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IBERIAN DAILY 02 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: COLONIAL, SANTANDER.

The Ibex’s 3-day underperformance
Even though most indices saw a bullish opening at both sides of the Atlantic, the trend turned around in the US with May’s good manufacturing ISM data amid fears about the high persistent inflation and uncertainties surrounding crude oil and gas supply. Thus, all sectors in the Euro STOXX, with the exception of Automobiles, saw drops, led by Travel&Leisure. On the macro side, in the euro zone April’s unemployment rate remained at 6.8% seen in March. In Spain, the Governor of the BoS warned that the income pact (containing margins and salaries) is in jeopardy of being broken, which could generate second-round effects, and he suggested that core inflation be used as a reference. In the US, the manufacturing ISM rose unexpectedly to 56.1 in May from 55.4 with the price heading moderating less than expected and even though the external orders heading improved significantly the employment index came in below 50 and the orders/inventory ratio fell again, suggesting a 52 level for the ISM over a 6-month horizon. The Fed’s Beige Book for May showed the economy is growing at a more modest pace, with consumption and the residential sector falling, as well as lower dynamism in employment in some states. On the geopolitical side, Saudi Arabia warned that it is getting ready to increase crude oil production in view of the ban on Russian oil, while OPEC+ recorded a larger production increase than what it pledged for the first time since Feb’22, although we do not expect slippage from the progressive increase plan already set out.
What we expect for today
European markets would open flat with some bullish bias whereas the oil sector would be hit by the sharp drop in crude oil prices. Currently, S&P futures are down -0.1% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US fell (VIX 25.69). Asian markets are falling (China’s CSI 300 -0.15% and Japan’s Nikkei -0.2%).
Today in the US we will learn May’s ADP employment survey, weekly jobless claims and April’s factory orders. In debt auctions: Spain (€ 4.5 Bn in bonds due 2025, 2027, 2029 and 2031) and France (€ 10.5 Bn in bonds due 2032, 2036 and 2052).