EUROPEAN EQUITY OPEN: Stocks open in the green, FTSE100 lags ahead of BoE
OVERNIGHT: On Wall Street, stocks were mixed (Dow underperformed, Nasdaq outperformed) as Treasury yields narrowed following US CPI data, which didn’t contain any hawkish surprises, as some were fearing following hot payrolls last week. Afterhours, DIS slipped following its results, HOOD gained. Our US wrap can be accessed here. APAC stocks were also mixed. China reported softer inflation data which supported arguments of a slow economic rebound ahead, while factory gate prices saw deeper deflation. (see below). Aussie share markets saw weakness in utilities and commodity sectors overshadowing outperformance in tech and after consumer inflation expectations ticked higher. Japanese shares were indecisive, and the BoJ’s Summary of Opinions provided very little in the way of fresh insight. Our APAC wrap is here.
EUROPEAN OPEN: Indices are in the green after the open, though the FTSE100 lags ahead of the BoE rate decision, where a 25bps hike is largely expected (see below). ECB's German representative Nagel is giving further remarks in premarket trade, largely reiterating his view that rate hikes are not over, and the central bank has more to do since inflation remains stubborn (see here). For EUR currency traders, it is worth highlighting the very lumpy expiries rolling off at today’s NY cut, with particular focus between 1.0950-1.10 (see here). There has also been some early comments this morning from US Treasury Secretary Yellen, who gave remarks ahead of the G7 meetings in Japan; Yellen reiterated remarks from the weekend, urging Congress to raise the debt ceiling, and cautioned that a US default would result in economic and financial catastrophe. On the corporate earnings slate, it has been another busy morning, and we include some highlights below.
STOCK SPECIFICS: Bayer (BAYN GY) Q1 adj. EBITDA missed expectations, and it said it sees FY23 results at the lower end of guidance ranges. Merck (MRK GY) revenue was in line with expectations, though it flagged a decline in operating profits for FY23. Siltronic (WAF GY) posted subdued results, and sees no recovery in H2 as end markets are expected to stagnate. Deutsche Telekom (DTE GY) upped its profits outlook after Q1 numbers topped expectations. Thyssenkrupp (TKA GY) boosted cash flow guidance despite losses in steel. Dutch bank ING (INGA NA) Q1 numbers beat expectations, and it launched a share buyback. Hapag-Lloyd (HLAG GY) sales topped expectations, though profits fell, and it confirmed guidance. Rolls-Royce (RR/ LN) trading update noted it was on track and flying hours are continuing to recover. Our full equity briefings for May 11th can be accessed here and here.
DAY AHEAD:
- Our interactive Day Ahead calendar is here; a pdf version can be accessed here.
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EUROPEAN DATA/SPEAKERS: The Bank of England is expected to lift interest rates by 25bps to 4.50% in a 7-2 vote, analysts predict, and BoE Governor Bailey will deliver a press conference following the announcement; our full preview can be accessed here. There is not much else on the data slate, but there will be remarks from the Riksbank’s Floden (again!), ECB’s markets chief Schnabel and ECB VP de Guindos. Italy will sell EUR 7.5-8.75bln of 2026, 2030 and 2043 debt. -
PREVIEW - BOE POLICY ANNOUNCEMENT (12:00BST/07:00EDT): Expectations are for the BoE to deliver a 25bps hike in the Base Rate to 4.5%, according to 55/56 analysts surveyed by Reuters, with just one looking for unchanged. Market pricing concurs with economists as 25bps is priced at around 85%. Dovish dissent from Tenreyro and Dhingra is expected once again. Focus will be on any hints over a potential pause in the current hiking cycle. Full Newsquawk preview can be accessed here. -
US DATA/SPEAKERS: Treasury Secretary Yellen will be delivering comments in the premarket ahead of the G7 meetings in Japan; Yellen is expected to reiterate her sharp warnings on the debt ceiling, and urge policymakers to act. Fed Governor Waller, who usually tilts hawkish, will deliver remarks. Data-wise, PPI data will be eyed to see if the headlines it comes in cooler, similar to the CPI data on Wednesday; after the hot payrolls data, some had expected an upside surprise. Weekly initial jobless claims and continuing claims data are expected to tick up a touch: initial is seen +3k to 245k, while the continuing claims measure is seen rising to 1.82mln from 1.805mln. On the supply front, the US will sell USD 21bln of 30yr, and the Treasury will also announce the size of next week’s 20yr bond supply. -
US CORPORATE EARNINGS: The highlights on today earnings slate includes JD; our Daily US Earnings Estimates note can be accessed here. -
ENERGY: The EIA weekly NatGas storage change data is expected to show a build of 74BCF (vs last week’s build of 54BCF). OPEC will release its MOMR. -
RECAP - CHINA CPI: Chinese CPI rose +0.1% Y/Y in April (exp. 0.4%, prev. 0.7%), the slowest rate of increase since February 2021; the monthly measure fell 0.1% (exp. unch). Producer prices declined -3.6% Y/Y in April (exp. -3.2%, prev. -2.5%). Pantheon Macroeconomics noted that inflation was weak as the country reopens, and the recovery is lopsided amid feeble global demand and increased output, where consumers were spending more on restaurants, leisure services and tourism, after the ending of zero-Covid policy, but less so on goods. "The divergence between services and goods inflation is likely to continue, as the services rebound outpaces domestic spending on goods," Pantheon says, "the government is likely to provide only targeted consumption measures in the next couple of months, but we see an increasing chance that slowing growth in Q2 will prompt a broader policy response in H2."
11 May 2023 - 08:10- Fixed IncomeData- Source: Newsquawk
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