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Cable Weakens On President Trump’s Warning On UK-US Trade Following PM May’s Soft Brexit Stance

Notes/Observations

  • China Trade Surplus with US rose to a record high, esaclating trade war concerns
  • President Trump says PM May’s plan for Brexit could ‘kill’ chances of bilateral trade deal with the US -Earnings season officially starts with major banking names JP Morgan, Citigroup and Wells Fargo set to report

Asia:

  • (JP) Bank of Japan (BoJ) might note that inflation could be short of its 2% target for up to 3 additional years (in line with Nikkei report)
  • China June trade surplus higher than expectations, surplus with US widens and hits record high
  • New Zealand June PMI hits lowest level since Dec 2017
  • China June M2 supply falls to record low of 8%

Europe:

  • President Trump tell UK newspaper that soft Brexit would ‘probably kill’ potential for future trade deal with US. “If they do a deal like that, we would be dealing with the European Union instead of dealing with the UK.
  • Trump also reveals to me PM ignored his advice on Brexit negotiations

Economic Data:

  • (DE) Germany Jun Wholesale Price Index M/M: 0.5% v 0.8% prior; Y/Y: 3.4% v 2.9% prior
  • (NO) Norway Jun Trade Balance (NOK): 22.0B v 16.3B prior
  • (NO) Norway Q2 House Price Index Q/Q: +2.2% v -0.3% prior
  • (FI) Finland May GDP Indicator WDA Y/Y: 3.4% v 1.8% prior
  • (FI) Finland Jun CPI M/M: 0.2% v 0.1% prior; Y/Y: 1.2% v 1.0% prior
  • (FI) Finland May Current Account: -€0.5B v -€1.6B prior
  • (CH) Swiss Jun Producer & Import Prices M/M: 0.2% v 0.2% prior; Y/Y: 3.5% v 3.2% prior
  • (CN) Weekly Shanghai copper inventories (SHFE): 234.7K v 258.7K tons prior
  • (PL) Poland Jun Final CPI M/M: 0.1% v 0.1% prelim; Y/Y: 2.0% v 1.6% prelim
  • (RU) Russia Narrow Money Supply w/e July 6th: 10.21T v 10.10T prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx50 +0.2% at 3,453, FTSE +0.6% at 7,694, DAX +0.2% at 12,523, CAC-40 +0.3% at 5,423; IBEX-35 -0.2% at 9,745, FTSE MIB +0.4% at 21,887, SMI +0.3% at 8,840, S&P 500 Futures +0.1%]
  • Market Focal Points/Key Themes: European indices opened higher across the board and stayed largely positive; technology and consumer discretionary lead better performers; financials underperforming ahead of major bank earnings reports in US; focus on UK news with Trump visit; upcoming earnings expected in the US session include JPMorgan, PNC Financial services and Citigroup

Equities

  • Consumer discretionary: Carrefour CA.FR -0.7% (analyst action), DCC DCC.UK +2.9% (earnings, acquisition), Halfords HFD.UK +1.9% (new CFO), L’Oreal OR.FR -0.1% (analyst action)
  • Energy: Aker BP AKERBP.NO -6.2% (results), Solaria Energia SLR.ES -11.1% (share issue)
  • Financials: Gam Holding GAM.CH -8.6% (results), International Personal Finance IPF.UK +5.5% (trading update), Storebrand STB.NO +2.0% (results)
  • Healthcare: Capio CAP.SE +22.0% (receives unsolicited bid)
  • Industrials: Orkla ORK.NO -5.3% (results)
  • Technology: Altran Technologies ALT.FR -20.9%(discovery of forged sales in unit), Dassault Systems DSY.FR +0.3% (analyst action), Fugro FUR.NL +3.7% (analyst action)
  • Telecom: Proximus PROX.BR -2.8% (acquisition)

Speakers

  • (UK) Foreign Office Minister Duncan: mood at Trump dinner was fantastically positive
  • (UK) UK Chancellor of the Exchequer Hammond (Fin Min): EU should engage with UK to deliver Brexit solution
  • (JP) Japan Chief Cabinet Sec Suga: No problem for bond market from keeping monetary policy easing
  • (UK) UK Chancellor of the Exchequer Hammond (Fin Min): EU should engage with UK to deliver Brexit solution; determined to protect financial services in UK
  • (RU) Russia Energy Min Novak: June Opec+ decision means gradual easing of output caps; OPEC+ weighs ongoing cooperation after 2018 – speaks at FED council

Currencies

  • US Dollar strengths across the board, USD/YEN cross trades highest in 5 months helping propel the Nikkei, as the Yen is on course for biggest weekly loss since Septemeber
  • GBP/USD falls on Trump comments regarding UKs soft Brexit stance.

Fixed Income

  • Bund Futures trade 24 ticks higher at 162.92 as the German Bund yield hovers below 0.30%. Upside targets 163.25 followed by 163.85, while a return lower targets the 159.75 level.
  • Gilt futures trade at 123.35 higher by 27 ticks as Trump’s comment weigh on sterling. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
  • Friday’s liquidity report showed Thursday’s excess liquidity rose from €1.867T to €1.871T. Use of the marginal lending facility rose from €56 to €135M.
  • Corporate issuance saw 4 issuers raise $5.0B in the primary market

Looking Ahead

  • 07:30 (IN) India Weekly Forex Reserves
  • 08:00 (BR) Brazil May IBGE Services Sector Volume Y/Y: -4.0%e v 2.2% prior
  • 08:00 (IS) Iceland Jun Unemployment Rate: No est v 2.2% prior
  • 08:15 (UK) Baltic Dry Bulk Index
  • 08:30 (US) Jun Import Price Index M/M: 0.1%e v 0.6% prior; Y/Y: 4.6%e v 4.3% prior, Export Price Index M/M: 0.2%e v 0.6% prior; Y/Y: No est v 4.9% prior, Import Price Index ex Petroleum M/M: 0.2%e v 0.1% prior
  • 09:00 (CA) Canada Jun Existing Home Sales M/M: 1.5%e v -0.1% prior
  • 10:00 (US) July Preliminary University of Michigan Confidence: 98.0e v 98.2 prior
  • 11:00 (CO) Colombia May Industrial Production Y/Y: 4.9%e v 10.5% prior
  • 11:00 (CO) Colombia May Retail Sales Y/Y: 5.0%e v 6.3% prior
  • 13:00 (US) Weekly Baker Hughes Rig Count data
  • 14:00 (CO) Colombia Central Bank Jun Minutes
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