EU CONSUMER STAPLES: Tesco | Moody's Positive Outlook

Reuters wire reporting that, according to two sources, the membership of the centre-left Social Democratic Party of Germany (SPD) has approved the coalition deal with the centre-right Christian Democratic Union/Christian Social Union (CDU/CSU). If confirmed, this would set up a rubber-stamp vote in the Bundestag on 6 May to approve CDU leader Friedrich Merz as the next chancellor. 

• The report claims that 84% of those members that votes approved the deal. The story does not say what turnout was. In order for the agreement to be approved, a simple majority of those voting was required with a turnout threshold of 20%. The SPD has around 358k grassroots members. On 29 April, SPD General Secretary Matthias Miersch confirmed that the turnout threshold had been reached.
• At around 1100CET, Chancellor Olaf Scholz will convene the final meeting of his minority Green-SPD cabinet. The sole decision will be to approve a 3.74% increase in statutory pensions effective July 1.
• On taking office, one of Merz's first actions is set to be a tour of key European capitals, with a visit to Paris for talks with President Emmanuel Macron on 7 May, the day after the Bundestag vote. The tour is also due to see Merz travel to Warsaw and Kyiv. 

• Some downside continuation for the Yen as Noted earlier since the EU Cash Govie open, nothing fast, but at new intraday low against the USD, GBP, EUR, while the Aussie still lags, although it is still the best performer, up 0.57% at present following the Australian CPI beat.
• The Overnight Japanese Data miss is likely playing a part, although the Overnight moves were more limited.
• USDJPY is eyeing Yesterday's high at 142.76.

Recap: German final March HICP was unrevised from the flash readings at 2.3% Y/Y (2.6% prior) and 0.4% M/M (0.5% prior). The final reading of national CPI was also unrevised at 2.2% Y/Y (2.3% prior) and 0.3% M/M (0.4% prior). Core CPI printed at 2.6% Y/Y (0.1pp upwardly revised, 2.7% prior), the lowest rate since June 2021.

• Overall, the CPI data confirmed a notable deceleration in services Y/Y inflation (a -0.13pp smaller contribution than in February) but with a caveat that it was mostly driven by airfares with the Easter holidays in April this year vs March last year.
• Goods inflation slightly accelerated (+0.04pp contribution vs prior) as softer energy was not quite able to cancel out firmer food / core goods inflation.
• The March CPI report highlighted differing Y/Y trends in services-heavy CPI subcategories:
  • The mixed-weight transport category (i.e. across goods & services) was key in March at 0.88% Y/Y (state-level data had implied 0.9-1.0%) after 2.4% in Feb. It confirmed that energy (-2.77% vs -1.6% in Feb) and travel services (airfares -8.04% Y/Y vs 9.26% prior) acted in tandem here.
  • Within the services-heavy CPI subcategories, there were some considerable differences in the Y/Y pace since December. Moderation was seen in education (4.67% Y/Y vs 5.0% Feb), restaurants and hotels (3.84% vs 4.2%) and recreation & culture (1.05% vs 1.1%). To the upside however, communications at -1.10% Y/Y (vs -1.2%) and healthcare at 2.98% (vs 2.8%).
  • A material acceleration in food inflation was also confirmed, at 3.4% Y/Y after 2.8% in Feb.
  • Categories associated with the core goods sector appear also firmer than before - clothing and footwear came in at 1.0% (after 0.5% prior) and furnishings and household Equipment at -0.25 (after -0.7%).