POWER: Swiss Hydro Power Stocks Retain Surplus Over 10-Year Avg

Goldman Sachs write “the recovery in risk sentiment coupled with policy puts on both the monetary and fiscal side continue to create a favourable environment for European sovereign credit. Even a risk wobble on tariff and trade risks saw marginal widening in sovereign credit spreads, which outperformed their equity beta”.

• Goldman continue “to estimate that sovereign spreads are slightly tight to fundamentals, but the same dynamics that are likely to keep the EUR front-end steep also imply that growth upside should prevent material widening”.
• They note that “French political risk remains an ongoing uncertainty, although we do not expect this to worsen tangibly on a short-term horizon. Unless we see increasing pressure from opposition parties for fresh elections, sovereign spreads will likely remain tight given the current favourable macro backdrop”.
• Zooming out, Goldman note that “relative to our year-end targets, Bonos are the least stretched and, given the strongest fiscal fundamentals there, we continue to expect vol-adjusted outperformance in Bonos vs BTPs and OATs.
• Overall, they “prefer sovereign credit to gain duration exposure in Europe, given the more symmetric distribution for terminal rate pricing”.

Moody's notes that "the affirmation of the A1 rating takes into account China's large, dynamic economy and capacity for innovation, even as we expect potential growth to slow towards 3.5-4.0% by 2030. Recent trends indicate an improving quality of growth, bolstering economic resilience. The debt burden is likely to increase further, although we expect that it will be partly offset by low interest rates supported by a large domestic savings pool. China's financial system provides large captive demand for government debt, while capital controls contribute to financial stability during periods of stress".

• "The negative outlook is driven by risks that trade tensions between China and its major trading partners could have a long-lasting negative effect on China's credit profile. In particular, shifts in global trade flows and dampened trade growth pose challenges to China's transition to higher productivity-led economic growth and its efforts to contain the rise in its government debt".
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WTI futures traded to a fresh S/T cycle high last Wednesday before finding resistance. The recovery since Apr 9, appears corrective. Key resistance to watch is $62.71, the 50-day EMA. It has been pierced, a clear break of it would highlight a stronger reversal and open $65.82, Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger. The May 21 price pattern is a shooting star - a reversal signal. Gold has recovered from its recent lows. The climb signals the end of the corrective phase between Apr 22 - May 15. Medium-term trend signals are unchanged, they remain bullish. Note that moving average studies are in a bull-mode position highlighting a dominant uptrend. A continuation higher would open $3435.6 next, the May 7 high. Key support and the bear trigger has been defined at $3121.0, the May 15 low.

• WTI Crude up $0.42 or +0.68% at $61.96
• Natural Gas down $0.02 or -0.6% at $3.313
• Gold spot down $22.78 or -0.68% at $3334.7
• Copper up $1.5 or +0.31% at $485
• Silver down $0.01 or -0.03% at $33.4544
• Platinum down $5.19 or -0.47% at $1091.32