Massive German spending timeline now up in the air after Merz failed first vote

EU Mid-Market Update: Massive German spending timeline now up in the air after Merz failed first vote for Chancellor in a historic first.

Notes/observations

- European equities opened higher but turned mixed/lower with German DAX underperforming after Friedrich Merz failed first Bundestag vote to become chancellor. Coalition instability likely; defections suspected. Risk of far-right AfD gains grows with prolonged uncertainty. Second vote penciled in for Friday.

- Services PMIs across Europe all beat consensus or are revised higher (except Spain); Tariff impact remaining the key theme of uncertainty.

- UK gilts move higher ahead of BOE decision on Thurs, US treasuries are little changed ahead of FOMC tomorrow; US 10-year treasury auction at in focus after recent 18bps rise.

- Taiwan dollar’s pauses rally; Concerns have been circulated of reduced US asset demand by Asia.

- Notable M&A: DoorDash to buy Deliveroo for £2.4B. AB Foods confirms talks with Endless LLP.

- Key EU earnings: Hugo Boss, Zalando, Fresenius Medical Care, MTU Aero, CRH, IWG, Philips.

- Asia closed mixed with Shanghai outperforming +1.1%. EU indices -0.2% to -1.6%. US futures -0.6% to -1.0%. Gold +1.3%, DXY -0.1%; Commodity: Brent +2.7%, WTI +2.8%; Crypto: BTC -0.3%, ETH -1.3%.

Asia

- Australia Mar Building Approvals M/M: -8.8% v -1.8%e.

- Australia Mar Household Spending M/M: -0.3% v +0.2%e; Y/Y: 3.5% v 3.9%e.

- China Apr Caixin PMI Services: 50.7 v 51.8e (27th month of expansion).

Europe

- ECB's Stournaras (Greece) noted that it seemed that the ECB would continue with rate cuts.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.59% at 534.14, FTSE -0.07% at 8,590.15, DAX -1.34% at 23,022.86, CAC-40 -0.63% at 7,679.47, IBEX-35 -0.20% at 13,487.00, FTSE MIB -0.45% at 38,303.00, SMI -0.31% at 12,214.40, S&P 500 Futures -0.67%].

Market focal points/key themes: European indices opened generally higher but later turned back to trading generally mixed; markets seen in a holding pattern with no major news on trade and ahead of risk events later in the week; DoorDash to acquire Deliveroo; Oerlikon sells Barmag unit to Rieter; outperforming sectors include energy and utilities; among underperforming sectors are materials and industrials; focus on US trade balance coming out later in the day; earnings expected in the upcoming Americas session include AMD, Ferrari, Intesa Sanpaolo and Bristol Myers Squibb.

Equities

- Consumer discretionary: Hugo Boss [BOSS.DE] +5.5% (results), Deliveroo [ROO.UK] +2.5% (receives 180p/shr cash offer from Doordash), Zalando [ZAL.DE] -1.0% (results).

- Financials: Raiffeisen [RBI.AT] +0.5% (results).

- Healthcare: Philips [PHIA.NL] -2.0% (results), Evotec [EVT.DE] -4.5% (results).

- Industrials: Continental [CON.DE] +1.0% (results; Merz fails first parliamentary vote in Bundestag to become new German Chancellor), Rheinmetall [RHM.DE] -2.5% (Merz fails first parliamentary vote in Bundestag to become new German Chancellor), MTU Aero Engines [MTX.DE] -3.5% (results), Geberit [GEBN.CH] +0.5% (results).

- Telecom: Telenor [TEL.NO] -1.0% (results).

Speakers

- SNB President Schlegel commented that was staying committed to price stability mandate; CHF currency has appreciated quite a bit. Prepared to intervene in FX if necessary and have not ruled out negative rates.

- German CDU Leader Merz failed to secure Chancellor position on 1st try, falling short by 6 votes.

- EU Trade Commissioner Sefcovic noted that EU-US tariff situation was not acceptable. US could collect $113B from the EU through new tariffs.

- Russia said to be weighing changing its budget rule amid slump in oil prices.

- Hong Kong Monetary Authority (HKMA) Chief Executive Yue noted that it had been reducing duration in US treasury holdings; Hong Kong’s Exchange fund had been diversifying into non-US assets.

Currencies/fixed income

- EUR/USD drifted higher in the session aided by upward revisions in various EU final PMI Services readings. Pair contained with recent range but at 1.1340 by mid-session.

- GBP/USD at 1.3325 with focus on the BOE rate decision on Thursday. Dealers noting that If the BOE removed its reference to gradual rate cuts, it would increase the scope for faster and larger cuts than previously expected.

- USD/JPY probed lower to test the 143.30 area.

- 10-year German Bund yield at 2.55% and 10-year Gilt yield at 4.55%. 10-year Treasury yield at 4.36%.

Economic data

- (CH) Swiss Apr Unemployment Rate: 2.8% v 2.9%e; Unemployment Rate (seasonally adj): 2.8% v 2.8%e.

- (SE) Sweden Apr PMI Services: 48.4 v 50.0e (2nd month of contraction); Composite: 50.0 v 50.6 prior.

- (FR) France Mar Industrial Production M/M: 0.2% v 0.3%e; Y/Y: +0.2% v -0.2%e - (FR) France Mar Manufacturing Production M/M: 0.6% v 0.5%e; Y/Y: 0.0% v -1.3% prior.

- (CZ) Czech Apr Preliminary CPI M/M: -0.1% v +0.1%e; Y/Y: 1.8% v 2.1%e (1st time in 10 months with annual pace back below target).

- (ES) Spain Apr Unemployment Change: -67.4K v -13.3K prior; Net Employment Change: +69.2K v +23.1K prior.

- (ES) Spain Apr Services PMI: 53.4 v 54.0e (20th month of expansion; Composite PMI: 52.5 v 53.0e.

- (ZA) South Africa Apr PMI (whole economy): 50.0 v 48.3 prior.

- (IT) Italy Apr Services PMI: 52.1 v 51.3e (5th month of expansion); Composite PMI: 52.1 v 50.2e.

- (FR) France Apr Final Services PMI: 47.3e v 46.8 prelim (confirmed 9th month of contraction); Composite PMI: 47.8 v 47.3 prelim.

- (DE) Germany Apr Final Services PMI: 49.0e v 48.8 prelim (confirmed 1st contraction in 5 months); Composite PMI: 50.1 v 49.7 prelim.

- (EU) Euro Zone Apr Final Services PMI: 49.7 v 49.7 prelim (confirmed 1st contraction in 5 months); Composite PMI: 50.1 v 50.1 prelim.

- (UK) Apr New Car Registrations Y/Y: -10.4% v +12.4% prior.

- (TW) Taiwan Apr Foreign Reserves: $582.8B v $578.0B prior.

- (UK) Apr Final Services PMI: 48.9 v 48.9 prelim; Composite PMI: 48.2 v 48.2 prelim.

- (UK) Apr Official Reserves Changes: No est v $4.4B prior.

- (EU) Euro Zone Mar PPI M/M: -1.6% v -1.4%e; Y/Y: 1.9% v 2.3%e.

Fixed income issuance

- (DE) Germany opened its book to sell EUR-denominated 30-year Bunds; guidance seen +3.25bps to bunds.

- (ES) Spain Debt Agency (Tesoro) sold total €5.767B vs. €5.5-6.5B indicated range in 6-month and 12-month bills.

- (AT) Austria Debt Agency (AFFA) sold total €1.725B vs. €1.725B indicated in 2035 and 2044 RAGB bonds.

Looking ahead

- (MX) Mexico CitiBanamex Survey of Economists.

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

- 05:25 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €4.5B in 2.4% Apr 2030 BOBL.

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.

- 05:30 (BE) Belgium Debt Agency (BDA) to sell combined €1.7B in 3-month, 6-month and 12-month bills.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR3.75B in 2032, 2037 and 2053 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 06:00 (IL) Israel to sell ILS1.9B in 2027, 2029, 2034 and 2052 bonds.

- 06:30 (EU) ESM to sell €1.1B in 3-month Bills.

- 07:00 (ZA) South Africa Mar Electricity Production Y/Y: No est v 0.4% prior; Electricity Consumption Y/Y: No est v -3.5% prior.

- 07:30 (TR) Turkey Apr Real Effective Exchange Rate (REER): No est v 73.48 prior.

- 08:00 (MX) Mexico Mar Leading Indicators M/M: No est v -0.12 prior.

- 08:00 (MX) Mexico Feb Gross Fixed Investment M/M: +1.0%e v -1.5% prior; Y/Y:-5.0%e v -6.7% prior; Private Consumption Y/Y: -2.0%e v -1.3% prior.

- 08:00 (MX) Mexico Apr Vehicle Domestic Sales: No est v 127.4K prior.

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

- 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:30 (US) Mar Trade Balance: -$136.7Be v -$122.7B prior.

- 08:30 (CA) Canada Mar Int'l Merchandise Trade (CAD): +1.6Be v -1.5B prior.

- 08:55 (US) Weekly Redbook LFL Sales data.

- 09:00 (BR) Brazil Apr Services PMI: No est v 52.5 prior; Composite PMI: No est v 52.6 prior.

- 10:00 (CA) Canada Apr Ivey Purchasing Managers Index: No est v 51.3 prior.

- 11:30 (US) Treasury to sell 6-week bills.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 16:30 (US) Weekly API Oil Inventories.

- 17:00 (NZ) New Zealand RBNZ Publishes Financial Stability Report.

- 18:00 (CO) Colombia Central Bank Apr Minutes.

- 18:45 (NZ) New Zealand Q1 Unemployment Rate: 5.3%e v 5.1% prior.

- 18:45 (NZ) New Zealand Q1 Employment Change Q/Q: +0.1%e v -0.1% prior; Y/Y: -0.5%e v -1.1% prior; Participation Rate: 71.0%e v 71.0% prior; Pvt Wages (ex-overtime) Q/Q: 0.5%e v 0.6% prior; Pvt Wages (including Overtime) Q/Q: 0.5%e v 0.6% prior; Average Hourly Earnings Q/Q: No est v 1.3% prior.

- 20:30 (HK) Hong Kong Apr PMI (whole economy): No est v 48.3 prior.

- 20:30 (JP) Japan Apr Final PMI Services: No est v 52.2 prelim; PMI Composite: No est v 51.1 prelim.

- 21:00 (PH) Philippines Mar Unemployment Rate: No est v 3.8% prior.