EUROZONE PRIVATE SECTOR GROWTH DECELERATES IN APRIL as manufacturing
contracts for the second consecutive month. New export orders
collapse for the seventh straight
month
alongside services PMI dipping to a seventh month low of 55.6.
Retail sales rose
to a four-month high in March growing by 1.1 percent month over month,
year over year sales improved 6.7 percent. The
10-year
Gilt rose 1.7 basis points.
FTSE 100 +0.76%,
German DAX +0.15%,
CAC 40 +0.13%,
STOXX Europe 600+0.17%
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GERMANY ONCE AGAIN CHOPS ITS 2019 GROWTH FORECAST for the second time in three months to 0.5 percent from 1 percent. Weak demand abroad has pushed
German manufacturing into a recessionmeanwhile domestic demand is booming aided by
record high employment. BDI Managing Director Joachim Lang acknowledges the state of the German economy,
“The best times for the economy are over”. The
10-year
Gilt rose 1.6 basis points.
FTSE 100 -0.04%,
German DAX +0.48%,
CAC 40 +0.49%,
STOXX Europe 600 +
0.07%
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U.K. WAGES GREW AT THE FASTEST PACE IN OVER A DECADE
increasing by 3.5 percent in the last quarter. Matt Hughes a labor market analyst stated
, "Earnings have now been growing ahead of inflation for over a year, but in real terms, wage levels have not yet returned to their pre-downturn peak."
Britain’s
unemployment hit a four-decade low
of 3.9 percent indicating the
Brexit stalemate
has not negatively impacted the labor market, in addition,
employment hit a new all-time
high
of 76.1 percent. The
UK 10-year Gilt
dipped 0.1 basis points.
FTSE 100 +0.52%,
German DAX +0.68%,
CAC 40 +0.33%,
STOXX Europe 600 +0.68%.
EUROPEAN EQUITIES ADVANCED FOR THE FIFTH CONSECUTIVE DAY lifted by bank and retail earnings,
“This optimism is really feeding into the European banking sector as well. When they will start to announce their earnings, the expectations are high…”
said Naeem Aslam, chief market analyst at TF Global Markets
. Italy significantly cuts its 2019 GDP forecast
to 0.1 percent from 1 percent and
increased its budget deficit
forecast to 2.5 percent, which
surpasses the allotted 2.04 percent
deficit issued by the European Union. Italy’s largest bank,
UniCredit SpA
, agreed to pay $1.3 billion to the U.S. Government pledging guilty to federal and state criminal charges using the U.S. financial system to
illegally move hundreds of millions of dollars in violation of U.S. sanctions on Iran.
ADI (Advantage Data Inc.) extensive corporate-bond index data showed a
net daily yield increment for high-grade versus high-yield constituents.
High-yield bonds edged out high-grade debt as of 3 PM, London time. Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded,
Viacom Inc. (USD) 5.875% 2/28/2057 made some analysts' 'Conviction Buy' lists. (See the chart for
Viacom Inc. bonds below).
Corey Mahoney (
cmahoney@advantagedata.com).
Sovereign-Debt Snapshot
| Country |
Maturity (Y) |
Yield (%) |
Previous (%) |
Spread (bp) |
| Australia |
10 |
1.893 |
1.869 |
-66.5 |
|
| Belgium |
10 |
0.495 |
0.434 |
-206.2 |
|
| France |
10 |
0.402 |
0.334 |
-215.5 |
|
| Germany |
10 |
0.059 |
-0.007 |
-249.9 |
|
| Italy |
10 |
2.395 |
2.372 |
-16.2 |
|
| Japan |
10 |
-0.048 |
-0.059 |
-260.5 |
|
| Netherlands |
10 |
0.134 |
0.073 |
-242.3 |
|
| Portugal |
10 |
1.169 |
1.130 |
-138.8 |
|
| Spain |
10 |
1.053 |
1.009 |
-150.4 |
|
| Sweden |
10 |
0.264 |
0.228 |
-229.3 |
|
| U.K. |
10 |
1.214 |
1.150 |
-134.3 |
|
| U.S. |
10 |
2.557 |
2.498 |
... |
Credit-Default Swap Market
LATEST NEWS:
Top moves, sovereign tighteners (5Y): China 41 bp and Finland 12 bp. Sovereign wideners (5Y): France 27 bp and Germany 11 bp.
New Issuance
| New Issues |
New Issues [Continued] |
| 1. Basellandsch KTBK (CHF) 0.375% 5/13/2030 (04/15/2019):180MM Senior Unsecured Notes, Price at Issuance 100.865, Yielding .3%. |
|
ADI Indexes
DATA CHECK:
| iShares Core EUR UCITS |
iShares Euro High Yield UCITS |
| NAV as of 04/16/2019, 131.41 |
NAV as of 04/16/2019, 104.55 |
| Daily NAV Change (%) +0.03% |
Daily NAV Change (%) +0.11% |
OVERALL EUROPEAN CREDIT MARKET:
The euro-zone economy shows signs of positive momentum, although conditions are expected to deteriorate hindered by the termination of quantitative easing, weakening credit rating quality, and uncertainty regarding the outcome of Brexit. Closely watched indicators and rates:
- Eurostat's unemployment rate: currently 7.8% (seasonally adjusted, February 2019)
- Eurostat's quarterly GDP: 0.2% (2018 Q3 Final)
- 6-month Euribor: current value -0.231%, as of 04/15/2019
Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com
Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.
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UK ECONOMY LEANS ON CONSUMERS AS BREXIT DRAGS
ON BUSINESSES.
Britain’s economy only grew 1.4 percent in 2018, the weakest increase in
six years. Bank of England’s Governor,
Mark Carney, stated: “When the economy is reliant on consumers, growth becomes very one-dimensional.”
Bank of England has signaled not raising interest rates
allowing cheaper capital to circulate around the economy. The value of business investment lost in Britain’s economy since the June 2016 referendum is roughly 10 billion pounds. Business investment fell every quarter of 2018, the longest decline since the 2008 financial crisis. The
UK 10-year Gilt
increased two-basis points.
FTSE 100 -0.03%,
STOXX Europe 600
+0.14%,
CAC 40 +0.09%,
German DAX +0.18%.
TRADE NEGOTIATIONS between the EU and the United States will not be easy, “but both sides should benefit in the end,
German economy Minister Peter Altamaier
said on Monday." The goal is to reduce tariffs to zero and ultimately fend off a trade conflict. Negotiations will commence later this week and will continue for the upcoming months. Among European high-yield bonds showing a concurrence of top price gains at appreciable volumes traded,
Barclays PLC (USD) 4.375% 9/11/2024 made some analysts' 'Conviction Buy' lists. (See the chart for
Barclays PLC bonds
below).
Niral Mehta (
nmehta@advantagedata.com).
Sovereign-Debt Snapshot
| Country |
Maturity (Y) |
Yield (%) |
Previous (%) |
Spread (bp) |
| Australia |
10 |
1.893 |
1.869 |
-66.5 |
|
| Belgium |
10 |
0.495 |
0.434 |
-206.2 |
|
| France |
10 |
0.402 |
0.334 |
-215.5 |
|
| Germany |
10 |
0.059 |
-0.007 |
-249.9 |
|
| Italy |
10 |
2.395 |
2.372 |
-16.2 |
|
| Japan |
10 |
-0.048 |
-0.059 |
-260.5 |
|
| Netherlands |
10 |
0.134 |
0.073 |
-242.3 |
|
| Portugal |
10 |
1.169 |
1.130 |
-138.8 |
|
| Spain |
10 |
1.053 |
1.009 |
-150.4 |
|
| Sweden |
10 |
0.264 |
0.228 |
-229.3 |
|
| U.K. |
10 |
1.214 |
1.150 |
-134.3 |
|
| U.S. |
10 |
2.557 |
2.498 |
... |
Credit-Default Swap Market
LATEST NEWS:
Top moves, sovereign tighteners (5Y): Belgium 23 bp and Finland 12 bp. Sovereign wideners (5Y): France 27 bp and China 41 bp.
New Issuance
| New Issues |
New Issues [Continued] |
| 1. Basellandsch KTBK (CHF) 0.375% 5/13/2030 (04/15/2019):180MM Senior Unsecured Notes, Price at Issuance 100.865, Yielding .3%. |
|
ADI Indexes
DATA CHECK:
| iShares Core EUR UCITS |
iShares Euro High Yield UCITS |
| NAV as of 04/15/2019, 131.30 |
NAV as of 04/12/2019, 104.39 |
| Daily NAV Change (%) -0.02% |
Daily NAV Change (%) +0.05% |
OVERALL EUROPEAN CREDIT MARKET:
The euro-zone economy shows signs of positive momentum, although conditions are expected to deteriorate hindered by the termination of quantitative easing, weakening credit rating quality, and uncertainty regarding the outcome of Brexit. Closely watched indicators and rates:
- Eurostat's unemployment rate: currently 7.8% (seasonally adjusted, February 2019)
- Eurostat's quarterly GDP: 0.2% (2018 Q3 Final)
- 6-month Euribor: current value -0.232%, as of 04/12/2019
Copyright 2019 Advantage Data Inc. All Rights Reserved. http://www.advantagedata.com
Information in this document should not be regarded as an offer to sell or solicitation of an offer to buy bonds or any financial instruments referred to herein. All information provided in this document is believed to be accurate. However, Advantage Data and its sources make no warranties, either express or implied, as to any matter whatsoever, including but not limited to warranties of merchantability or fitness for a particular purpose. Opinions in this document are subject to change without notice. Electronic redistribution, photocopying and any other electronic or mechanical reproduction is strictly prohibited without prior written permission from Advantage Data Inc.
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GERMAN GOVERNMENT EXPECTS THE ECONOMY TO GROW BY 0.5 PERCENT THIS YEAR, LOWER THAN A RECENT ESTIMATE OF 0.8. German Finance Minister mentioned, “
The economy is losing momentum but still growing, with private consumption and state spending expecting to support overall growth this year.”
Unresolved trade disputes, Brexit uncertainty and a sluggish world economy have hit foreign demand and hurt manufacturers.
Stricter pollution standards are challenging the country’s car manufacturers, a critical component of their GDP. If
the slowdown worsens, it will put pressure on the ECB to provide more
stimulus for the Eurozone economy. The
UK 10-year Gilt
increased six-basis points.
FTSE 100 -0.14%,
STOXX Europe 600
+0.11%,
CAC 40 +0.33%,
German DAX +0.54%.
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EU GRANTS BRITAIN SIX MORE MONTHS TO LEAVE THE BLOC
EXTENDING THE DEADLINE INTO OCTOBER, ALTHOUGH, IT COULD HAPPEN QUICKER ACCORDING TO THERESA MAY.
“There is huge frustration from many people that I had to request this extension, but it was the logical thing to do,” stated Theresa May. German Chancellor, Merkel mentioned, “An orderly exit by Britain can be best ensured if we
prolong the duration of a deal.” The ECB will keep its monetary policy as accommodative as possible to ensure positive growth across the economy. The
ECB hinted they will leave interest rates unchanged amid trade tensions and uncertainty around
Brexit. The
UK 10-year Gilt
increased five-basis points.
FTSE 100 -0.09%,
STOXX Europe 600
+0.13%,
CAC 40 +0.83%,
German DAX +0.34%.
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EUROZONE’S GOVERNMENT BOND AND EQUITIES MARKETS RALLIED, WHILE THE EURO DECLINED AFTER THE ECB CHIEF MARIO DRAGHI WARNED THAT THE ECONOMY FACES MANY HEADWINDS. The ECB remains
dovish on the outlook for inflation as it sees further depreciation over the upcoming months.
Germany’s benchmark 10-year bond yield fell to a one-week low of minus 0.038 percent and the
French 10-year bond yields fell 3 bps, resulting in higher bond prices. The ECB and Bank of England have
implemented “swap-lines” in place to offer each other’s currencies in banks in their respective jurisdictions if money markets freeze up. European Union leaders
will
grant Prime Minister Theresa May a “second delay to Brexit at an emergency summit; timeframe and terms have not been disclosed.” The
UK 10-year Gilt
declined one-basis point.
FTSE 100 -0.03%,
STOXX Europe 600
+0.26%,
CAC 40 +0.26%,
German DAX +0.51%.
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“
UK ECONOMY TO LOSE 3.5 PERCENT OF GDP IN NO-DEAL BREXIT,” STATED THE IMF. The increase in trade barriers has a
detrimental
impact on UK foreign domestic demand. The
IMF downgraded
its
forecast for economic growth in Britain this year to 1.2 percent from a forecast of 1.5 percent, the weakest since 2009.
Britain could suffer a
loss of 2-3 years of positive GDP if it departs the EU without a deal. The downward revisions reflect the negative effect of
prolonged uncertainty about the Brexit outcome. BoE stated, “We are ready to take
a cautious, data-dependent approach
to monetary policy.” The
UK 10-year Gilt
declined one basis point.
FTSE 100 -0.35%,
STOXX Europe 600
-0.47%,
CAC 40 -0.65%,
German DAX -0.94%.
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WEAK TRADE DATA CASTING DOUBT ON GERMANY’S ECONOMIC
STRENGTH
. German exports and imports declined more than expected in February dropping by an aggregate of 1.3 percent
in February. German exporters are suffering from a
slowing world economy, trade disputes and Brexit angst.
The trade surplus edged up to
18.7 billion euros
from a
revised 18.6 billion euros the previous month. German industrial orders fell by the biggest margin in more than two years.
Brexit deadline is looming and a “no-deal Brexit makes no sense and is the worst possible solution,”
stated European Agriculture Commissioner, Phil Hogan. The
UK 10-year Gilt
declined one-tenth of a basis point.
FTSE 100 +0.07%,
STOXX Europe 600 -0.19%,
CAC 40 +0.38%,
German DAX -0.39%.
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EUROPEAN EQUITIES GAINED following the release of a
positive U.S. jobs
report signaling the U.S. economy remains strong despite
global economies faltering. In the European front, German industrial output increased 0.7 percent in February aided by a
flood of construction
activity, however,
“The industrial sector is expected to remain subdued given the weak development in orders and the gloomier business climate” The
UK 10-year
Gilt
rose 3.3 basis points.
FTSE 100 +0.78%,
STOXX
Europe 600
+0.19%,
CAC 40
+0.38%,
German DAX
+0.21%.
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