HomeContributorsFundamental AnalysisGerman ZEW Reading Reaches 6 Year Low On Trade War Concerns

German ZEW Reading Reaches 6 Year Low On Trade War Concerns

Notes/Observations

  • UK economy picks up a some momentum in May, driven by services
  • UK PM May tries to find unity amid chaos over Brexit plans
  • Euro falls as German ZEW data drops to 6 year low

Asia:

  • China June CPI data comes in line, PPI rises to highest level in 7 months driven by the oil and gas production, coal mining, metals and chemicals processing and manufacturing sectors
  • China Ministry of Commerce (MOFCOM) announces measures to mitigate the impact of China-US trade frictions on companies

Europe:

  • UK PM May named Jeremy Hunt as new foreign secretary after Boris Johnson stepped down from his post. Matt Hancock replaces Hunt as health secretary.
  • UK first monthly estimate of GDP showed a rise of 0.3%, a fourth straight monthly increase, against a backdrop of economic uncertainty; Industrial and Manufacturing data miss forecasts
  • German ZEW Economic Sentiment and Current Conditions fall short of estimates marking the lowest reading since August 2012, with political uncertainty in particular, fears over an escalation of the international trade war dampening the economic outlook.

Economic Data:

  • (NO) NORWAY JUNE CPI M/M: 0.6% V 0.5%E; Y/Y: 2.6% V 2.4%E
  • (JP) JAPAN JUNE PRELIM MACHINE TOOL ORDERS Y/Y: 11.4% V 14.9% PRIOR
  • (FI) Finland May Industrial Production M/M: 0.9% v -1.7% prior; Y/Y: 3.5% v 3.9% prior
  • (DK) Denmark June CPI M/M: -0.1% v -0.1%e; Y/Y: 1.1% v 1.1%e
  • (FR) FRANCE MAY INDUSTRIAL PRODUCTION M/M: -0.2% V 0.7%E; Y/Y: 0.9% V 2.1%E
  • (FR) France May Manufacturing Production M/M: -0.6% v 0.3%e; Y/Y: 0.8% v 0.8%e
  • (HU) Hungary June CPI M/M: 0.3% v 0.3%e; Y/Y: 3.1% v 3.1%e
  • (HU) Hungary May Preliminary Trade Balance: €0.6B v €0.7Be
  • (IT) Italy May Industrial Production M/M: 0.7% v 0.8%e; Y/Y: 2.1% v +6.7% prior
  • (UK) MAY INDUSTRIAL PRODUCTION M/M: -0.4% V 0.5%E; Y/Y: +0.8% V 1.9%E
  • Manufacturing Production M/M: +0.4% v 0.7%e; Y/Y: +1.1% v 1.9%e
  • *(UK) MAY GDP M/M: 0.3% v 0.3%e (FIRST MONTHLY RELEASE); 3M/3M: 0.2% v 0.2%e
  • (UK) MAY VISIBLE TRADE BALANCE: -ÂŁ12.4B V -ÂŁ12.0BE
  • (DE) GERMANY JULY ZEW CURRENT SITUATION: 72.4 V 78.1E; EXPECTATIONS SURVEY: -24.7 V -18.9E
  • (EU) EURO ZONE JULY ZEW EXPECTATIONS SURVEY: -18.7 V -12.6 PRIOR

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx50 flat at 3,463, FTSE +0.1% at 7,693, DAX flat at 12,548, CAC-40 +0.3% at 5,415; IBEX-35 -0.3% at 9,901, FTSE MIB +0.2% at 22,072, SMI +0.1% at 8,770, S&P 500 Futures +0.1%]
  • Market Focal Points/Key Themes: European indices opened marginally higher but turned to mixed with slight downward bias as the session progressed; political considerations in the UK in focus; continuing high oil prices support energy sector; utilities worst performers; Nordex awarded biggest single contract in its history; upcoming earnings expected in the US session include Pepsico and AAR

Equities

  • Consumer discretionary: Ocado OCDO.UK -2.3% (earnings), Photo-Me PHTM.UK +7.0% (results), esco TSCO.UK -1.2% (exec change)
  • Energy: Nordex NDX1.DE +8.2% (order)
  • Financials: TP ICAP TCAP.UK -32.0% (outlook)
  • Industrials: Airbus AIR.FR +2.6% (analyst action), Arcadis ARCAD.NL -5.7% (strategic review)
  • Healthcare: Cambian CMBN.UK +28.3% (takeover offer), Softcat SCT.UK +8.4% (trading statement)

Currencies

  • The Norwegian crown rallied against the euro following hotter than expected CPI
  • GBP/USD fulls back from highs after weaker Industrial and Manufacturing production data. Having rebounded to a high of 1.3300 the pair dropped back over 50 pips after the weaker data with the day lows of 13224 the next target.

Fixed Income

  • (ES) Spain Debt Agency (Tesoro) sells total €4.74B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills
  • Bund Futures trade 11 ticks lower at 162.46 following the move in Treasuries. Upside targets 163.25 followed by 163.85, while a return lower targets the 159.75 level.
  • Gilt futures trade at 122.98 lower by 26 ticks as UK cabinet exits weigh on sterling. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
  • Tuesday’s liquidity report showed Monday’s excess liquidity fell from €1.879T to €1.878T. Use of the marginal lending facility rose from €50M to €26M.
  • Corporate issuance saw financial borrowers drive Monday’s issuance

Looking Ahead

  • 07:00 (BR) Brazil Jun FGV Inflation IGP-DI M/M: 1.7%e v 1.6% prior; Y/Y: 8.1%e v 5.2% prior
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:30 (CL) Chile Jun Trade Balance: $B v $0.7Be
  • 08:30 (CL) Chile Jun International Reserves: $B v $37.3B prior
  • 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
  • 09:00 (MX) Mexico Jun CPI M/M: +0.3%e v -0.2% prior; Y/Y: 4.6%e v 4.5% prior, CPI Core M/M: 0.2%e v 0.3% prior
  • 15:00 (US) May Consumer Credit: $12.0Be v $9.3B prior
  • 16:00 (US) Weekly Crop Progress Report
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