Notes/Observations

  • Quiet start to trading week with participant prepare for Fed meeting mid-week
  • Risk that a new UK Conservative leader could pursues a hard Brexit
  • Analysts note that potential ECB action was at risk of being triggered

Asia:

  • Hong Kong Chief Executive Carrie Lam announced delay extradition bill indefinitely (didn’t withdraw it); protests continuing for Lam’s resignation
  • China NDRC spokesperson stated to study and roll out relevant policies on rare earth as soon as possible

Europe/Mideast:

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  • ECB De Guindos (Spain): ECB will act if inflation expectations are de-anchored
  • ECB Nowotny (Austria): Reiterates that ECB still had instruments to support euro zone economy in case of a recession or deflation risk, additional instruments were not needed in foreseeable future
  • Italy said to have about a week to reply to the EU regarding its public finances. PM’ Conte letter to the EU Commission will ask that the EU reviews a rule that requires member states to keep the budget deficit within 3% of GDP
  • UK Conservative leadership candidates for PM debate Sunday night but none seem to agree on how to deal with Brexit and to reach a deal with EU (Note: Boris Johnson was absent from the debate)

Americas:

  • US Commerce Sec Ross downplayed the chances of a major trade deal being announced if President Trump/Xi meet at the G20; thinks the most that will come out of it might be agreement to actively resume talks

Energy:

  • Saudi Energy Min Al-Falih stated that he hoped to get oil market into balance before 2020 and hoped that OPEC agreed to extend production cut at expected meeting in early July

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 +0.1% at 379.2, FTSE +0.2% at 7357, DAX +0.2% at 12115, CAC-40 +0.2% at 5376, IBEX-35 -0.2% at 9171, FTSE MIB +0.3% at 20668, SMI +0.1% at 9859, S&P 500 Futures +0.1%]
  • Market Focal Points/Key Themes: European Indices trade mixed trading within a narrow range following a mixed session in Asia and slightly higher US futures. Shares of Lufthansa is a notable decliner weighing on the Dax falling over 10% as the company cut its full year guidance due to falling prices and challenging environment; Kier Group also continues to fall following job cuts and suspending dividend, with Staffline another notable decline falling almost 30% on a potential capital raise and dividend suspension. H&M shares reverse earlier gains after prelim Q2 Rev came ahead of forecasts, while NeuroSearch declines on a profit warnings. Meanwhile Babcock International gains on a rejected combination offer from Serco; Deutsche Bank gains on reports of moving €30-50B in assets into a bad bank, while WPP gains on talks to sell a majority take in The Farm to Picture shop.

Equities

  • Consumer discretionary: H&M [HMB.SE] -1.9% (Q2 sales), WPP Group [WPP.UK] +1.3% (to announce sale of majority stake in The Farm to Picture Shop), Lufthansa [LHA.DE]: -12% (lowers FY19 Rev guidance), Staffline Group (STAF.UK) -29% (Group update, suspends dividend, potential placing)
  • Financials: Deutsche Bank AG [DBK.DE] +1.8% (to create €30-50B in assets into “bad bank”)
  • Healthcare: Novozymes [NZYMB.DK] -0.6% (strategy update for 2020-2022)
  • Industrials: Babcock International [BAB.UK] +4% (confirms merger with Serco), Kier Group [KIE.UK] -10% (cuts 1.2K jobs, suspends dividend), Continental [CON.DE] -1.3% (Analyst downgrade)

Speakers

  • ECB’s Coeure (France): Global indicators on inflation seem bleak. Markets were sending quite an alarming message that was at odds with benign economic data. Central banks should never ignore market signals , nor follow them blindly either
  • ECB’s Cos (Spain): Spain should focus on resolving structural reforms
  • India Central Bank (RBI) Gov Das: End of political uncertainty to reverse economic weakness
  • China Foreign Ministry spokesperson Lu Kang: Central govt to continue support Hong Kong Chief Executive Lam. To release news on President Xi’s visit to G20 when we have some
  • Iran nuclear spokesperson: Country to surpass level for low-enriched uranium in Jun. Still time for European countries to help protect Iran from US sanctions but needed action not words

Currencies/Fixed Income

  • USD: The greenback maintained its recent gains it mustered from late last week on the back of better data. Focus on the mid-week Fed rate decision. Lots of analysts have turned dovish in recent months with a potential of 75bps in cuts from the Fed possible. However, Goldman Sachs saw only a 10% chance that any such move would occur this week. Also focus remains on mid-east situation as tension between the US and Iran heat up following the recent attacks on the oil tankers. EUR: Session saw no fundamental catalysts for the Euro to find any legs to move higher. Dealers note that Friday’s June Euro Zone PMIs were expected to remain consistent with sluggish economic activity. Analysts note that potential ECB action was at risk of being triggered

Economic Data

  • (DK) Denmark May PPI M/M: -0.4% v +0.7% prior; Y/Y: -0.4% v +1.2% prior
  • (NO) Norway May Trade Balance (NOK): 11.3B v 17.3B prior
  • (CZ) Czech May PPI Industrial M/M: 0.5% v 0.2%e; Y/Y: 3.8% v 3.5%e
  • (TR) Turkey Mar Unemployment Rate: 14.1%v 14.7% prior
  • (CH) Swiss Weekly Total Sight Deposits (CHF): 578.5B v 578.1B prior; Domestic Sight Deposits: 467.6B v 469.1B prior
  • (IT) Italy Apr General Government Debt: €2.373T (record level) v €2.359T prior
  • (EU) Euro Zone Q2 Labour Costs Y/Y: 2.4% v 2.3% prior

Fixed Income Issuance

  • (NO) Norway sold NOK6.0B vs. NOK6.0B indicated in 12-month Bills; Avg Yield: 1.20% v 1.14% prior; Bid-to-cover: 2.01x v 2.48x prior
  • (SK) Slovakia Debt Agency (Ardal) sold total €227M in 2028 and 2030 bonds

Looking Ahead

  • (UR) Ukraine Central Bank Jun Minutes
  • US public hearing on $300B in additional tariffs on China starts Monday
  • 05:30 (NL) Netherlands Debt Agency (DSTA) to sell bills
  • 05:30 (DE) Germany to sell €3.0B in 6-month BuBills
  • 05:30 (BE) Belgium Debt Agency (BDA) to sell €3.2B in 2024, 2038, and 2066 OLO Bonds
  • 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
  • 07:25 (BR) Brazil Central Bank Weekly Economists Survey
  • 08:00 (PL) Poland May CPI Core M/M: -0.3%e v +1.0% prior; Y/Y: 1.6%e v 1.7% prior
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (ES) Spain Debt Agency (Tesoro) announces size of upcoming issuance; to sell €B in 2021, 2024 and 2035 bonds on Thursday, Jun 20th
  • 08:30 (US) Jun Empire Manufacturing: 12.0e v 17.8 prior
  • 08:30 (CA) Canada Apr Int’l Securities Transactions (CAD): No est v -1.5B prior
  • 09:00 (FR) France Debt Agency (AFT) to sell combined €3.7-4.9B in 3-month, 6-month and 12-month Bills
  • 10:00 (US) Jun NAHB Housing Market Index: 67e v 66 prior
  • 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
  • 13:00 (EU) ECB’s Draghi in Portugal
  • 16:00 (US) Apr Net Long-term TIC Flows: No est v -$28.4B prior; Total Net TIC Flows: No est v -$8.1B prior
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