Biden arrives in Japan for G7 Leader Summit – FXStreet

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EU mid-market update: Biden arrives in Japan for G7 Leader Summit; Big UK fashion retailer notes it is seeing softening in American markets trading.

Notes/observations

– Risk appetite finds fresh tailwinds on US debt ceiling optimism.

– G7 Leader Summit to begin in Japan; focus on Russian sanctions enforcement and semiconductor partnerships.

– EU session participation light due to Ascension Thursday holiday.

– Corporate news recap: UK fashion brand Burberry reported results and admitted its Americas market is now a challenge, under pressure and it is seeing softening in trading, noting younger American customers are spending less; Cisco during the earnings call said April was a tiny bit better month than Feb and Mar; UK telecom giant BT Group announced plans to cut up to 55K jobs during next decade.

Asia

– Japan Apr Trade Balance: -¥432.4B v -¥600Be; Exports Y/Y: 2.6% v 3.0%e; Imports Y/Y: -2.3% v -0.6%e.

– Australia Apr Employment Change: -4.3K v +25.0Ke; Unemployment Rate 3.7% v 3.5%e.

– Japan PM Kishida stated that the Govt would work on expanding FDI into Japan. Comments made after he met the heads of the world’s largest chipmakers (**Insight: Japan looking for ways to grow chipmaking at home for cutting-edge chips amid growing US-China tensions and as concern grows about over-reliance on Taiwan).

– New Zealand Budget forecasts 2023-24 budget deficit of NZ$7.6B and noted that a return to surplus would take place in 2026 (**Note: one year later than prior forecast. Gross bond issuance for four years to June 2027 was raised from NZ$100B to NZ$120B. Raised its 2023 GDP from -0.3% to +1.0% (no longer forecasting a recession) while maintaining the 2024 GDP growth at 2.1%.

Europe

– EU said to be willing to sign an agreement with the UK to boost co-operation on the regulation of financial services.

– UK PM Sunak to agree to historic UK-Japan “Hiroshima Accord” ahead of G7 Summit. UK to announce a new ‘semiconductors partnership’ with the Japanese government and step up defense cooperation with Japan to uphold stability in Indo-Pacific.

Americas

– House Speaker McCarthy (R-CA) reiterated view that a debt ceiling agreement by Sunday was ‘doable’.

– Florida Gov Ron DeSantis said to officially enter the 2024 US presidential race next week.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.55% at 466.53, FTSE +0.63% at 7,771.57, DAX +1.43% at 16,179.25, CAC-40 +0.87% at 7,464.14, IBEX-35 +0.55% at 9,262.01, FTSE MIB +1.11% at 27,498.00, SMI -0.71% at 11,437.78, S&P 500 Futures +0.10%].

Market focal points/key themes: European indices open higher across the board and advanced into the green as the session progressed; Nordics and Switzerland closed for holiday; sectors leading the way higher include industrials and energy; lagging sectors include materials and real estate; oil & gas subsector supported with WTI consolidating above $70/bbl; Informa to acquire Winsight; Geely raises stake in Aston Martin; earnings expected in the upcoming US session include Bath Body Works, Dole and Walmart.

Equities

Consumer discretionary: Burberry [BRBY.UK] -6.0% (earnings; color on Americas spending), International Distributions Services [IDS.UK] -1.5% (earnings; no dividend), EasyJet [EZJ.UK] +1.0% (earnings; bookings color).

Energy: Saipem [SPM.IT] +4.0% (large orders), Petrofac [PFC.UK] +13.5% (large order).

– Financials: Deutsche Bank [DBK.DE] +4.0% (said to settle Jeffrey Epstein accusers’ suit).

Industrials: Aston Martin Lagonda [AML.UK] +13.0% (Geely takes stake), Volkswagen [VOW3.DE] +2.0% (cost saving; revamping core brand).

Technology: Future plc [FUTR.UK] -15% (earnings; outlook).

Telecom: BT Group [BT.A.UK] -7.5% (earnings; plans to cut up to 42% of all jobs during next decade to realign business).

Speakers

ECB’s De Guindos (Spain) stated that service inflation was the most worrying for ECB. Still scope to continue with rate hikes but most of the tightening had already been done.

ECB’s Muller (Estonia) stated that it was premature to expect ECB to cut rates early in 2024.

Philippines Central bank Policy Statement noted that the prior rate hikes continued to work their way through the economy. Its baseline scenario saw a gradual return of inflation to target band in the forecast horizon but risks remained to the upside. Prepared to respond to emerging threats of inflation and resume tightening if necessary.

President Biden commented after meeting Japan PM at the G7 that would hold Russia accountable for its brutal aggression in Ukraine.

Currencies/fixed income

– USD continued to be on some firm footing. Greenback had been aided by recent sign the Chinese economy post-COVID recovery was losing momentum. Dollar also aided by optimism over US debt ceiling talks.

– USD/JPY approaching the 138 area for fresh YTD highs in the pair.

– AUD/USD was softer after Australia job report possibly complicating any plans for RBA to hike again.

Economic data

– (ES) Spain Mar House transactions Y/Y: -5.7% v -6.6% prior.

– (CZ) Czech Apr PPI Industrial M/M: -1.2% v -0.2%e; Y/Y: 6.4% v 7.5%e.

– (TR) Turkey Central Bank (TCMB) May Inflation Expectation Survey: Next 12 Months: 29.8% v 31.0% prior.

(PH) Philippines Central Bank (BSP) left its Overnight Borrowing Rate unchanged at 6.25% (as expected).

– (ES) Spain Mar Trade Balance: -€0.2B v -€2.5B prior.

– (HK) Hong Kong Apr Unemployment Rate: 3.0% v 3.0%e.

Fixed income issuance

– (ES) Spain Debt Agency (Tesoro) sold total €6.512B vs. €5.5-6.5B indicated in 2025. 2027, 2028 and 2043 bonds.

– Sold €1.603B in 0.00% May 2025 SPGB bonds; Avg Yield: 3.046% v 2.351% prior; Bid-to-cover: 1.82x v 2.37x prior.

– Sold €1.307B in 0.00% Jan 2027 SPGB bond; Avg Yield: 3.027% v 2.667% prior; Bid-to-cover: 1.72x v 2.19x prior.

– Sold €1.482B in 1.4% July 2028 bonds; Avg yield: 3.086% v 1.493% prior, Bid-to-cover: 1.65x v 1.49x prior.

– Sold €2.12B in 3.45% July 2043 SPGB bonds; Avg Yield: 3.991% v 3.469% prior; Bid-to-cover: 1.24x v 1.84x prior.

Looking ahead

– (EG) Egypt Central Bank Interest Rate Decision: Expected to leave Key Rates unchanged.

– (IL) Israel May 12-month CPI Forecast: No est v 3.0% prior.

– 05:25 (EU) Daily ECB Liquidity Stats.

– 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.

– 06:00 (PT) Portugal Apr PPI M/M: No est v -2.2% prior; Y/Y: No est v 0.2% prior.

– 06:00 (CZ) Czech Republic to sell Bills.

– 06:00 (RO) Romania to sell RON700M in 8.25% 2032 Bonds.

– 06:45 (US) Daily Libor Fixing.

– 08:00 (UK) Daily Baltic Dry Bulk Index.

– 08:30 (US) May Philadelphia Fed Business Outlook: -20.0e v -31.3 prior.

– 08:30 (US) Initial Jobless Claims: 252Ke v 264K prior; Continuing Claims: 1.82Me v 1.813M prior.

– 08:30 (CL) Chile Q1 GDP Q/Q: 1.0%e v 0.1% prior; Y/Y: -0.9%e v -2.3% prior.

– 08:30 (CL) Chile Q1 Current Account: +$0.3Be v -$5.0B prior.

– 08:30 (US) Weekly USDA Net Export Sales.

– 09:00 (RU) Russia Gold and Forex Reserve w/e May 12th: No est v $599.2B prior.

– 09:05 (US) Fed’s Jefferson on Economic Outlook.

– 09:30 (US) Fed’s Barr testifies before Senate Banking Committee.

– 10:00 (US) Apr Existing Home Sales: 4.30Me v 4.44M prior.

10:00 (US) Apr Leading Index: -0.6%e v -1.2% prior.

– 10:00 (CA) Bank of Canada (BOC) Financial System Review.

– 10:30 (US) Weekly EIA Natural Gas Inventories.

– (EG) Egypt Central Bank Interest Rate Decision.

– 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

– 13:00 (US) Treasury to sell 10-Year TIPS Reopening.

– 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave Overnight Rate unchanged at 11.25%.

– 15:00 (AR) Argentina Apr Trade Balance: +$0.6Be v -$1.1B prior.

– 18:45 (NZ) New Zealand Apr Trade Balance (NZD): No est v -1.3B prior; Exports: No est v 6.5B prior; Imports: No est v 7.8B prior.

– 19:01 (UK) May GfK Consumer Confidence: -27e v -30 prior.

– 19:30 (JP) Japan Apr National CPI Y/Y: 3.5%e v 3.2% prior; CPI Ex Fresh Food (core) Y/Y: 3.4%e v 3.1% prior; CPI Ex Fresh Food/Energy (Core-Core) Y/Y: 4.2%e v 3.8% prior.

– 22:35 (CN) China to sell 30-year Upsized Bonds.

– 22:35 (CN) China to sell 3-month Bills.

– 23:30 (JP) Japan to sell 3-Month Bills.