Notes/Observations
- Proposed US tariffs on European goods curbed risk appetite; optimism waned over a recent US-China trade truce
- UK Construction PMI misses expectations to hit a 10-year low
- EU Leaders hold another summit to try to fill key EU positions
Asia:
- RBA cut its Cash Rate Target by 25bps to 1.00% (as expected) for its 2nd straight meeting (14th overall in the current easing cycle). This was the 1st back-to-back rate cut in 7 years. The decision to lower the cash rate to help make further inroads into the spare capacity in the economy and assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target.
- South Korea Jun CPI M/M: -0.2% v -0.1%e; Y/Y: 0.7% v 0.8%e
- China Premier Li reiterated stance that China would not resort to competitive yuan devaluation, to keep yuan at reasonable and equilibrium level; to keep economic growth stable and maintain prudent monetary policy. Would not flood economy with excess liquidity; To use targeted RRR, lower real borrowing costs to SMEs
Europe/Mideast:
- Italy Govt said to be cutting its 2019 deficit target from 2.4% to 2.04% and confirmed its 2020 budget deficit at 2.1% of GDP. Remain compliant with all EU fiscal rules and added that the reduction of structural deficit meant EU disciplinary procedure would not be warranted
- Parliament Speaker Bercow denies amendment that would block a no deal Brexit
Americas:
- USTR proposed increased tariffs on EU products due to EU aircraft subsidies, proposes adding more tariffs to $4.0B of EU goods; increases total amount to $25B
Energy:
- OPEC delegates stated that OPEC had reached agreement on cooperation charter; Iran had approved compromise on OPEC+ charter. Ratified 3-year contract renewal for Sec Gen Barkindo
- Saudi Oil Min Al-Falih: commitment to 9-month extension is unequivocal; all countries promise a better conformity to OPEC cuts
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.08% at 388.18, FTSE +0.38% at 7,525.62, DAX -0.11% at 12,506.45, CAC-40 -0.07% at 5,564.27, IBEX-35 -0.35% at 9,233.87, FTSE MIB +0.04% at 21,261.50, SMI +0.40% at 10,016.50, S&P 500 Futures -0.16%]
- Market Focal Points/Key Themes: European Indices trade mixed consolidating after gains seen yesterday tracking mixed Asian Indices and slightly lower US Index futures. On the corporate front shares of Johnson Service Group trades higher following an upbeat trading statement, with continued strong trading into May; Plus500 gains on a rise in Revenues q/q, while Funding Circle declines sharply after cutting its full year revenue outlook. Celyad gains over 10% following a strategic update, while Galapagos moves to a 14 year high on confirmed Filgotinib filing in the US for 2019. Elsewhere Ryan ticks higher after June metrics, with H^T group gaining on an acquisition of assets, while Carr’sGroup declines on the acquisition of NW Total Engineered Solutions for £9.6M. Looking ahead notable earners include Greenbrier, Omnova solutions and Acuity Brands.
Equities
- Consumer discretionary: WPP [WPP.UK] -2% (confirms in discussion on Kantar), Adidas [ADS.DE] -1% (analyst action)
- Financials: Funding Circle [FCH.UK] -19% (trading update; profit warning), Deutsche Bank [DBK.DE] -1% (considering lowering capital buffer to fund the company’s overhaul), Plus500 [PLUS.UK] +4.5% (trading update)
- Healthcare: Celyad [CYAD.BE] +9% (strategic update), BioInvent [BINV.SE] +5.5% (approval), Nicox [COX.FR] +4% (license agreement)
- Industrials: Dialight [DIA.UK] -31% (profit warning; CEO to step down)
Speakers
- German Association of Chambers of Trade and Industry (DIHK) cuts 2019 export forecast from 2.5% to 1.0% as trade disputes and protectionism were increasingly affecting Germany companies overseas
- Poland PM Morawiecki stated a=that he hoped that EU leaders would be able to choose a new EU Commission chief today
- Spain PM Sanchez: stated that Socials supported Timmermans (Netherlands) for EU Commission chief and supportedt Manfred Weber (Germany) for EU Parliament head)
- Spain Parliament Speaker: To begin debate on forming govt on Monday, July 22nd
- Romania Central Bank gov Isarescu stated that had a balanced approach to targeting price stability. Tensions between fiscal and monetary policies were inherent
- China Premier Li reiterated stance to fine-tune monetary policy while being prudent; domestic economy faced downward pressure from slowing global growth
- Iran Oil Min Zanganeh: OPEC+ may need to cut production by more than 1.2M bpd
Currencies/Fixed Income
- FX markets were little phased in directionless trading.
- EUR/USD little changed just under the 1.13 level. More analysts calling for 1 10bps rate cut by the ECB later this month keeping a cap on the pair. Italian yield continue to fall as Italy Govt improving its forecasts on its 2019 budget deficit to GDP ratio in order to avoid EU deficit proceedings.
- GBP/USD was only slightly weaker after UK Jun Construction PMI fell like a rock to test 10-year lows. pair at 1.2615 just ahead of mid-session.
- AUD/USD was higher by 0.3% after the RBA again cuts its key rate by another 25 bps. Dealers citing technical support aiding the Aussy. Pair just under the 0.70 level.
Economic Data
- (DE) Germany May Retail Sales M/M: -0.6% v +0.5%e; Y/Y: 4.0% v 2.7%e
- (UK) Jun Nationwide House Prices M/M: 0.1% v 0.2%e; Y/Y: 0.5% v 0.5%e
- (FR) France May YTD Budget Balance: -€83.9B v -€67.2B prior
- (ES) Spain Jun Unemployment Change: -63.8K v -90.0Ke
- (HU) Hungary Apr Final Trade Balance: €0.3B v €0.2B prelim
- (UK) Jun Construction PMI: 43.1 v 49.2e (2nd straight contraction and lowest reading since Apr 2009)
- (HK) Hong Kong May Retail Sales Value Y/Y: –1.3% v -4.3%e; Retail Sales Volume Y/Y: -1.7% v -5.4%e
- (EU) Euro Zone May PPI M/M: -0.1% v +0.1%e; Y/Y: 1.7% v 1.8%e
Fixed Income Issuance
- (ID) Indonesia sold total IDR22.15T vs. IDR15.0T target in 3-month and 12-month Bills and 5-year, 10-year, 15-year, and 20-year Bonds
Looking Ahead
- 05:30 (UK) Weekly John Lewis LFL Sales data – 05:30 (AU) RBA Gov Lowe speaks in Darwin
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 05:30 (UK) DMO to sell £3.0B in new 0.625% 2025 Gilts
- 05:30 (BE) Belgium Debt Agency (BDA) to sell €1.4-1.8B in 3-month and 6-month Bills
- 06:00 (IE) Ireland Jun Unemployment Rat: No est v 4.4% prior
- 06:30 (EU) ESM to sell €2.5B in 3-month bills
- 06:35 (US) Fed’s Williams (moderate, voter) on Global Economic and Policy Outlook
- 07:00 (MX) Mexico May Leading Indicators M/M: No est v 0.05 prior
- 07:01 (US) Preview: June 2019 Vehicle Sales numbers expected throughout the day from major auto makers
- 07:45 (US) Weekly Chain Stores Sales data
- 08:00 (BR) Brazil May Industrial Production M/M: -0.3%e v +0.3% prior; Y/Y: +6.3%e v -3.9% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (RU) Russia announces upcoming OFZ Bond issuance
- 08:30 (CA) Canada May MLI Leading Indicator M/M: No est v 0.4% prior
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:30 (CA) Canada Jun Manufacturing PMI: No est v 49.1 prior
- 10:00 (MX) Mexico weekly International Reserve data
- 10:05 (UK) BOE Gov Carney
- 11:00 (DK) Denmark Jun Foreign Reserves (DKK): No est v 451.7B prior
- 11:00 (US) Fed’s Mester (hawk, non-voter)
- 11:30 (US) Treasury to sell 52-week bills
- 13:00 (NZ) New Zealand Jun QV House Prices Y/Y: No est v 2.3% prior
- 14:00 (CO) Colombia Central Bank Jun Minutes
- 16:30 (US) Weekly API Oil Inventories
