Rate hikes continue – Focus on ECB

EU mid-market update: Rate hikes continue; focus on ECB; Regional banks attempt to calm down concerns with fresh deposit data.

Notes/Observations

- Amongst a chain of rate decisions, Norway Central Bank (Norges) hiked its deposit rate by 25bps as expected, noted that the key rate would most likely be raised further in June. ECB rate decision later at 08:15 ET (13:15 GMT) with 25bps hike priced in. Markets still digesting FOMC rate decision following yesterday's unsurprising 25bps hike but statement removed crucial 'committee anticipates that some additional policy firming may be appropriate' sentence.

- Risk off appetite ensues amid continuing US regional bank instability. EU indices lower, USD higher. PACW approx -40% in premarket after Board of Directors confirmed they are continuously reviewing strategic options and was recently approached by several potential partners and investors; Says it has not experienced unusual deposits out of the bank.

- EU Earnings Recap: Airbus post close yesterday reports weak Q1 and notes continued supply chain challenges; Rheinmetall Q1 op profit came in light; Infineon strong Q2 and raises FY23 rev, margins and FCF; BMW Q1 beats, affirms FY25 targets; VW Q1 strong and affirms FY23 deliveries; Legrand beats and registers big increase in FCF; Shell authorizes $4.0B buyback.

- Asia closed higher with Hang Seng outperforming at +1.3%. EU indices are -0.4 % to -0.5%. US futures are -0.1% to +0.2%. Gold -0.2%, DXY +0.1%; Commodity: Brent +1.1%, WTI +0.9%, TTF -0.9%; Crypto: BTC +1.3%, ETH +1.6%.

Asia

- Australia Mar Trade Balance (A$): 15.3B v 13.0Be; Exports M/M: +4% v -3% prior; Imports M/M: +2% v -10% prior.

- China Apr Caixin PMI Manufacturing registered its 1st contraction in three months) (49.5 v 50.0e).

Americas

- FOMC raised the Target Range by 25bps to 5.00-5.25% (as expected). Statement noted that tighter credit conditions would likely to weigh on economy. Future actions depended on tightening impact, along with economic and financial developments. Dropped phrase that some additional policy increases might be appropriate.

- Fed Chair Powell post rate decision press conference stressed that the Fed remained strongly committed to bringing inflation back down to 2%: Inflation remains well above target. To take a data dependent approach to determining extent of future rate hikes.

- Brazil Central Bank (BCB) left the Selic Target Rate unchanged at 13.75% (as expected) for its 6th straight pause in the current tightening cycle. Reiterated stance to assess if the strategy of maintaining the SELIC rate for a long period will be enough to ensure the convergence of inflation to target.

- Pacific West is working with strategic partners and weighing options including splitting up the bank, a capital raise or a possible sale.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.50% at 460.19, FTSE -0.47% at 7,751.60, DAX -0.38% at 15,755.05, CAC-40 -0.46% at 7,369.94, IBEX-35 -0.56% at 9,025.67, FTSE MIB -0.61% at 26,672.00, SMI -0.22% at 11,481.00, S&P 500 Futures +0.01%].

Market focal points/key themes: European indices open lower across the board and stayed in the red through the early part of the session; better performing sectors include energy and financilas; sectors leading the way lower include industrials and consumer discretionary; oil & gas subsector supported following the release of earnings from Shell; rebound GAM to be acquired by LionTrust; focus on ECB rate decision later in the day; earnings expected in the upcoming US session include Apple, ConocoPhillips, Rengeneron and Zoetis.

Equities

- Consumer discretionary: Hugo Boss [BOSS.DE] -0.5% (Q1 results, raises FY23 EBIT and Rev), Next plc [NXT.UK] +2.0% (trading update), Zalando [ZAL.DE] -6.0% (earnings).

- Consumer staples: Casino Guichard-Perrachon [CO.FR] -16.0% (earnings), Henkel [HEN3.DE] -1.0% (Q1 sales).

- Energy: Shell [SHEL.UK] +2.0% (Q1 results, authorizes $4.0B buyback), Equinor [EQNR.NO] +4.0% (earnings).

- Financials: Gam Holding [GAM.CH] -23.0% (Liontrust to acquire Gam Holding).

- Healthcare: Novo Nordisk [NOVOB.DK] -5.0% (Q1, expands buyback by DKK2.0B), Valneva [VLA.FR] +17.0% (earnings), Argenx [ARGX.BE] -1.5% (Q1 results).

- Industrials: Maersk [MAERSKB.DK] -1.0% (earnings; outlook comments), Volkswagen [VOW3.DE] +1.0% (Q1 results), BMW [BMW.DE] +2.0% (Q1 beat, affirms FY23), Rheinmetall [RHM.DE] -3.0% (Q1 results), Skanska [SKAB.SE] -8.0% (earnings).

- Technology: Infineon [IFX.DE] -2.0% (final Q1 beat, raises FY23 Rev, margins and FCF).

- Materials: ArcelorMittal [MT.NL] -2.0% (earnings).

Speakers

- BOE Decision Maker Panel Survey: 12-month business inflation expectations seen at 5.5%.

- Norway Central Bank Policy Statement –noted that the dcision to hike by 25bps was unanimous. Higher policy rate was needed to dampen inflation. It forward guidance noted that the Key rate was likely to be raised further in Jun. Future policy rate path would depend on economic developments. Domestic growth had slowed, but activity remained high. Watching NOK currency weakness and economic pressures.

- Norway Central Bank (Norges) Gov Bache post rate decision press conference noted that it had yet to see the full effect of prior rate hikes. Faster rate hikes by other central banks have contributed to the NOK currency (Crown) weakness.

- Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) maintained its end-2023 inflation at 22.3% and end-2024 inflation at 8.8%. It did raise the end-2023 food-price inflation at 22.0% to 27.9%.

- Turkey Central Bank (CBRT) Gov Kavcioglu noted that the TRY currency (Lira) stability was a factor in inflation decline **Note: CPI has decelerated for the past seven months with Apr YoY at 45.5%).

Currencies/fixed income

- USD consolidated its post FOMC losses after the Fed hinted that it would likely pause at its upcoming meeting in June.

- EUR/USD at 1.1045 by mid-session with focus on the upcoming ECB rate decision. ECB expected to hike by 25bps as data since the ECB's March meeting had provided little support for another 50bps hike. Headline inflation had likely peaked but members consistently remark that it remained uncomfortably high.

- USD/JPY staying below the 125 level. Japanese markets will be closed for holiday for the remainder of the week.

Economic data

- (DE) Germany Mar Trade Balance: €16.7B v €16.3Be; Exports M/M: -5.2% v -2.2%e; Imports M/M: -6.4% v -2.1%e.

- (RU) Russia Apr Services PMI: 55.9 v 58.1 prior; Composite PMI: 55.1 v 56.8 prior.

- (SE) Sweden Apr PMI Services: 50.5 v 49.9 prior (1st expansion in 3 months); PMI Composite: 49.1 v 48.7 prior.

- (ES) Spain Apr Net Unemployment Change: -73.9K v -48.8K prior (2nd straight decline).

- (ES) Spain Apr Services PMI: 57.9 v 59.9e (6th straight expansion); Composite PMI: 56.3 v 58.5e.

- (ZA) South Africa Apr PMI (whole economy): 49.6 v 49.4e.

- (IT) Italy Apr Services PMI: 57.6 v 56.5e (4th straight expansion and highest since Apr 2021); Composite PMI: 55.3 v 55.5e.

- (FR) France Apr Final Services PMI: 54.6 v 56.3 prelim (confirmed 3rd month of expansion); Composite PMI: 52.4 v 53.8 prelim.

- (DE) Germany Apr Final Services PMI: 56.0 v 55.7 prelim (confirmed 4th straight expansion); Composite PMI: 54.3 v 53.9 prelim.

- (EU) Euro Zone Apr Final Services PMI: 56.2 v 56.6 prelim (confirmed 4th straight expansion); Composite PMI: 54.1 v 54.4 prelim.

- (UK) Apr New Car Registrations Y/Y: 11.6% v 18.2% prior.

- (NO) Norway Central Bank (Norges) raised the Deposit Rate by 25bps to 3.25%; as expected.

- (UK) Apr Final Services PMI: 55.9 v 54.9 prelim (confirmed 3rd month of expansion); Composite PMI: 54.9 v 53.9 prelim prior.

- (UK) Mar Net Consumer Credit: £1.6B v £1.2Be; Net Lending: £0.0B v £1.6Be.

- (UK) Mar Mortgage Approvals: 52.0K v 46.0Ke.

- (UK) Mar M4 Money Supply M/M: -0.6 % v -0.3% prior; Y/Y: 0.4% v 1.1% prior; M4 (ex-IOFCs) 3-Month Annualized: +2.3% v -0.5% prior.

- (UK) Apr Official Reserves Changes: $0.6B v $3.3B prior.

- (HK) Hong Kong Mar Retail Sales Value Y/Y: 40.9% v 41.2%e; Retail Sales Volume Y/Y: 39.4% v 35.5%e.

- (EU) Euro Zone Mar PPI M/M: -1.6% v -1.7%e; Y/Y: 5.9% v 5.8%e.

- (CY) Cyprus Apr CPI M/M: 0.3% v 1.0% prior; Y/Y: 3.7% v 5.8% prior.

- (IS) Iceland Q1 Unemployment Rate: 3.8% v 3.3% prior.

Fixed income issuance

- (IN) India sold total INR330B vs. INR330B indicated in 2028, 2033 and 2052 bonds.

- (ES) Spain Debt Agency (Tesoro) sold total €6.376B vs. €5.0-6.0B indicated range in 2026, 2028 and 2040 SPGB bonds.

- Sold €2.430B in 2.80% 2026026GB bond; Avg Yield: 2.941% v 3.257% prior; bid-to-cover: 1.64x v 1.51x prior.

- Sold €2.174B in 0.00% Jan 2028 SPGB bonds; Avg Yield: 2.922% v 2.983% prior; Bid-to-cover: 1.54x v 1.62x prior.

- Sold €1.772B in 1.20% Oct 2040 SPGB bonds; Avg Yield: 3.751% v 1.210% prior, bid-to-cover: 1.26x v 1.73x prior.

- (ES) Spain Debt Agency (Tesoro) sold €559M vs. €250-750M indicated range in 0.65% Nov 2027 Inflation-linked bonds (SPGBei); Real Yield: +0.671% v -0.958% prior; Bid-to-cover: 2.01x v 2.0x prior.

- (FR) France Debt Agency (AFT) sold total €10.747B vs. €10.0-11.5B indicated range in 2033, 2039, 2054 and 2072 Bonds.

- Sold €5.075B in 3.0% May 2033 Oat; Avg Yield: 2.83% v 2.70% prior; Bid-to-cover: 1.92x v 2.03x prior.

- Sold €1.911B in 1.75% Jun 2039 green Oat; Avg Yield: 3.10% v 0.44% prior; Bid-to-cover: 2.46x v 2.76x prior.

- Sold €2.248B in 3.00% May 2054 Oat; Avg Yield: 3.33% v 3.12% prior; Bid-to-cover: 1.95x v 2.01x prior.

- Sold €1.513B in 0.50% May 2072 Oat; Avg Yield: 2.82% v 1.77% prior; bid-to-cover: 1.97x v 1.84x prior.

Looking ahead

- (SE) Informal meeting of EU employment ministers.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.

- 06:00 (IL) Israel Mar Unemployment Rate: No est v 3.9% prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (ZA) South Africa Mar Electricity Consumption Y/Y: No est v -8.7% prior; Electricity Production Y/Y: No est v -9.7% prior.

- 07:30 (US) Apr Challenger Job Cuts: No est v 89.7K prior; Y/Y: No est v 319.4% prior.

- 07:30 (TR) Turkey Apr Real Effective Exchange Rate (REER): No est v 59.38 prior.

- 08:00 (MX) Mexico Mar Unemployment Rate (unadj): 2.7%e v 2.7% prior.

- 08:00 (MX) Mexico Apr Consumer Confidence: 45.0e v 44.5 prior.

- 08:00 (MX) Mexico Feb Gross Fixed Investment M/M: +1.1%e v -0.5% prior; Y/Y: 9.1%e v 7.9% prior.

- 08:00 (MX) Mexico Apr Domestic Vehicle Sales: No est v 118.8K prior.

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

- 08:15 (EU) ECB Interest Rate Decision: Expected to raise Key Rates by 25bps; Expected to raise Main 7-day Refinancing Rate by 25bps to 3.75%; Expected to raise Marginal Lending Facility by 25bps to 4.00%; Expected to raise Deposit Rate by 25bps to 3.25%;

- 08:30 (US) Initial Jobless Claims: 240Ke v 230K prior; Continuing Claims: 1.87Me v 1.858M prior.

- 08:30 (US) Q1 Preliminary Nonfarm Productivity: -2.0%e%e v +1.7% prior; Unit Labor Costs: 5.5%e v 3.2% prior.

- 08:30 (US) Mar Trade Balance: -$63.1Be v -$70.5B prior.

- 08:30 (CA) Canada Mar Int'l Merchandise Trade (CAD): 0.2Be v 0.4B prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (EU) ECB chief Lagarde post rate decision press conference.

- 09:00 (BR) Brazil Apr Services PMI: No est v 51.8 prior; Composite PMI: No est v 50.7 prior.

- 09:45 (UK) BOE Gilt sale operation.

- 10:00 (CA) Canada Apr Ivey Purchasing Managers Index (seasonally adj): No est v 58.2 prior.

- 10:00 (DK) Denmark Central Bank (Nationalbanken) rate announcement.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (CO) Colombia Mar Exports: $4.5B e v $4.2B prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:05 (CA) Bank of Canada (BOC) Gov Macklem.

- 21:00 (PH) Philippines Apr CPI Y/Y: 7.0%e v 7.6% prior.

- 21:30 (AU) Australia Central Bank (RBA) Statement on Monetary Policy (SOMP).

- 21:30 (AU) Australia Mar Home Loans Value M/M: -0.3%e v -0.9% prior.

- 21:45 (CN) China Apr Caixin PMI Services: 57.2e v 57.8 prior; PMI Composite: No est v 54.5 prior.

- 22:35 (CN) China to sell 3-month and 6-month bills.