Morning Report – Monday 11th May

Main Headlines

Boris Johnson announced the first steps to restart the U.K. economy. There will be no immediate end to the lockdown, but restrictions on movement will be relaxed from Wednesday, starting with unlimited outdoor time and freedom to drive to parks and beaches. The PM said he’d tighten the rules in key areas, and those who flout social distancing guidelines face fines starting at £100. Some schools and shops could reopen in June.

The Hang Seng rose about 2% to lead Asia stocks higher across the board on signs the pandemic toll is moderating and China’s guarantee to provide more stimulus. U.S. stock futures added to gains after the S&P 500 shrugged off Friday’s grim labour statistics. Oil fell after its second straight weekly advance. Ten-year Treasuries ticked lower and Gold edged higher.

The PBOC pledged “more powerful” policies to counter the virus impact in China, with more focus on growth and jobs. In its quarterly monetary policy report, the bank didn’t reiterate an earlier vow to “avoid excess liquidity flooding the economy.” It did repeat that prudent monetary policy will be more flexible and appropriate, and said it will keep liquidity at a reasonably ample level.

GBP

Sterling remains rangebound after the PM’s address to the nation however, it will be a busy week for UK data, with Q1 GDP released along with BRC retail sales, IP and trade data. The government will today outline guidance for businesses on how to make themselves “Covid secure.” All passengers arriving in the U.K. by air — except from France — will soon be asked to quarantine themselves for 14 days.

EUR

The ECB is preparing to inject more stimulus regardless of last week’s shock ruling by Germany’s constitutional judges which suggested that the ECB may have stepped outside its remit. The ECB could decide to increase the euro pandemic program set up in March, extend it into 2021, or promise to reinvest the proceeds of bonds as they mature. The European Commission threatened twice over the weekend to sue Germany, with Commission President Ursula von der Leyen saying in a statement that “the final word on EU law is always spoken in Luxembourg.” When the ECB decide that more stimulus is needed, the emergency program is the obvious vehicle as it wasn’t covered by last week’s ruling. The euro remains bearish ahead of key European data due to be released this week including EZ IP and German CPI, but the key numbers will be German and EZ Q1 GDP.

USD

The US has priced in a severe slowdown of economic activity and Friday’s positive reaction to the slight beat on an historically weak U.S. employment report shows that any sign of an economic pulse will be well received. The staggering U.S. unemployment rate reported by the government last week amid coronavirus lockdowns may get even worse, Treasury Secretary Steven Mnuchin said on Sunday. There are several pieces of key U.S. data to be released this week, including April CPI, PPI, industrial production, University of Michigan May consumer sentiment and retail sales. Retail sales for April are out Friday and expected to plunge 11.6% m/m. Investors last week started pricing in negative U.S. rates for first time.

Main Economic Data/Central Banks/Government (All Times BST)

• 7:00 a.m.: Norway April CPI
• 8:00 a.m.: Turkey Feb. unemployment
• 8:30 a.m.: Riksbank’s minutes from April 27 meeting
• 9:00 a.m.: Italy March industrial production
• 11:45 a.m.: ECB’s Mersch speaks
• 1:00 p.m.: BOE’s Breeden speaks

Corporate Events

Earnings include Henkel, Marriott, Under Armour, Continental Resources

Corporate Highlights

• United Airlines scrapped its $2.25 billion bond offering. The carrier had been pushing to extend the sale into next week as potential buyers pressured it for better terms even after it sweetened the yield to 11%.
• Elon Musk is considering liberating Tesla from California. The billionaire threatened to move its operations to Texas and Nevada after a California county blocked Tesla’s only U.S. car plant from reopening.