- European equities start the week off on the backfoot in a week set to be dominated by risk ahead of FOMC, BoJ and RBNZ meetings
- German IFO the only major data release this morning, but despite coming in a touch softer vs expectations, had little impact on the EUR.
- Highlights Include US New Home Sales and potential comments from ECB’s Constancio and Coeure
Asian equity markets began in a lacklustre fashion amid a cautious tone ahead of key policy meetings this week from FOMC, BoJ and RBNZ, while market closures due to ANZAC day also contributed to the lack of buying . Nikkei 225 (-0.8%) snapped its 4-day win streak as JPY recovered from some of Friday’s slump, while Sony shares plunged around 5% in a continuation of the weakness seen after delaying its earnings forecast. Shanghai Comp (-0.4%) is also negative despite the PBoC continuing to inject ample funds into the market as rising debt concerns clouded sentiment with total debt said to have risen to 237% of GDP in Q1. 10yr JGBs are lower as participants booked profits and the BoJ refrained from its bond-buying operations.
Japanese PM Abe ordered the compilation of a supplementary budget for rebuilding areas seriously affected by the recent earthquakes. (Kyodo)
PBoC Vice-Governor Chen said that financial institutions are facing expanding credit risks. (RTRS)
PBoC set the CNY mid-point at 6.5120 vs. last close. 6.5015 (Prev. mid-point 6.4898). Injected CNY 180bln via 7-day reverse repos. (RTRS)
China's total debt rose to a record 237% of GDP in Q1 which is much greater than emerging-market counterparts and has accumulated significantly from the 148% of GDP at the end of 2007. (FT)
Shanghai-London stock connect is to be announced in September. (HKEJ)
EQUITIES/ FIXED INCOME
Markets have kicked off the week in a shaky fashion so far, with European stocks trading firmly in the red (Euro Stoxxx -0.7%), slipping lower since the open.Sentiment has been dampened by lower than expected Ifo readings, while the likes of EDF (-7.9%) and Philips (-4.7%) underperform on stock specific news. Material names are also among the worst performers amid downside in the commodity complex, with energy also softer today as WTI Jun’16 futures slip back below USD 43.50/bbl.
In tandem with the downside in equities, Bunds trade higher this morning, with June’16 futures above 162.50 . In terms of European supply, this week is set to see a sizeable drop to around EUR 7bln from the EUR 22.5bln that hit the market last week, while from a redemption perspective, today is set to see EUR 30bln of principals due to be paid by France.
Not too much to get excited about this Monday, with the multiple event risks ahead causing some 2 way trade between the broader risk tone and USD sentiment. The FOMC on Wednesday is the man event, and although many expect the Fed to stay on hold for now, their rhetoric will be keenly monitored.USD/JPY is the focal point though, as the BoJ meeting has been built up on recent talk of negative rates being extended through the lending program, but a fair chunk of this has now been priced in , and with stocks coming off better levels, we have seen the lead spot rate giving up almost 1 JPY off the overnight highs at 111.90. The commodity currencies are also a little heavy this morning, but AUD is proving a little more resilient. CAD is underperforming with a slippage in Oil prices, though little momentum on the market at the moment. Cable still unable to put in a stronger test on 1.4500, but looks well supported on dips. German IFO the only major data release this morning, but despite coming in a touch softer vs expectations, had little impact on the EUR.
Oil has managed to trade above the USD 43.00/bbl level after hitting this support level overnight . It then met some pretty strong resistance at USD 43.50/bbl and is on its way back down to test USD 43.00/bbl once more. Gold initially trickled higher in EU trade as risk off sentiment grips the markets up as much as USD 7.00 at one stage before then ebbing in to negative territory. Elsewhere, copper and iron-ore prices were down amid cautiousness ahead of upcoming key risk events and after Chinese commodity exchanges raised transaction fees late last week to curb speculation.
Indonesian oil minister says there will be no urgent need to freeze oil output with oil at USD 45/bbl and he also goes on the say he sees no oil producers meeting before OPEC June meeting and Indonesia's OPEC governor says June meeting wont tackle output quotas. (RTRS)
Iran state they will reach their pre sanction oil output levels by the end of May’16. (RTRS)
Iran’s oil minister stated that Iran will support any plan to stabilize the market and that the Doha meeting was a positive step, despite the failure to reach an output freeze deal. The oil minister also added that Iran’s oil output has risen by 1mln bpd vs. January and that it will keep raising output until it regains pre-sanction market share. (RTRS)
The Eastern Libyan government are poised to send their first export of crude oil. (WSJ)
CFTC said COMEX gold speculators increased net long positions by 3,812 contracts to 188,030 contracts, COMEX silver speculators increased net long positions by 11,428 contracts to 66,313 contracts and COMEX copper speculators decreased net short positions by 1,524 contracts to 8,164 contracts in week to April 19th. (RTRS)
Australia will implement import duties on certain types of steel from China to help support domestic steelmakers. (RTRS)