Notes/Observations
- US-China trade truce boosts risk appetite but analysts believe Intellectual property issues unlikely to be solved in the talks
- Major European PMI manufacturing data (Beats: none: ; Misses: Euro Zone, Germany, France, Italy and UK)
- OPEC+ said to extend the production cuts for another 6-9 months
Asia:
- China and US agreed to restart trade talks; US agreed not to impose any new tariffs
- US President Trump shook hands with North Korea leader Kim Jong Un, Trump also took 20 steps into North Korea (first sitting US President to walk into North Korea)
- Japan Q2 Tankan Large manufacturing Index hits a 3-year low ( 7 v 9e)
- China Jun Official Manufacturing PMI registers its 2nd straight contraction (49.4 v 49.5e)
- China Jun Caixin PMI Manufacturing registered its 1st contraction since Feb and its 2nd lowest since Jun 2016. (49.4 v 50.1e)
- Japan METI confirmed to adopt stricter rules on some exports related to key display panel and chip materials, including polymide, resist, HF to South Korea, effective July 4th due to worsening relations with South Korea
- South Korea Jun Trade Balance $4.2B v $4.1Be; Exports Y/Y: -13.5% v -13.5%e (7th straight decline, fastest decline since Jan 2016)
Europe/Mideast:
- UK PM Candidate Hunt announced £20B no-deal Brexit ‘war chest’ to financially support industries; planned to ‘ramp up’ no deal preparations; planned to cut corporate taxes to 12.5% regardless of Brexit deal. Government must be prepared to walk away from bad Brexit deal. Key is to negotiate a better Brexit deal
- Turkey President Erdogan: Have heard from Pres Trump that there will be no sanctions over the S400 missile defense system deal with Russia; Russian S-400
Americas:
- President Trump: negotiations with China were continuing, believe we are “back on track” with China. To allow US companies to sell their equipment to Huawei
- White House Adviser Kudlow stated that the move related to Huawei would only apply to products that were widely available around the world and not the most ‘sensitive’ equipment. US Commerce Dept to grant some additional licenses where there is general availability of the parts the company needs.
Energy:
- OPEC said to roll over production cuts for second half of 2019
- Russia Energy Min Novak stated that an agreement to extend the oil production cut deal was consolidated; other countries were supporting an extension
- Saudi Energy Min al-Falih said the agreement would most likely to be extended by 9 months
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.76% at 387.80, FTSE +1.03% at 7,501.77, DAX +1.23% at 12,551.15, CAC-40 +0.66% at 5,575.42, IBEX-35 +0.28% at 9,224.40, FTSE MIB +0.27% at 21,292.50, SMI +0.76% at 9,973.00, S&P 500 Futures +1.09%]
- Market Focal Points/Key Themes: European Indices trade higher across the board in risk on trade tracking stronger Asian Indices and higher US index futures following an agreement between the US and China on a trade truce. Macro data remained subdues as European Manufacturing PMIs generally came in below expectations. On the corporate front shares of Latecoere trades sharply higher following a takeover offer from searchlight capital; Future gains following upbeat guidance and the stepping down of its CFO, while Selvaag Bolig also gaining on Q2 Revenue figures. In other news Aston Martin gains slightly as Strategic European Invest Group consider taking a stake in the company; Hurricane Energy declines sharply after plugging its Warwick Deep well, whilst export names in general are all gaining following the positive trade news.
Equities
- Consumer discretionary: Aston Martin Lagonda Global Holdings [AML.UK] +1.5% (partial offer)
- Materials: Fresnillo [FRES.UK] -3% (tax decision), ArcelorMittal [MT.NL] +2.5% (confirms asset sale)
- Energy: Hurricane Energy [HUR.UK] -14% (well update)
- Financials: Deutsche Bank [DBK.DE] +2% (job cuts)
- Industrials: Daimler [DAI.DE] +2%, Covestro [1COV.DE] +2% (G-20 talks), Schaeffler [SHA.DE] +1.5% (plant sale)
- Technology: Dialog Semiconductor [DLG.DE] +4%, Infineon [IFX.DE] +3.5%, AMS[AMS.CH] +5.5% (G-20 talks), Future [FUTR.UK] +10.5% (trading update)
- Telecom: Nokia [NOKIA.FI] +0.5%, Ericsson [ERICB.SE] +0.5% (G-20 talks)
Speakers
- Italy PM Conti: Difficult to say if EU leaders will reach an agreement on a candidate to succeed Juncker
- Fed’s Clarida (moderate, voter): Chair Powell has stated that saw some room for more accommodation
Currencies/Fixed Income
- Geo-political tensions eased following G20 meeting in Japan to help risk appetite with the resumption of trade talks between the US and China. However, despite the trade truce many analysts believed Intellectual property issues unlikely to be solved in the talks.
- EUR/USD was lower by 0.5% throughout the session today. Major European PMI manufacturing data saw all of the major readings miss expectations (Euro Zone, Germany, France, Italy and UK all missed). Also the inability
- GBP/USD lower by 0.4% after the UK PMI Manufacturing missed its expectations to remain in contraction territory for the 2nd straight month. Pair at 1.2645 just ahead of the mid-day trading.
- USD/JPY higher by .3% to retest above the 108 level as risk appetite found fresh legs.
Economic Data
- (IN) India Jun PMI Manufacturing: 52.1 v 52.7 prior (23rd month of expansion)
- (RU) Russia Jun PMI Manufacturing: 48.6 v 49.8 prior (2nd consecutive contraction and lowest reading since July 2018)
- (SE) Sweden Jun PMI Manufacturing: 52.0 v 53.1 prior
- (CH) Swiss May Real Retail Sales Y/Y: -1.7% v -0.8% prior
- (AU) Australia Jun Commodity Index: 127.6 v 124.6 prior; Y/Y: 13.0% v 11.5% prior
- (NL) Netherlands Jun Manufacturing PMI: 50.7 v 52.2 prior (70th month of expansion but lowest reading since June 2013)
- (NO) Norway Jun PMI Manufacturing: 51.9 v 54.5e (12th straight expansion)
- (HU) Hungary Jun Manufacturing PMI: 54.4 v 56.0e (43rd month of expansion)
- (PL) Poland Jun PMI Manufacturing: 48.4 v 49.0e (8th straight contraction)
- (TR) Turkey Jun PMI Manufacturing: 47.9 v 45.3 prior (15th straight contraction)
- (ES) Spain Jun Manufacturing PMI: 47.9 v 49.5e (confirms move back into contraction and lowest reading since Apr 2013)
- (CH) Swiss Jun PMI Manufacturing: 47.7 v 49.0e (3rd straight contraction)
- (CZ) Czech Republic Jun PMI Manufacturing: 45.9 v 46.9e (7th straight contraction and lowest since July 2009)
- (SE) Sweden May Household Lending Y/Y: 5.0% v 5.0% prior
- (TH) Thailand Jun Business Sentiment Index: 49.4 v 50.1 prior
- (IT) Italy Jun Manufacturing PMI: 48.4 v 49.1e (9th straight contraction)
- (FR) France Jun Final Manufacturing PMI: 51.9 v 52.0e (confirmed its 3rd straight expansion and highest since Sept)
- (DE) Germany Jun Final Manufacturing PMI: 45.0 v 45.4e (confirmed its 6th straight contraction)
- (DE) Germany Jun Unemployment Change: -1.0K v 0.0Ke; Unemployment Claims Rate: 5.0% v 5.0%e
- (CH) Swiss Total Sight Deposits (CHF): 579.3B v 578.9B prior; Domestic Sight Deposits: 466.7B v 465.9B prior
- (EU) Euro Zone Jun Final Manufacturing PMI: 47.6 v 47.8e (confirmed 5th straight contraction)
- (GR) Greece Jun Manufacturing PMI: 52.4 v 54.2 prior(25th month of expansion butt lowest since Nov 2017)
- (EU) Euro Zone May M3 Money Supply Y/Y: 4.8% v 4.6%e
- (IT) Italy May Preliminary Unemployment Rate: 9.9% v 10.3%e (lowest level since Feb 2012)
- (UK) Jun PMI Manufacturing: 48.0 v 49.5e (2nd straight contraction and lowest since Feb 2013)
- (UK) May Net Consumer Credit: £0.8B v £0.9Be ; Net Lending: £3.1B v £4.2Be
- (UK) May Mortgage Approvals: 65.4K v 65.5Ke
- (UK) May M4 Money Supply M/M: -0.1% v +0.5% prior; Y/Y: 2.2% v 2.9% prior; M4 Ex IOFC Annualized: 2.8% v 2.8% prior
- (EU) Euro Zone May Unemployment Rate: 7.5% v 7.6%e (lowest since 2008)
- (DK) Denmark Jun PMI Survey: 45.0 v 49.1 prior
- (ZA) South Africa Jun Manufacturing PMI: 46.2 v 45.4 prior (6th straight contraction)
- (BE) Belgium May Unemployment Rate: 5.5% v 5.5% prior
Fixed Income Issuance
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 3-month bills; Avg Yield: 1.23% v 1.15% prior; Bid-to-cover: 1.96x v 4.06x prior
Looking Ahead
- (ZA) South Africa Jun Naamsa Vehicle Sales Y/Y: No est v -5.8% prior (revised from -5.7%)
- (IT) Italy Jun Budget Balance: No est v -€0.9B prior
- (RO) Romania Jun International Reserves: No est v $36.7B prior
- (AR Argentina Jun Government Tax Revenue (ARS): No est v 444.2B prior
- (BR) Brazil May CNI Capacity Utilization: No est v 77.8% prior
- 05:30 ((NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 6-month bills
- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
- 06:00 (PT) Portugal May Industrial Production M/M: No est v 2.9% prior; Y/Y: No est v -1.6% prior
- 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 (CZ) Czech Jun Budget Balance (CZK): No est v -50.9B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 09:00 (BR) Brazil Jun PMI Manufacturing: No est v 50.2 prior
- 09:00 (FR) France Debt Agency (AFT) to sell combined €3.7-4.9B in 3-month, 6-month and 12-month Bills
- 09:45 (US) Jun Final Markit Manufacturing PMI: 50.1e v 50.1 prior
- 10:00 (US) Jun ISM Manufacturing: 51.0e v 52.1 prior; Prices Paid: 52.8e v 53.2 prior
- 10:00 (US) May Construction Spending M/M: 0.0%e v 0.0% prior
- 10:00 (MX) Mexico May Total Remittances: $3.3Be v $2.9B prior
- 10:00 (MX) Mexico Central Bank Economist Survey
- 10:30 (MX) Mexico Jun PMI Manufacturing: No est v 50.0 prior
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 12:00 (IT) Italy Jun New Car Registrations Y/Y: No est v -1.2% prior
- 13:00 (MX) Mexico Jun IMEF Manufacturing Index: No est v 49.4 prior; Non-Manufacturing Index: No est v 49.4 prior
- 14:00 (BR) Brazil Jun Trade Balance: $5.2Be v $6.4B prior; Total Exports: $17.6Be v $21.4B prior; Total Imports: $12.5Be v $15.0B prior
