EUROPEAN OPEN: Equities open flat ahead of EU officials visit to China and US ADP jobs data

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  OVERNIGHT: US stocks were lower Tuesday, with cyclical/value sectors leading the decline after a chunky fall in the number of job openings dimmed the markets' view on the US labour market and growth expectations (see here). Asia-Pac stocks were mixed with sentiment clouded following the negative handover from Wall St, where risk assets were pressured as weak JOLTS data stoked economic growth concerns; APAC trading was also hampered by mass closures across Greater China for Ching Ming Festival (see here). In central bank events, the RBNZ lifted rates by more than expected (see below).


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  EUROPEAN OPEN: European indices open around flat on Wednesday; there doesn’t appear to be any specific drivers this morning; banking concerns continue to linger, and UBS’ AGM today will keep the banking headlines coming; elsewhere, the global growth narrative was dented on Tuesday after data showed the tightness was alleviating in the US labour market, which resulted in additional pricing for rate cuts this year. Overnight there was a larger than expected rate rise out of New Zealand (see below). Today’s European focus will likely be on geopolitics, with EU officials visiting China (see Day Ahead section for our primer), while US ADP jobs data will set the tone ahead of Friday’s more widely-followed NFP report. Data out of Europe this morning was focussed on the industrial sector, where both France and Germany saw better-than-expected performance in February (see below).


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  STOCK SPECIFICS: In financials, BoE approves UBS (UBSG SW) takeover of Credit Suisse (CSGN SW) in the UK, and separately, the banks have received a temporary green light from the EU antitrust regulators. Grenke said it generated it had a highly profitable Q1 for new business despite the volatile interest rate environment. Energy names will note US major Exxon Mobil (XOM) said that a change in liquid prices will negatively impact its Q1 upstream earnings by up to USD 1.8bln vs Q4 levels. TotalEnergies (TTE FP) confirmed Tuesday reports that Baghdad will take a 30% stake in its USD 27bln Iraq energy project. In materials, Heidelberg Materials (HEI GY) will reportedly sign an MoU with Canada for a carbon capture facility for cement production. In industrials, Sodexo (SW FP) plans to spin off its Benefits & Rewards services during 2024, confirms its mid-term targets. In utilities, Iberdrola (IBE SM) to sell in excess of 8,400 MW of combined cycle gas capacity in Mexico for USD 6bln to Mexico's infrastructure partners. In autos, Volkswagen's (VOW GY) Skoda unit will raise wages by 10%. In real estate, Hammerson (HMSO LN) shareholder Lighthouse Properties said it had no confidence in Hammerson's board, and plans to vote against the election of at least two non-exec directors at next month's AGM. In geopolitics, Italy is reportedly reviewing options to limit China's influence over Pirelli (PIRC IM). Our full European equity specific briefings can be accessed here and here.

DATA RELEASES:

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  RBNZ: New Zealand's central bank hiked rates by 50bps, more than analysts were expecting, lifting its Overnight Cash Rate to 5.25%. Westpac said the move reflects a determination to get to where it thinks it needs to be quickly, though it still appears to be eyeing a peak OCR of 5.5% this year. "The RBNZ is wary of the additional pressures that the cyclone rebuild will place on an economy that is already overheated (though starting to cool off)," Westpac said, adding that it expects a further 25bps increase at the May review; "The RBNZ is likely to retain a tightening bias beyond this, and the balance of risks is towards a peak higher than 5.5%."


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  EUROPEAN INDUSTRIALS: Data released today showed German industrial orders rising +4.8% M/M in February, topping expectations of a +0.3% M/M rise; though the prior was revised down to +0.5% from +1.0% initially reported. ING said German industrial orders have rebounded sharply since November, brightening the outlook for German industry, but warned that the US slowdown, the longer-term fallout from recent financial turmoil, the broader impact of monetary policy tightening, could all still act as headwinds for the sector ahead. Meanwhile, data out of France also showed industrial output above expectations, with the headline rising 1.2% M/M (exp. +0.5%), while the prior was revised up to -1.4% from an initially reported -1.9%.

DAY AHEAD:

• Our full interactive calendar can be accessed here; a pdf version can be accessed here.


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  EUROPEAN DATA/SPEAKERS: Final S&P Global services PMI data for March are due out of Europe; Eurozone, France and Germany's metrics are expected to be unrevised. Italian retail sales data for February will be released. ECB chief economist Lane will give remarks in the afternoon. On the EM central bank front, Poland's NBP is expected to hold its Base Rate at 6.75%. EU officials' China visit continues (between April 5-7th), our primer for the events can be accessed here.


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  US DATA/SPEAKERS: Ahead of the BLS jobs report due on Good Friday (NOTE: the desk will be running a special service covering the event from 13:00BST/08:00EDT to 13:45BST/08:45EDT on the squawk and headline feed, although only FX markets will be trading amid holiday closures), the ADP will release its gauge of payrolls on Wednesday, where the headline rate is expected to cool to 200k from 242k. Traders will be paying close attention to the ISM Services data, after the manufacturing equivalent drove a dovish reaction as it came in softer than expectations; in terms of the details, the headline is seen moderating to 54.5 from 55.1, but there will also be attention on the sub-indices. Fed's 2024 non-voting member Mester will speak before the market open; on Tuesday, Mester said that the Fed needs to raise rates above 5% and hold there for a while, arguing that inflation remained too high; she added that she does not share the market's outlook for rate cuts this year. Elsewhere, weekly MBA mortgage applications data will be released.


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  SUPPLY: The UK will sell GBP 3.5bln of 2029 debt, while Germany will sell EUR 4bln of a 2029 line.


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  ENERGY: The DoE will release weekly energy inventory data; as a basis of comparison, the API's data is said to have shown Crude stocks -4.3mln bbls (exp. -2.3mln), Cushing inventories -1.0mln bbls, gasoline stocks -4.0mln bbls (exp. -1.7mln), and distillate stocks -3.7mln bbls (exp. -0.4mln). Citi's analysts said the data was bullish across the board.

05 Apr 2023 - 08:10- Fixed IncomeData- Source: Newsquawk