• Overall a busy weekend for markets with the informal EU meeting, Turkish elections, a Chinese RRR cut and more signs of escalating Trade tensions
  • Renewed trade tensions as reports circulate that the US planned to tighten restrictions on Chinese investments in the US and limit tech exports to China
  • Hard data on the German economy continues to disappoint (IFO Survey below expectations)
  • Highly anticipated EU Summit on Thursday and Friday
  • Upcoming data in the week focuses on US PCE (Fri) and Europe’s first look at June inflation across the region on (Thursday and Friday)


  • China PBOC cuts Reserve Ratio Requirement (RRR) for some banks by 50bps (as speculated), effective July 5th; (3rd targeted cut this year). Move releases CNY700B v CNY400Be in liquidity
  • BoJ June Meeting Summary of Opinions: Reiterates view that was appropriate to patiently continue strong easing under current framework; still some distance to 2% target


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  • Bank for International Settlements (BIS) Annual Report: Warns of trade war threat but says rates should keep rising
  • EU Summit ended with progress made toward immigration agreement but failed find joint solution so far
  • Italian Proposal Document on Migration: Needed to re-examine country-of-first-arrival criterion. Every EU country should get set quotas for economic migrants. Those who do not welcome refugees should see EU funding cut
  • German Chancellor Merkel: All agreed on need to reduce illegal migration and to protect borders. Large amount of common ground during discussions but failed find joint solution so far
  • Italy PM Conte: “extremely satisfied” having steered the debate in the right direction. Wanted to drop rules that first EU country of arrival was responsible for any given person
  • Turkey President Erdogan declared himself the winner of the election with 53% of the vote (won with a simple majority to avoid any 2nd round vote)


  • US President Trump said to plan new restrictions on technology exports to China and Chinese investment; announcement expected by the end of the week. Treasury Dept is said to be creating rules that would block firms with at least 25% Chinese ownership from buying companies involved in industrially significant technology. Administration may examine only new deals (not existing transactions) in terms of the potential investment restrictions.

Economic Data:

  • (FI) Finland May PPI M/M: 1.2% v 0.4% prior; Y/Y: 4.9% v 3.3% prior
  • (ES) Spain May PPI M/M: 1.1% v 0.7% prior; Y/Y: 2.9% v 1.8% prior
  • (AT) Austria Apr Industrial Production M/M: +1.0% v -0.5% prior; Y/Y: 5.9% v 5.2% prior
  • (CZ) Czech Jun Business Confidence: 17.0 v 15.6 prior; Consumer Confidence: 10.5 v 11.3 prior, Composite (Consumer & Business) Confidence: 15.7 v 14.7 prior
  • (TW) Taiwan May Industrial Production Y/Y: 7.1% v 6.0%e
  • (DE) Germany Jun IFO Business Climate: 101.8 v 101.8e; Current Assessment: 105.1 v 105.6e, Expectations Survey: 98.6 v 98.0e
  • (PL) Poland May Unemployment Rate: 6.1% v 6.1%e – (CH) SNB Total Sight Deposits for Week Ended Jun 22nd (CHF): 576.7B v 576.5B prior

Fixed Income Issuance:

  • None seen



  • Indices [Stoxx600 -0.8% at 381, FTSE -0.8% at 7619, DAX -1.0% at 12456, CAC-40 -0.8% at 5347; IBEX-35 -1.0% at 9689, FTSE MIB -1.2% at 21621, SMI -0.9% at 8539 , S&P 500 Futures -0.6%]
  • Market Focal Points/Key Themes: European stocks open lower; trade concerns continue to weigh on risk sentiment; corporate news flow light at beginning of week; coalition disagreement in Germany also leading to investor concerns; oil prices put pressure on energy stocks; financials underperforming; Air France impacted over discontent with potential new CEO Philippe Capron; focus on EU leaders summit later in the week, as well as US durable goods data


  • Consumer discretionary: Air France-KLM AF.FR (CEO opposition), IWG IWG.UK confirms possible cash offer from Terra Firma
  • Healthcare: Ambu AMBUB.DK (analyst action)
  • Financial: Countrywide CWD.UK (profit warning)


  • South Africa Central Bank (SARB) reiterated view that saw little room for additional easing
  • China PBOC stated that it would cut re-lending rate for Small and medium sized enterprises (SMEs) by 50bps


  • Safe haven flows were in vogue in the session as dealers contemplated the prospect of a full-blown trade war between the US and China with the USD, CHF and JPY currencies the main rivers of the flows.
  • EUR/USD reversed its initial losses despite the continuing disappointment of German data. The IFO Survey for Jun came in below expectations
  • Turkish lira has gained some 2.0% versus the dollar and euro in the wake of Erdogan’s election win on Sunday. In the weeks heading into the elections the TRY currency continually hit record lows on the perceived lack of independence of the central bank after the elections. The move seemed to be some retracement of the current trend.

Fixed Income

  • Bund Futures trade 31 ticks higher at 162.44 after the EU failed to reach an immigration deal. Upside targets 162.75 followed by 163.25, while a return lower targets the 159.75 level.
  • Gilt futures trade at 122.98 higher by 39 ticks as the long end swap spread has reached new recent low again. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
  • Monday’s liquidity report showed Friday’s excess liquidity rose from €1.820T to €1.829T. Use of the marginal lending facility fell from €97M to €77M.
  • Corporate issuance saw $46.5B priced in the primary market last week

Looking Ahead

  • (BR) Brazil May Total Federal Debt (BRL): No est v 3.659T prior
  • (RO) Romania May M3 Money Supply Y/Y: No est v 11.1% prior
  • 06:00 (IL) Israel May Unemployment Rate: No est v 3.9% prior
  • 06:00 (RO) Romania to sell Bonds
  • 06:00 (IL) Israel to sell Bonds
  • 06:30 (IS) Iceland to sell 6-month Bills
  • 06:45 (US) Daily Libor Fixing
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 07:30 (TR) Turkey Jun Capacity Utilization: No est v 77.9% prior
  • 07:30 (TR) Turkey Jun Real Sector Confidence (Seasonally Adj): No est v 106.7 prior; Real Sector Confidence: No est v 109.9 prior
  • 08:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:30 (US) May Chicago Fed National Activity Index: 0.30e v 0.34 prior
  • 08:55 (FR) France Debt Agency (AFT) to sell combined €3.8-5.0B in 3-month, 6-month and 12-month BTF Bills
  • 09:00 (MX) Mexico Apr Retail Sales M/M: -0.2%e v +0.9% prior; Y/Y: 3.1%e v 1.2% prior
  • 09:30 (BR) Brazil May Current Account: $1.0Be v $0.6B prior; Foreign Direct Investment (FDI): $3.0Be v $2.6B prior
  • 09:30 (EU) ECB announces Covered-Bond Purchases
  • 09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
  • 10:00 (US) May New Home Sales: 667Ke v 662K prior
  • 10:30 (US) Jun Dallas Fed Manufacturing Activity: 23.0e v 26.8 prior
  • 11:30 (US) Treasury to sell 3-month and 6-month Bills
  • 16:00 (US) Weekly Crop Progress Report
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