CREDIT PRE-MARKET: EUR Market Wrap
- 2y/10y bunds closed -11bp/-7bp after European curves bull steepened Thursday as a downside US inflation surprise drove a dovish repricing in central bank cut expectations.
- Main/XO ended flat at 53bp/289bp while €IG/€HY was +0.5bp/+6bp with long-ended IG spreads underperforming by around 0.5bp and Tech the only sector staying in the green. Tech, along with Fins, is now the best performing sector WoW at -5bp.
- SXXP ended +0.6% with media lagging at -0.6% while SPX was -0.9%. Notable €IG movers included Mohawk Industries +7%, Sartorius +6%, DNB Bank +6%, Vivendi +6%, Barry Callebaut -12%, Maersk -5%.
- SX5E and SPX futures are flat while Asian equities are mixe. Looking ahead, US PPI and prelim UMich sentiment and inflation expectations data round off the week’s calendar.
| GMT/Local | Impact | Country | Event |
| 0430/1330 | ** | JP | Industrial Production |
| 0600/0800 | *** | SE | Inflation Report |
| 0645/0845 | *** | FR | HICP (f) |
| 0700/0900 | *** | ES | HICP (f) |
| - | *** | CN | Money Supply |
| - | *** | CN | New Loans |
| - | *** | CN | Social Financing |
| 1230/0830 | *** | US | PPI |
| 1230/0830 | * | CA | Building Permits |
| 1300/0900 | * | CA | CREA Existing Home Sales |
| 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 1600/1200 | *** | US | USDA Crop Estimates - WASDE |
| 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
UK DATA: UK Activity Data Due at 7:00 BST
- UK activity data, including monthly GDP and it's components for April, are due for release at 7:00BST.
- Looking at the monthly print, the Bloomberg median is -0.1% M/M for April with estimates ranging from -0.3% to +0.2%, following March's higher than expected print of +0.4% M/M.
- In regards to the main subcomponents (Services, Industrial Production, Construction) - consensus looks for both Services and Industrial Production to come in at -0.1% M/M. Construction output is expected to remain flat on the month after last month's 0.4% M/M contraction, although construction PMI increased to 53 in April.
- The services M/M forecast has estimates ranging from -0.4% to 0.1%. In contrast, analyst expectations for IP are skewed downwards with estimates ranging from -0.4% to 0.3%, likely to be affected by bad weather.
- In terms of market reaction we expect a relatively muted reaction (particularly compared to either inflation or labour market data). Today's data, even with a large surprise, is unlikely to be the catalyst for any MPC member to decide whether to change their vote at the June MPC meeting, although tepid growth will be in-line with the bank's quarterly staff projection of +0.24% for Q2.
EURJPY TECHS: Trendline Support Remains Intact
- RES 4: 172.97 2.0% 10-dma envelope
- RES 3: 172.00 Round number resistance
- RES 2: 171.56 High Apr 29 and the bull trigger
- RES 1: 170.89 High Jun 3
- PRICE: 168.94 @ 06:45 BST Jun 12
- SUP 1: 168.09 Low Jun 4
- SUP 2: 167.70 Trendline support drawn from the Dec 7 ‘23 low
- SUP 3: 165.64 Low May 7
- SUP 4: 164.02 Low May 3 and a pivot support
The latest pullback in EURJPY is considered corrective and the primary trend structure remains bullish. Sights are on 171.56, the Apr 29 high and a key resistance where a break would confirm a resumption of the uptrend. Support to watch is at a key trendline drawn from the Dec 7 ‘23 low, at 167.70. A clear breach of this line would highlight a potential reversal. Note this would also confirm a break of the 50-day EMA, at 167.52.
EUROZONE ISSUANCE: EGB Supply
The EU held a syndication while the Netherlands and Finland held conventional auctions yesterday. Germany and Italy both still look to hold auctions this week. We pencil in estimated gross issuance for the week at E22.2bln, down from E31.3bln last week.
- Today Germany, will look to sell E4bln of the 2.20% Feb-34 Bund (ISIN: DE000BU2Z023).
- Italy will conclude the week tomorrow by holding a 3/7/15/25-year BTP auction. On offer will be E3.5-4.0bln of the new 3-year 3.45% Jul-27 BTP (ISIN: IT0005599904), E2.0-2.5bln of the 3.45% Jul-31 BTP (ISIN: IT0005595803), E1.0-1.25bln of the 4.15% Oct-39 BTP (ISIN: IT0005582421) and E1.0-1.25bln of the 3.85% Sep-49 BTP (ISIN: IT0005363111).
