Notes/Observations
- IMF’s Lagarde likely seen to continue the ECB’s easy-money policy stance under Draghi; European bond yields hit fresh record lows
- Sweden Riksbank left interest rates unchanged and reiterated its forward guidance that it expected to raise rates at the end of this year or the beginning of next year
- Major European PMI services data (Beats: Euro Zone, Germany, Italy, Spain; Misses: France, UK)
Asia:
- Australia May Trade Balance: A$5.8B v A$5.3Be (record high surplus); supported by higher iron ore prices
- China Jun Caixin PMI Services missed expectations to hit a 4-month low (52.0 v 52.6e)
- South Korea Finance Ministry cuts 2019 GDP and CPI forecasts. Cut 2019 GDP growth forecast from 2.6-2.7% to 2.4-2.5% and cut 2019 CPI forecast from 1.6% to 0.9%
- BoJ official Funo reiterated stance that must maintain sufficiently low rates for prolonged period given prices, inflation expectations not heightening much; BOJ forward guidance left room for current low rates to be maintained beyond Spring 2020
Europe/Mideast:
- EU reached deal on key positions: Christine Lagarde nominated for ECB presidency; Belgium’s Charles Michel proposed as EU Council president; Germany’s Ursula Von Der Leyen proposed as EU Commission head
- EU’s Juncker stated that Germany abstained in vote for EU top positions and added that Parliament approval of EU jobs ‘won’t be easy’
- Italy PM Conte stated that was glad to see woman as ECB President and that the new Commission would be very well balanced. Italy was guaranteed an economic portfolio in new Commission
- BOE Gov Carney saw Q2 economic growth ‘considerably weaker and added that it was unsurprising that the market saw a lower bank rate. Escalation of US-China tension might take 1% off GDP
Americas:
- Trump announces Fed nominees. To nominate current Executive Vice President of Saint Loius Fed Christopher Waller to be member of Fed; Also intends to nominate economic advisor Judy Shelton to serve on Fed board
- White House Trade Adviser Navarro stated that continued to head in positive direction on China trade talks; US was talking to China on the phone already. Fed cutting interest rates and passage of USMCA would help the stock market hit 30K on the Dow
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.72% at 392,08, FTSE +0.59% at 7.603,75, DAX +0.76% at 12.622,07, CAC-40 +0.61% at 5.610,66, IBEX-35 +0.85% at 9.360,01, FTSE MIB +1.32% at 21.674,50, SMI +0.55% at 10.076,50, S&P 500 Futures +0.82%]
Market Focal Points/Key Themes:
- European Indices trade higher across the board continuing the positive momentum on the back of continued record low yields across the European bond space. Asian Indices traded mostly lower, with US Index futures pointing to a higher open.
- On the corporate front UK Supermarket giant Sainsbury’s trades higher despite its Q1 update, and decline in sales; Estate agent Purplebricks gains after earnings and reports its to pull out of the US; JD Sports also rises following its trading update, while Nordex rising almost 10% after its Q2 sales numbers.
- Meanwhile PureCircle shares fall after guiding below forecasts, with Electrocomponents also declining following a trading update.
- In other news, Telford Homes rises 12% on a takeover bid from CBRE; Britvic rises after reports PM Candidate Boris Johnson will review ‘sin taxes’, while Fagron declines following a private placement by holders.
- Looking ahead notable earners include International Speedway in a shortened trading session in the US.
Equities
- Consumer discretionary: Telford Homes [TEF.UK] +12% (receives offer from CBRE), Sainsbury’s [SBRY.UK] +2% (trading update), Stolt-Niesen [SNI.NO] -1.5% (earnings), Electrocomponents [ECM.UK] -2% (trading update), JD Sports Fashion [JD.UK] +3.5% (AGM statement)
- Consumer staples: Tate & Lyle [TATE.UK] +1.5%, Britvic [BVIC.UK] +2%, Barr [BAG.UK] +0.5%, Fevertree Drinks [FEVR.UK] +2% (UK PM candidate Johnson pledges review of sugar and salt taxes)
- Energy: Nordex [NDX1.DE] +9% (order intake)
- Financials: Deutsche Bank [DBK.DE] -1% (held talks with Citi and BNP)
- Industrials: Synthomer [7YC.DE] -1% (to acquire OMNOVA), Henkel [HEN.DE] +1.5% (analyst action)
- Technology: Avast [AVST.UK] +3%, Sophos Group [SOPH.UK] +7.5% (Broadcom-Symantec acquisition)
Speakers
- Sweden Central Bank (Riksbank) Policy Statement reiterated forward guidance that next potential rate hikewas seen near year-end or in early 2020. Inflationwais close to 2% target; economics outlook and inflation prospects remained good . If conditions for inflation changed then monetary policy would be adjusted
- Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference stated that developments were in-line with forecasts; reiterated forward guidance that next potential rate hike seen near year-end or in early 2020
- ECB’s Rehn (Finland) said to stress that OMT bond buying is an important instrument
- ECB Nowotny (Austria): Monetary easing had strengthened financial stability
- Italy said to not commit to a 2020 budget deficit target in the EU. Later reports circulated that Italy Govt decree said to contain clause to curb the 2020 budget deficit
- EU official said to see the first structural improvement in Italy’s public finances as a result of the 2019 measures
- Russia Central Bank (CBR) Gov Nabiullina stated that it planned to cut rates in small steps and would complete the easing cycle by mid-2020
- China said to consider purchasing some US agricultural products as a goodwill gesture amid the resumption of trade talks. Soybeans, corn, pork are being considered but volumes will be smaller than during the last trade truce
Currencies/ Fixed Income
- EUR/USD remains on soft footing as ECB would likely loosen monetary policy in the coming months after announcements that IMF’s Lagarde was set to succeed Mario Draghi as the ECB’s President. Dealers noted that Lagarde was likely seen to continue the ECB’s easy-money policy stance. Pair staying below the 1.13 level as European bond yield hit fresh record lows
- GBP/USD was softer by 0.2% in the aftermath of BOE Gov Carney cautious comments on growth yesterday. PMI Services data for Jun also missed expectations and barely stayed in expansion territory. Markets currently fully pricing in a BOE rate cut by August 2020 .
- EUR/SEK was lower after Sweden’s Riksbank maintained its forward guidance that the next rate move would be higher despite concerns of the global economy. Cross tested below the 10.49 as a result of the rate decision and rate path outlook.
Economic Data
- (IN) India Jun PMI Services: 49.6 v 50.2 prior (1st contraction in 13 months); PMI Composite: 50.8 v 51.7 prior
- (RU) Russia Jun PMI Services: 49.7 v 52.0 prior (1st contraction in 41 months); PMI Composite: 49.2 v 51.5 prior
- (SE) Sweden Jun PMI Services: 49.9v 52.8 prior (1st contraction since July 2013); PMI Composite: 50.5 v 52.9 prior
- (TR) Turkey Jun CPI M/M: 0.0% v 0.2%e; Y/Y: 15.7% v 16.1%e (3rd month that inflation decelerated); CPI Core Index Y/Y: 14.9% v 14.7%e
- (TR) Turkey Jun PPI M/M: 0.1% v 2.7% prior; Y/Y: 25.0% v 28.7% prior
- (ZA) South Africa Jun PMI (whole economy): 49.7 v 49.3 prior (2nd straight contraction)
- (ES) Spain Jun Services PMI: 53.6 v 52.8e; Composite PMI: 52.1 v 51.7e
- (SE) Sweden Central Bank (Riksbank) left the Repo Rate unchanged at -0.25% (as expected) and maintains its forward guidance on next possible hile
- (IT) Italy Jun Services PMI: 50.5 v 50.0e (5th straight month above expansion level); Composite PMI: 50.1 v 49.5e
- (FR) France Jun Final Services PMI: 52.9 v 53.1e (confirmed 3rd month of expansion); Composite PMI: 52.7 v 52.9e
- (DE) Germany Jun Final Services PMI: 55.8 v 55.6e(confirmed 72nd month of expansion); Composite PMI: 52.6 v 52.6e
- (EU) Euro Zone Jun Services PMI: 53.6 v 53.4e (confirmed 72nd month of expansion); Composite PMI: 52.2 v 52.1e
- (BR) Brazil Jun FIPE CPI (Sao Paulo): 0.2% v 0.0% prior
- (UK) Jun Services PMI: 50.2 v 51.0e (3rd straight expansion); Composite PMI: 49.7 v 51.0e
- (UK) Jun Official Reserves Changes: $3.7B v $2.3B prior
Fixed Income Issuance
- (DK) Denmark sold total DKK2.04B in 2025 and 2029 DGB Bonds
- (IN) India sold total INRB vs. INR160B indicated in 3-month, 6-month and 12-month bills
Looking Ahead
- (UR) Ukraine Jun Official Reserve Assets: No est v $19.4B prior
- (IL) Israel Jun Foreign Currency Balance: No est v $118.1B prior
- 05:30 (ZA) South Africa Jun SACCI Business Confidence: No est v 93.0 prior
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
- 05:30 (DE) Germany to sell €4.0B in new 0% Oct 2024 BOBL
- 05:30 (GR) Greece Debt Agency (PDMA) to sell 26-week bills; Avg Yield: % v 0.41% prior; Bid-to-cover: x v 1.56x prior (Jun 5th 2019)
- 06:00 (PL) Poland Central Bank (NBP) Interest Rate Decision: Expected to leave Base Rate unchanged at 1.50%
- 06:00 (UK) BOE’s Cunliffe at Conference in Lisbon
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia OFZ bonds auction
- 07:00 (US) MBA Mortgage Applications w/e Jun 28th: No est v 1.3% prior
- 07:00 (MX) Mexico Jun Vehicle Domestic Sales: No est v 101.9K prior ‘
- 07:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Ohlsson participates in Seminar
- 07:30 (US) Jun Challenger Job Cuts Y/Y: No est v 85.9% prior
- 08:00 (BR) Brazil May PPI Manufacturing M/M: No est v 1.2% prior; Y/Y: No est v 7.8% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:15 (US) Jun ADP Employment Change: +140Ke v +27K prior
- 08:15 (UK) BOE’s Broadbent speaks in London.
- 08:30 (US) May Trade Balance: -$54.0Be v -$50.8B prior
- 08:30 (US) Initial Jobless Claims: 223Ke v 227K prior; Continuing Claims: 1.68Me v 1.688M prior
- 08:30 (CA) Canada May Int’l Merchandise Trade (CAD): -1.7Be v -1.0B prior
- 09:00 (BR) Brazil Jun PMI Services: No est v 47.8 prior; PMI Composite: No est v 48.4 prior
- 09:00 (SG) Singapore Jun Purchasing Managers Index: No est v 49.9 prior; Electronics Sector Index: No est v 49.4 prior
- 09:00 (CL) Chile May Retail Sales Y/Y: No est v -0.8% prior; Commercial Activity Y/Y: No est v 2.3% prior
- 09:00 (SE) Sweden Central Bank (Riksbank) Dep Gov Floden in Visby
- 09:45 (US) Jun Final Markit Services PMI: 50.7e v 50.7 prelim; Composite PMI: No est v 50.6 prelim
- 10:00 (US) May Factory Orders: -0.6%e v -0.8% prior; Factory Orders(ex-transportation): No est v 0.3% prior
- 10:00 (US) May Final Durable Goods Orders: -1.3%e v -1.3% prelim; Durables Ex Transportation: No est v 0.3% prelim; Capital Goods Orders (Non-defense/ex-aircraft): No est v 0.4% prelim; Capital Goods Shipments (Non-defense/ex-aircraft): No est v 0.7% prelim
- 10:00 (US) Jun ISM Non-Manufacturing Index: 56.0e v 56.9 prior
- 10:00 (PL) Poland Central Bank Gov Glapinski to hold post rate decision press conference
- 10:30 (FR) ECB’s Villeroy (France) in Paris
- 11:00 (CO) Colombia May Exports: $3.9Be v $3.9B prior
- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills
- 12:00 (CA) Canada to sell 5-Year Bonds
