates have reached close to their peak.

-Bank of Korea (BOK) Gov Rhee noted some short-term interest rates are below expectation.

-Czech Central Bank Vice Gov Zamrazilova said Key Interest Rate at 7.00% sufficient for taming inflation in current state of economy.

-ECB’s Villeroy (France) said Climate change impact is core to ECB mandate.

Currencies/fixed income

-USD still firmer following US PMIs on Friday, but slightly lower than initial high.

-EUR/USD at 1.102 rising off back of Wunsch’s hawkish commentary and unalarming German IFO data.

-USDJPY still unable to make another challenge for 135.0, trades at 134.3, firmer from FOMC rate expectations.

-GBP/USD climbing through 1.245 on way to 1.25.

Economic data

-(SG) Singapore Mar CPI M/M: 0.5% v 0.6% prior; Y/Y: 5.5% v 5.5%e; CPI Core Y/Y: 5.0% v 5.1%e.

-(FI) Finland Mar PPI M/M: -0.7% v -0.6% prior; Y/Y: 3.8% v 9.2% prior.

-(CZ) Czech Apr Business Confidence: 10.1 v 6.9 prior; Consumer Confidence: -16.3 v -21.5 prior.

-(TR) Turkey Apr Capacity Utilization: 75.4% v 73.5% prior.

-(TR) Turkey Apr Real Sector (Manufacturing) Confidence (Adj): 105.1 v 104.1 prior; Real Sector Confidence (unadj): 108.0 v 105.2 prior.

-(PL) Poland Mar Sold Industrial Output M/M: 14.1% v 15.9%e; Y/Y: -2.9% v -2.2%e.

-(DE) Germany Apr IFO Business Climate Survey: 93.6 v 93.4e; Current Assessment Survey: 95.0 v 96.0e; Expectations Survey: 92.2 v 91.1e.

-(CH) Swiss weekly Total Sight Deposits (CHF): 538.4B v 544.2B prior; Domestic Sight Deposits: 520.4B v 515.7B prior.

-(PL) Poland Mar Real Retail Sales M/M: 14.0% v 14.8%e; Y/Y: -7.3% v -6.2%e; Retail Sales (current prices) Y/Y: 4.8% v 7.7%e.

-(PL) Poland Mar PPI M/M: -0.8% v -0.3%e ; Y/Y: 10.1% v 11.0%e.

-(PL) Poland Mar Construction Output Y/Y: -1.5% v +0.5%e.

-(TW) Taiwan Mar Industrial Production Y/Y: -14.5% v -12.3%e.

-(TW) Taiwan Mar Unemployment Rate: 3.6% v 3.6%e.

-(TW) Taiwan Mar M1 Money Supply Y/Y: % v 2.0% prior; M2 Money Supply Y/Y: 6.6% v 6.8% prior.

- (IS) Iceland Mar Wage Index M/M: 0.9% v 0.4% prior; Y/Y: 9.5% v 8.7% prior.

- (HK) Macau Mar tourist arrivals at 1.96M, +22.8% m/m, +271.4% y/y.

Fixed income issuance

-(PH) Philippines sold total PHP10.58B vs. PHP15.0B indicated in 3-month, 6-month and 12-month bills.

-(TH) Thailand Central Bank sold total THB50B vs. THB50B indicated in 6-month and 12-month bills.

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month bills; Avg Yield: 3.55% v 3.24% prior; bid-to-cover: 1.76x v 2.05x prior.

Looking ahead

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

- 05:30 ((DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell €3.0-3.5B in 2028, 2033 and 2054 OLO Bonds.

- 06:00 (RO) Romania to sell combined RON1.4B in 2030 and 2036 bonds.

- 06:00 (IL) Israel to sell combined ILS1.25B in 2025, 2029, 2030, 2031 and 2052 bonds.

- 07:00 (IS) Iceland to sell Bills.

- 07:15 (CR) ECB's Vujcic (Croatia).

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

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

- 08:30 (US) Mar Chicago Fed National Activity Index: -0.20e v -0.19 prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.3-6.5B in 3-month, 6-month and 12-month bills.

- 09:00 (BE) Belgium Apr Business Confidence: No est v -7.6 prior.

- 09:00 (CL) Chile Mar PPI M/M: No est v -2.1% prior.

- 09:30 (IT) ECB's Panetta (Italy).

- 10:30 (US) Apr Dallas Fed Manufacturing Activity: -11.0e v -15.7 prior.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 12:00 (CA) Canada to sell 3 Year Bonds.

- 15:00 (AR) Argentina Feb Economic Activity Index (Monthly GDP) M/M: No est v 0.3% prior; Y/Y: No est v 2.9% prior.

- 16:00 (US) Weekly Crop Progress Report.

- 19:00 (KR) South Korea Q1 Advance GDP Q/Q: +0.2%e v -0.4% prior; Y/Y: 0.9%e v 1.3% prior.

- 19:30 (AU) Australia Weekly ANZ Roy Morgan Consumer Confidence: No est v +0.1 prior.

- 19:50 (JP) Japan Mar PPI Services Y/Y: 1.6%e v 1.8% prior.

- 22:30 (KR) South Korea to sell KRW1.1T in 20-Year Bonds.

- 23:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills.