Notes/Observations
- Expectations rising that the Fed might be poised to cut interest rates this year.
- EU Commission seems likely to recommend an excessive deficit procedure against Italy
- Major European PMI services data remain in growth territory (Beats: Euro Zone, Germany, UK, Spain. Italy; Misses: France)
Asia:
- Australia Q1 GDP registered its slowest pace since 2009 (Q/Q: 0.4% v 0.5%e v 0.2% prior; Y/Y: 1.8% v 1.8%e)
- China May Caixin PMI Services: 52.7 v 54.0e
- RBNZ Assistant Gov Hawkesby stated that the central view was for interest rates to remain broadly around current levels for foreseeable future but did have room to provide stimulus if needed
Europe/Mideast:
- Italy Dep PM Di Maio (5-Star): confirmed he and Dep PM Salvini (League) had spoken and reached agreement to work together. Intended to govern for four more years, it’s key to give govt stability
- Dep PMs Di Maio and Salvini said to have discussed option of breaching the EU’s 3% budget deficit rule
- EU Finance Ministers said to tell G20 counterparts this week resolving global trade tensions has highest priority
- UK Conservative Party spokesperson confirmed party would name a new PM by week of July 22nd
Americas:
- Fed Chair Powell: using low rates to lift inflation could risk fueling financial market excesses; Fed will act as appropriate to sustain expansion
- US Treasury Dept Spokesperson confirmed that PBoC Gov Yi Gang to meet with US Treasury Sec Mnuchin at upcoming G20 Finance Meeting
- US Commerice Dept Report noted to accelerate permitting process for rare earths mining. Cautioned that a halt in Chinese and Russian exports of critical minerals could cause significant shocks throughout the US and foreign supply chain
Energy:
- Weekly API Oil Inventories: Crude: +3.5M v -5.3M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.17% at 373.54, FTSE +0.23% at 7,230.58, DAX +0.18% at 11,993.16, CAC-40 +0.23% at 7,230.58, IBEX-35 +0.22% at 9,137.44, FTSE MIB -0.33% at 20,163.50, SMI +0.44% at 9,639.80, S&P 500 Futures +0.28%]
Market Focal Points/Key Themes:
- European Indices trade higher once again tracking gains across Asia and further strength in US futures after steep gains yesterday following a slightly more dovish FED and slightly better Services PMI readings out of Europe.
- On the corporate front Norsk Hydro shares rise sharply on an earnings beat, with Card Factory gaining on a trading update, Biffa and GB Group also gain following earnings. Elsewhere Babcock International gains after the company affirmed their outlook.
- Meanwhile Impax Asset Management and Clas Ohlson decline on earnings, with Varta also falling following its production plans.
- In other news Bourbon gains following a restructuring offer from creditors; Provident Financial rises ~15% after Non-Standard finance withdrew its offer for the company, while Evotec gains following a strategic alliance with Celgene.
- Looking ahead notable earners include retailers G-III apparel, Brown Forman, American Eagle as well as Campbell Soup.
Equities
- Consumer discretionary: Card Factory [CARD.UK] +1.5% (earnings)
- Consumer staples: Clas Ohlson [CLSB.SE] -1.5% (earnings)
- Energy: Norsk Hydro [NHY.NO] +3% (earnings), Bourbon [GBB.FR] +15% (restructuring)
- Financials: Provident Financial [PFG.UK] +10% (lapse of offer), AA PLC [AA.UK] +4% (AGM statement), Impax Asset Management [IPX.UK] -5% (earnings)
- Healthcare: Evotec [EVT.DE] +2.5% (collaboration)
- Industrials: Varta [VAR1.DE] -3.5% (expands production), Babcock [BAB.UK] +2.5% (outlook), Chemring Group [CHG.UK] +1% (earnings)
- Technology: Learning Technologies [LTG.UK] +4% (AGM statement)
- Materials: Voestalpine [VOE.AT] +4% (earnings)
Speakers
- Italy League party official Borghi (budget committee) reiterated stance that Italy would not accept any belt tightening measures in 2019. Budget talks with EU Commission must not end with compromise like it did in Autumn 2019 and stressed that PM Conte and Fin Min Tria must take a hard line in budget talks
- Italy Stats Agency (Istat) Monthly Economic Note: Leading indicators fell in May bit at a pace slower than April
- IMF cut China 2019 and 2020 GDP growth forecast citing trade uncertainties and saw growth slowing to 5.5% by 2024. Cuts China 2019 GDP forecast from 6.3% to 6.2% and 2020 GDP forecast from 6.2% to 6.1%. IMF noted that China current stimulus efforts were enough to stabilize growth but additional easing might be necessary if trade tension escalate. Fiscal expansion could be used to stabilize the economy
- President Trump: Do not want to take military action against Iran but there is always the chance of military action
Currencies/ Fixed Income
- USD: The dollar index futures continued slightly lower as prices stayed around the 97 handle. The next level we will look to at the downside is not too far away in the 96.54 region. We also saw Fed Chair Powell comment that using low rates to lift inflation could risk fueling financial market excess and that the Fed will act as appropriate to sustain expansion.
- EUR/USD: the Euro held its ground yesterday against the dollar as the focus for the Euro continues to be the Italian government and their tensions with the EU. The next levels to the upside will be in the 1.1320 area a level set as the high last month. Focus remains on Thursday ECB’s meeting but analysts believe event likly to be more important driver for Italian government bonds than the Euro currency.
- GBP/USD: cable resumed its grind back up as comments regarding Brexit and the EU remain muted as the Tory leadership looks to choose a new successor for PM May. The cable currently trades around 1.2700 as we look to PMI services to create some volatility for the cable, something manufacturing and construction figures were unable to do.
Economic Data
- (IN) India May PMI Services: 50.2 v 51.0 prior (12th month of expansion but lowest since May 2018)
- (RU) Russia May PMI Services: 52.0 v 53.9e (40th month of expansion but lowest since May 2016); PMI Composite: 51.5 v 53.0 prior
- (NO) Norway Q1 Current Account Balance (NOK): 67.8B v 47.3B prior
- (SE) Sweden May PMI Services: 53.3 v 53.9 prior; ; PMI Composite: 53.3 v 53.0 prior
- (ES) Spain Apr Industrial Output NSA Y/Y: -2.0% v -0.2% prior; Industrial Output SA Y/Y: +1.7% v -0.2%e; Industrial Production M/M: 1.8% v 0.5%e
- (CZ) Czech Apr Retail Sales Y/Y: 4.8% v 3.4%e; Retail Sales (ex-auto) Y/Y: 6.9% v 5.4%e;
- (HU) Hungary Apr Retail Sales Y/Y: 7.1% v 6.3%e
- (ZA) South Africa May PMI (whole economy): 49.3 v 50.1e (moves back into contraction)
- (ES) Spain May Services PMI: 52.8 v 52.5e (67th month of expansion); Composite PMI: 52.1 v 52.1e
- (IT) Italy May Services PMI: 50.0 v 49.8e (4th straight month above expansion level); Composite PMI: 49.9 v 49.3e
- (FR) France May Final Services PMI: 51.5 v 51.7e (confirms 2nd month of expansion); Composite PMI: 51.2 v 51.3e
- (DE) Germany May Final Services PMI: 55.4 v 55.0e (confirms 71st month of expansion); Composite PMI: 52.6 v 52.4e
- (EU) Euro Zone May Final Services PMI: 52.9 v 52.5e (confirms 71st month of expansion); Composite PMI: 51.8 v 51.6e
- (UK) May New Car Registrations Y/Y: -4.6% v -4.1% prior
- (TW) Taiwan May CPI Y/Y: 0.9% v 0.8%e; CPI Core Y/Y: 0.6% v 0.8%e; WPI Y/Y: -0.2% v -0.9%e
- (TW) Taiwan May Foreign Reserves: $464.4B v $464.8B prior
- (UK) May Services PMI: 51.0 v 50.6e (2nd straight expansion); Composite PMI: 50.9 v 51.0e
- (UK) May Official Reserves Changes: $2.3B v $1.5B prior
- (EU) Euro Zone Apr Retail Sales M/M: -0.4% v -0.5%e; Y/Y: 1.5% v 1.5%e
- (EU) Euro Zone Apr PPI M/M: -0.3% v +0.2%e; Y/Y: 2.6% v 3.1%e
Fixed Income Issuance
- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 3.75% 2021 bonds; Avg Yield: 1.15% v 1.12% prior; Bid-to-cover: 1.80x v 4.75x prior
Looking Ahead
- 05:30 (ZA) South Africa May SACCI Business Confidence: 94.0e v 93.7 prior
- 05:30 (GR) Greece Debt Agency (PDMA) to sell €1.25B in 26-week bills
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
- 05:45 (NO) Norway Central Bank (Norges) Gov Olsen speaks in Stavanger
- 06:00 (IE) Ireland May Unemployment Rate: No est v 5.4% prior
- 06:00 (IE) Ireland Apr Industrial Production M/M: No est v 1.1% prior; Y/Y: No est v 18.6% prior
- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
- 06:00 (FI) Finland to sell €1.0B in Sept 2029 RAGB bonds
- 06:00 (RU) Russia OFZ bonds auction
- 06:45 (US) Daily Libor Fixing
- 07:00 (US) MBA Mortgage Applications: No est v -3.3% prior
- 07:00 (UK) Weekly PM May question time in House of Commons
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:15 (US) May ADP Employment Change: +185Ke v +275K prior
- 08:30 (CA) Canada Q1 Labor Productivity Q/Q: +0.4%e v -0.4% prior
- 08:30 (CL) Chile Apr Economic Activity Index (Monthly GDP) M/M: 0.2%e v 0.6% prior; Y/Y: 2.1%e v 1.9% prior; Economic Activity (ex-mining): No est v 2.3% prior
- 09:00 (BR) Brazil May PMI Services: No est v 49.9 prior; PMI Composite: No est v 50.6 prior
- 09:45 (US) May Final Services PMI: 50.9e v 50.9 prelim; Composite PMI: No est v 50.9 prelim
- 09:45 (US) Fed’s Clarida gives welcoming remarks at Fed Conference
- 10:00 (US) May ISM Non-Manufacturing Index: 55.4e v 55.5 prior
- 10:30 (US) Weekly DOE Oil Inventories
- 11:00 (US) Fed’s Bostic speaks on Housing Panel in Atlanta
- 12:00 (CA) Canada to sell 3 Year Bonds
- 13:00 (NZ) New Zealand May QV House Prices Y/Y: No est v 2.7% prior
- 14:00 (US) Federal Reserve Beige Book
- 15:00 (AR) Argentina Apr Industrial Production Y/Y: No est v -13.4% prior; Construction Activity Y/Y: No est v -12.3% prior
