SocGen

SocGen: "The Pound Short Covering May Just Be Starting"

"The possibility of a hard Brexit has already been discounted by the market, but the larger parliamentary majority currently implied by the polls would strengthen the UK government's negotiating position domestically. The market is now assigning better odds to a post-Brexit EU-UK trade agreement, and thus the worst may be behind us and cable short covering may just be starting."

Key Events In The Coming Week: French Election, Earnings, Manufacturing, Housing

This week will be dominated by the first round of the French presidential election on Sunday. On the data side, following China's strong economic report, attention will focus on US industrial production growth on Tuesday. In the euro area, flash PMIs for April due on Friday could point to moderation. This is also the first full corporate earnings week.

SocGen: "A Final Purge Of All Bearish Bond Sentiment May Cleanse The Market"

"I see no reason for USD/JPY to stop this side of 108. 2.29% this morning on nominal US 10s sees them below their recent range and real yields are 37bp now. Only a fall in US nominal yields to 1bp is avoiding the relative picture being even uglier but that just highlights the BOJs impotence in the face of lower global (US) yields."

As Stocks Sink, This Is What RBC Is Looking For

"...reticence from the buyside to take-down ‘net length’ is beginning to sting as recent ‘hiding-places’ are now dragging and generally very ‘high beta’ long portfolios (crowded ‘market’ factor) means increasingly painful drawdowns."

SocGen: "The Upcoming Central Bank Reversal Can't Be Helpful For Stocks"

"The wider Fed debate is about the impact on risk assets of shrinking the balance sheet. If near-zero rates and central bank buying of bonds have been the fundamental driver of global capital towards higher-yielding assets, then reversing both parts of this can't be helpful. Which is how markets have reacted overnight."

SocGen: Markets Are Losing Their Fear Of Inflation (Again)

The scorching ADP print may have brought another life into the reflation trade this morning, with TSYs dropping and the dollar rising, pushing S&P futures higher, but that may not be sufficient according to SocGen's Kit Juckes.

Deutsche: The Fed Gave Trump Just Enough Rope To Hang Himself With

"The future is bimodal with volatility to be found between politics vs. policy... Either political bottlenecks clear and the stimulus gets approved and goes full force leading to higher growth potential with structural steepening of the curve, or political tensions effectively sabotage either its arrival or content (or both), and the curve initially bear flattens or even twists with rate shorts capitulation accelerating the rally of the back end."

Why China Unexpectedly Hiked Rates 10 Hours After The Fed

The PBOC stressed that its interbank rate hikes simply followed the market's development, thus are not "true" policy rate hikes. Nevertheless, it also listed four classical rate-hike reasons for the interbank rate changes: the economic recovery, rising inflation (particularly that of housing), strong credit growth and Fed's rate hikes.

It's 1994 Again: Why Albert Edwards Expects An Imminent "Bond Market Bloodbath"

"Accelerated Fed rate hikes will cause tremors in the Treasury bond markets, forcing rates up, most especially in the 2 year – just like 1994. But as yet another central bank-inspired global recession unfolds, I  believe US 10y bond yields will ultimately converge with Japanese and European yields well below zero"

SocGen: "The Average Stock Is Still 26% Down From Their All-Time Highs"

"All would appear to be rosy in the equity market with the consensus promising higher EPS growth in 2017 and bond yields remaining reasonably well behaved despite higher headline rates of inflation and a very slightly more hawkish tone from the US Federal Reserve. However scratch below the surface of these headline numbers and all is not as it seems."  -SocGen

The Week's Key Economic And Financial Events

In this holiday-shortened week, attention will be on the US FOMC minutes, housing data and consumer confidence. There will be GDP, PMI and inflation releases across the Euro Area as well as the latest Greek Eurogroup meeting. Look for GDP and public finances data in the UK.