E Markets: Hell

  • ECB monthly bulletin: Risks to growth outlook have moved to the downside. “Overall, the risks surrounding the euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.”

Market Recap:

Equities: The US S&P500 futures are down 0.45% after a 0.22% loss yesterday. The Stoxx Europe 600 is off 0.5% with forecast cuts driving. The MSCI Asia Pacific remains holiday thin and off 0.2% with Australia gaining at Brazil’s expense in the mining sector. 

  • Japan Nikkei off 0.59% to 20,751.28
  • Korea Kospi flat at 2,203.42
  • Hong Kong Hang Seng closed for holiday
  • China Shanghai Composite closed for holiday
  • Australia ASX up 1.1% to 6,159.20
  • India NSE50 up 0.06% to 11,069.40
  • UK FTSE so far off 0.1% to 7,167
  • German DAX so far off 1.0% to 11,210
  • French CAC40 so far off 0.5% to 5,054
  • Italian FTSE so far off 1.1% to 19,767

Fixed Income: The blast of cold data and dovish central bank outlooks drives EU bonds sharply higher, yields are down almost everywhere except in Italy – that contrast and fear about growth matters. German 10-year bond yields off 4bps to 0.12%, French OATs off 3bps to 0.55%, UK Gilts post-BOE off 4bps to 1.17% while Italy up 9bps to 2.92%, Spain off 1bps to 1.25%, Portugal up 1bps to 1.68% and Greece up 6bps to 3.96%. 

  • Spain sold E1.2bn of 3Y Bonds at -0.086% with 3.88 cover - previously -0.047%
  • France AFT sold E4.45bn of 10Y OATs at 0.57% with 2.15 cover - previously 0.70% and 1.92 cover. 
  • US Bonds are bid across the curve– 2Y off 2bps to 2.50%, 5Y off 3bps to 2.48%, 10Y off 3bps to 2.67% and 30Y off 3bps to 3.01%. 
  • Japan JGBs sold with focus on supply and BOJ– 2Y up 1bps to -0.15%, 5Y up 1bp to -0.15%, 10Y up 1bps to -0.01%, 30Y up 2bps to 0.62%.  The MOF sold Y563.4bn of 0.7% 30Y #61 JGB at 0.589% with 4.72 cover from 0.72% previously
  • Australian bonds are bid with RBA hangover continuing –3Y off 3bps to 1.64%, 10Y off 7bps to 2.10%. 

Foreign Exchange: The US dollar index up 0.2% to 96.60. In EM USD also bid, Asia– KRW off 0.15% to 1122 while INR up 0.2% to 71.41; EMEA– RUB off 0.3% to 66.045, ZAR off 0.25% to 13.57 and TRY off 0.6% to 5.241

  • EUR: 1.1340 off 0.25%.Range 1.1332-1.1369 with 1.13 risk of break leading to 1.1180 target getting higher on EU forecasts.
  • JPY: 109.85 off 0.1%.Range 109.73-110.09 with 110.20 holding opening up 108 on equity de-risk move threat. EUR/JPY 124.50 off 0.35%.
  • GBP: 1.2905 off 0.2%.Range 1.2895-1.2963 with UK May still working on the Brexit story but EUR driving today 1.2850 next key. EUR/GBP .8780 flat. 
  • AUD: .7105 off 0.1%. Range .7092-.7114 with .7050 back in play post RBA Lowe despite stock rally and mining focus. NZD off 0.2% to .6755
  • CAD: 1.3250 up 0.3%.Range 1.3204-1.3254 with 1.3050 base now for 1.3350 again. Oil, US rates and data key. 
  • CHF: 1.0020 flat. Range 1.0017-1.0029 with EUR/CHF 1.1355 off 0.3%. All about Italian bonds, ECB policy and weaker growth – EUR driving. 
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