Notes/Observations
- Dovish central bank rhetoric ahead of Wed’s Fed meeting.
- RBA’s June minutes signaled further central-bank policy easing ahead
- BOK May Minutes saw member talked about need for cut
- ECB’s Draghi opens Sintra forum on a dovish note; says all options were raised and discussed at the last policy meeting with interest-rate cuts and more QE are part of its arsenal.
- German ZEW Survey mixed overall but Expectations Survey did registered a big miss
- Focus on UK 2nd round ballot in Conservative Party leadership race
Asia:
- RBA Jun Minutes noted that members agreed that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead. It noted that lower interest rates were not the only policy option
- April US TIC data showed that China Total holding of US Treasuries at a 2-year low ($1.113T v $1.12T prior)
- BOJ Gov Kuroda stated that overseas economic developments would be discussed at upcoming rate review this week. Uncertainty over global economic outlook was high with risks on downside for global economy. BOJ’s Yield Control (YCC) was creating extremely loose monetary conditions for households and companies
Europe/Mideast:
- Italy budget dispute with EU said to be centered on 2020 targets. Italy Treasury said to forecast 2020 deficit at about 1.8% of GDP and the ruling coalition parties (League and 5-Star) in Italy want it higher
- Italy Dep PM Salvini (League) said to be seeking a pretext to break up government and go to early elections
- 2nd round of Conservative (Tory) leadership voting on Tuesday (Jun 18th); the candidates need at least 33 votes to go into next round
- Chancellor of the Exchequer Hammond (Fin Min) said to be prepared to resign over PM May spending plans
Energy:
- Iran energy minister Zanganeh said to have told Russia Energy Mon Novak that Iran could not meet with OPEC+ within the July 3-4 time frame, but July 12th would be acceptable. Noted that changing that date from June 25-26 required OPEC consensus
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.7% at 381.2, FTSE +0.4% at 7388, DAX +0.8% at 12180, CAC-40 +1.1% at 5449, IBEX-35 +0.4% at 9163, FTSE MIB +1% at 20822, SMI +0.5% at 9918, S&P 500 Futures +0.3%]
- Market Focal Points/Key Themes: Equities European Indices trade higher across the board following a generally higher session is Asia and stronger US Index futures, with a dovish Draghi speech helping Indices higher and putting pressure on the Euro. On the corporate front shares of Danish traded Ambu is a notable declines after cutting its full year outlook, with Siltronic declining over 10% after cutting its outlook. Kapsch TrafficCom and Safestore also decline on earnings. Telecom Plus,and Frontier Developments are among the gainrs following earnings and trading updates. On the M&A front shares of Tieto rise following a merger with Evry; Interestrust gains after the acquisition of Viteos for $330M. In other news shares of Infineon and Sound Energy decline following respective placings. Looking ahead notable earners include Winnebago Industries and Barnes and Nobel.
- Consumer discretionary: Intertrust [INTER.NL] +5% (Acquisition)
- Energy: Nordex AG [NDX1.DE] -1% (US order), Sound Energy [SOU.UK] -7% (placing)
- Healthcare: Ambu [AMBUB.DK] -17% (Cuts outlook)
- Technology: Wirecard [WDI.DE] +2.8% (AGM comments), Infineon Technologies [IFX.DE] +4% (Capital increase), Siltronic [WAF.DE] -14% (cut guidance), Tieto [TIETO.FI] +6% (merger with Evry)
Speakers
- ECB’s Draghi opened the ECB forum in Sintra by reiterated that the central bank was committed to price stability objective; He stressed that if the outlook did not improve then additional stimulus would be needed and that more rate cuts were part of tool kit. All options were raised and discussed at the last policy meeting and that interest-rate cuts and more QE were part of its arsenal.
- Sweden Central Bank (Riksbank) May Business Survey: Swedish companies still saw good economic activity but were expecting a weakening in the period ahead
- Italy Fin Min Tria reiterated govt stance that 2019 budget deficit to GDP ratio between 2.1-2.2% but numbers to be better than forecast. Confident that would reach an agreement with EU. Hoped EU growth would create space for more spending but added Italy did not want to create a problem in Europe. Stressed that the macroeconomic situation in Italy was not very good.
- German IFO institute trimmed 2020 GDP growth forecast from 1.8% to 1.7% while maintaining the 2019 GDP forecast at 0.6%
- German ZEW Economists: Economic outlook for Germany was similarly negative as it was in the last quarter of 2018
- Hong Kong Chief Executive Lam to apologize for mishandling of extradition bill (2nd apology as the first was a written reply. The 2nd would be an ‘in person apology’)
- Bank of Korea (BOK) May Minutes had one member noting that external risks had risen while another unidentified member saw the case for rate cut due to downside risks
- Japan Cabinet Office (Govt) Jun Monthly Economic Report: Maintained its overall assessment that domestic economy was recovering at a moderate pace while exports and production remained weak
- Iran President Rouhani stated that his country would not wage war against any nation
- Saudi Arabia said to push for oil production cut in H2
- Russia Energy Min Novak stated that Russia was ready to discuss July 10-12th as OPEC+ meeting dates
Currencies/Fixed Income
- USD: The US Dollar traded higher mostly due to a risk off scenario where tension between the US and Iran continues to heat up. We could see further highs from the US dollar as weakness from Euro area currencies continue to weaken. The US dollar index futures trade around 97.22 and we could see current highs broken above 97.50. Dovish central bank rhetoric also aiding the greenback (RBA, BOK and ECB all had dovish tones in the session)
- EUR: The Euro was pushed lower today breaking the 1.12 handle after ECB head Mario Draghi released dovish comments and hinted of a return of QE. This also saw the Bund futures reach their highest level 172.44 which resulted in a record low of -0.3%. EUR/USD below the 1.12 level with dealing eyeing the next level to the downside in the 1.1100 region.
- GBP: The cable saw another day lower as it traded near the 1.25 handle making today the 5th day the cable traded lower. We have tomorrow’s CPI figures that could continue the current volatile state. To the upside we have the level of 1.2750 region and to the downside we have the yearly low of 1.2420.
Economic Data
- (EU) Euro Zone May EU27 New Car Registrations: +0.1% v -0.4% prior (1st rise in 9 months)
- (TR) Turkey Apr Industrial Production M/M: -1.0% v +0.1%e; Y/Y: -4.0% v -2.2%e
- (AT) Austria May CPI M/M: 0.2% v 0.1% prior; Y/Y: 1.7% v 1.7% prior
- (ES) Spain Q1 labour Costs Y/Y: 2.1% v 0.9% prior
- (DE) Germany Jun ZEW Current Situation Survey: 7.8 v 6.1e; Expectations Survey: -21.1 v -5.8e
- (EU) Euro Zone Jun Expectations Survey: -20.2 v -1.6 prior
- (EU) Euro Zone May Final CPI Y/Y: 1.2% v 1.2%e; CPI Core Y/Y: 0.8% v 0.8%e; CPI M/M: 0.1% v 0.2%e
- (EU) Euro Zone Apr Trade Balance (Seasonally Adj): €15.3B v €17.0Be; Trade Balance NSA (unadj): €15.7B v €22.5B prior
Fixed Income Issuance
- (ID) Indonesia sold total IDR24.0T vs. IDR15.0T target in 3-month and 12-month Bills and 5-year, 10-year, 15-year, 20-year, and 30-year Bonds
- (ES) Spain Debt Agency (Tesoro) sold total €1.39B vs. €1.0-2.0B indicated range in 3-month and 9-month bills
- (CH) Switzerland sold CHF409M in 3-month bills; Avg Yield: -0.798% v -0.790% prior
Looking Ahead
- 05:30 (UK) Weekly John Lewis LFL Sales data
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 05:30 (UK) DMO to sell £2.75B in new conventional 0.875% Oct 2029 Gilts
- 06:45 (US) Daily Libor Fixing
- 07:00 (BR) Brazil Jun IGP-M Inflation (2nd Preview): No est v 0.6% prior
- 07:30 (IR) ECB’s Lane (Ireland)
- 07:45 (US) Weekly Chain Stores Sales data
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (RU) Russia announces upcoming OFZ Bond issuance
- 08:30 (US) May Housing Starts: 1.235Me v 1.235M prior; Building Permits: 1.290Me v 1.290M prior (revised from 1.296M)
- 08:30 (CA) Canada Apr Manufacturing Sales M/M: 0.4%e v 2.1% prior
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:00 (EU) Weekly ECB Forex Reserves
- 10:00 (MX) Mexico Weekly International Reserve data
- 10:00 (EU) ECB chief Draghi with BOE Gov Carney at ECB forum in Sintra
- 11:30 (US) Treasury to sell 52-week bills
- 16:30 (US) Weekly API Oil Inventories
