Notes/Observations

  • Safe-haven flows continue to dominate as Iran appeared to close the door on talks to resolve Mid-East tensions
  • Subdued growth pattern that the ECB and the Fed perceive as weak enough to trigger near-term policy easing
  • Focus on fed chief Powell later in the NY afternoon

Asia:

  • BOJ Apr minutes (two meetings ago):reiterated that appropriate to persistently continue with the current powerful monetary easing to achieve that 2% inflation (little changed from prior months minutes)
  • US President Trump reportedly considering ending post-War Japan Defense pact believing the treaty treated the US unfairly and was too one-sided. Doesn’t oblige for Japan to come to America’s defense

Americas:

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  • Fed’s Kaplan (dove, non-voter): concerned a rate cut now could fuel imbalances; wise to take time to consider if we need to change rates
  • US Trade Rep Lighthizer spoke with China Vice Premier Liu He via phone today, details of the conversation were not initially disclosed
  • Senior White House Administration Official: China President Xi likely to meet with Trump on second day of G20 (Sat, Jun 29th)
  • US judge found three large Chinese banks in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations

Energy:

  • President Trump confirmed signing executive order on further Iran sanctions; called them ‘strong’ sanctions to target Supreme Leader Ayatollah Khamenei and those in his office
  • US, UK, UAE and Saudi joint statement: called on Iran to halt any further action that threatened regional stability and called for diplomatic solutions to deescalate tensions
  • Iran For Min Spokesman Mousavi: Latest US sanctions means ‘closing channel of diplomacy forever’

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -0.13% at 383.30, FTSE -0.31% at 7,393.75, DAX -0.08% at 12,265.36, CAC-40 -0.18% at 5,511.81, IBEX-35 -0.52% at 9,145.00, FTSE MIB -0.35% at 21,210.50, SMI -0.11% at 9,892.50, S&P 500 Futures -0.17%]
  • Market Focal Points/Key Themes: European Indices trade mostly lower in a lackluster session so far, tracking a mixed session in Asia and slightly lower US Index futures. Geopolitical tensions remain at the forefront as President Trump signed off on new sanction on Iran. On the M&A front, Altran shares trade over 20% higher after entering into exclusive negotiations to be acquired by Capgemini for €14/shr; Billerudkorsnas divested its majority stake in Bergvik Skog Ost for SEK12.2B, while Royal Dutch shares is in lead position to acquire Dutch firm Eneco ans Enel and Total drop out of the running. On the corporate front Carpetright gains on earnings, while Morses Club, Petrofac, Gear4music and Ahlers decline. In other news the UK Supermarkets Tesco, Morrison’s and Sainsbury’s trade under pressure as market growth remained flat; Poxel gains following positive data from its Imeglimin Phase 3 trial, while Beter Bed declines sharply as the company investigates alternatives for future of Matratzen Concord. Looking ahead notable earnings include Lennar, Factset Research and Barnes and Noble Education.

Equities

  • Consumer discretionary: Tesco [TSCO.UK] -3% (Kantar data), Carpetright [CPR.UK] +9% (earnings), Beter Bed Holding [BBED.NL] -37% (liquidity), Gear4music [G4M.UK] -10% (earnings)
  • Energy: Petrofac [PFC.UK] -5% (trading update)
  • Financials: Morses Club [MCL.UK] -6% (AGM)
  • Healthcare: Santhera Phamaceuticals [SANN.CH] +4% (EMA validation), Poxel [POXEL.FR] +3% (study results)
  • Technology: Altran Technologies [ALT.FR] +21%, CapGemeni [CAP.FR] +6% (entered into discussions)
  • Telecom: Iliad [ILD.FR] -5% (analyst action)

Speakers

  • ECB’s De Guindos (Spain) reiterated Council stance that effects of negative rates on the banking sector needed to be carefully monitored; situation could be dampened by deteriorating growth expectations and contribute to sector’s structural weakness
  • Italy Dep PM DI Maio (5-Star): reiterated stance coalition govt would serve its full term and carry on for another 4 years
  • Japan Cabinet Office Official Shibuya: Met with US counterparts on trade on Tuesday 9Jun 25th). Did not discuss all issues but did increase the understanding of viewpoints
  • BOK Gov Lee stated that it would respond appropriately to drastic worsening in economic conditions. It now saw 2019 inflation below the prior April view of 1.1%
  • Iran’s President Rouhani stated that US sanctions on Tehran displayed Washington’s desperation and reiterated that the actions would fail. Policy towards Tehran displayed Trump Administration ‘despair with the White House mentally ‘retarded’ . Tehran practicing strategic patience but had no fear; Iranian airspace was a red line. Claimed that US violated 2015 nuclear deal and only wanted to talk at this time

Currencies/Fixed Income

  • Central bank rate speculation keeping the FX market probing for a new trend but geopolitical concerns continued to percolate.
  • EUR/USD tested above the 1.14 handle early in the session but the pair could not hold into its gains.
  • Dealers noted that speculation that ECB to embark on a rate cut in the coming months have driven German and other Euro Zone government bond yields to or near record lows this month German 10-year year hits a fresh record low at -0.33%
  • The JPY currency (Yen) was the main beneficiary of safe-haven flows with USD/JPY testing 5-month lows below the 107 level.

Economic Data

  • (FI) Finland May Unemployment Rate: 8.8% v 8.0% prior
  • (FR) France Jun Business Confidence: 106 v 106e; Manufacturing Confidence: 102 v 104e; Production Outlook Indicator: 3 v 5e; Own-Company Production Outlook: 8 v 13e
  • (AT) Austria Apr Industrial Production M/M: -1.4% v -1.0% prior; Y/Y: 4.5% v 5.7% prior
  • (ES) Spain May PPI M/M: 0.0% v 0.7% prior; Y/Y: 1.1% v 2.4% prior
  • (ZA) South Africa Apr Leading Indicator: 105.5 v 104.9e
  • (SE) Sweden May PPI M/M: 0.0% v -0.7% prior; Y/Y: 3.5% v 4.9% prior
  • (HK) Hong Kong May Trade Balance (HKD): -34.7B v -36.8Be; Exports Y/Y: –2.4% v 4.5%e; Imports Y/Y: -4.3% v -5.8%e

Fixed Income Issuance

  • (ID) Indonesia sold total IDR8.0T vs. IDR6.0T in 6-month Islamic Bills and 2-year, 4-year, 7-year and 15-year, Sukuk Bonds
  • (IT) Italy Debt Agency (Tesoro) sold €2.25B vs. €1.75-2.25B indicated range in Zero Coupon Jun 2021 CTZ; Avg Yield: 0.431% v 0.818% prior; Bid-to-cover: 1.58x v 1.46x prior
  • (IT) Italy Debt Agency (Tesoro) sold total €1.0B vs. €0.5-1.0B indicated range in 2028 and 2041 inflation-linked bonds (BTPei)
  • (ZA) South Africa sold total ZAR3.3B in 2030, 2035 and 2040 bonds
  • (CH) Switzerland sold CHF403.6M in 3-month bills; Avg Yield: -0.801% v -0.798% prior

Looking Ahead

  • (PT) Portugal Apr Current Account Balance: No est v -€0.3B prior
  • 05:30 (ZA) South Africa Q1 Non-farm payrolls Q/Q: No est v 0.9% prior; Y/Y: No est v 1.6% prior
  • 05:30 (UK) Weekly John Lewis LFL Sales data
  • 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)(prior €6.2B with 33 bids recd)
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
  • 05:30 (DE) Germany to sell €5.0B in 0% Jun 2021 Schatz
  • 05:30 (UK) DMO to sell £2.25B in 1.75%2049 Gilts
  • 06:00 (UK) Jun CBI Retailing Reported Sales: -5e v -27 prior; Total Distribution: -10e v -20 prior
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (BR) Brazil Central Bank COPOM Jun Minutes
  • 07:00 (BR) Brazil Jun FGV Consumer Confidence: No est v 86.6 prior
  • 07:45 (US) Weekly Chain Stores Sales data
  • 08:00 (PL) Poland May M3 Money Supply M/M: 1.0%e v 0.7% prior; Y/Y: 10.1%e v 10.4% prior
  • 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: expected to leave Base Rate unchanged at 0.90%; expected to leave Overnight Deposit Rate unchanged at -0.05%
  • 08:00 (BR) Brazil Mid- Jun IBGE Inflation IPCA-15 M/M: 0.1%e v 0.4% prior; Y/Y: 3.9%e v 4.9% prior
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (RU) Russia announces upcoming OFZ Bond issuance
  • 08:30 (CA) Canada Apr Wholesale Trade Sales M/M: 0.2%e v 1.4% prior
  • 08:45 (US) Fed’s Williams (moderate, voter)
  • 08:55 (US) Weekly Redbook LFL Sales data
  • 09:00 (US) Apr FHFA House Price Index M/M: 0.2%e v 0.1% prior
  • 09:00 (US) Apr S&P/Casechiller (20-City) M/M: 0.10%e v 0.09% prior; Y/Y: 2.50%e v 2.68% prior; NSA Index: 215.60e v 214.09 prior
  • 09:00 (US) Apr S&P/Casechiller (overall) HPI Y/Y: 3.5%e v 3.7% prior; House Price Index: No est v 206.23 prior
  • 09:00 (MX) Mexico Apr Retail Sales M/M: +0.3%e v -0.2% prior; Y/Y: 1.8%e v 1.6% prior
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:00 (HU) Hungary Central Bank Gov Matolcsy post rate decision press conference
  • 10:00 (US) Jun Richmond Fed Manufacturing Index: 4e v 5 prior
  • 10:00 (US) May New Home Sales: 685Ke v 673K prior
  • 10:00 (US) Jun Consumer Confidence: 131.0e v 134.1 prior
  • 10:00 (MX) Mexico Weekly International Reserve data
  • 12:00 (US) Fed’s Bostic (dove, on-voter)
  • 13:00 (US) Fed Chair Powell in NY
  • 13:00 (US) Treasury to sell 2-year Notes
  • 13:15 (FR) ECB’s Coeure (France) in Frankfurt
  • 15:00 (AR) Argentina Apr Shop Center Sales Y/Y: No est v -16.6% prior; Supermarket Sales Y/Y: No est v -14.5% prior
  • 15:30 (US) Fed’s Barkin (hawk, non-voter)
  • 16:30 (US) Weekly API Oil Inventories
  • 18:30 (US) Fed’s Bullard (voter, dove) gives welcoming remarks at Lecture in St. Louis
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