Focus Turns To Fed Chair Powell’s Mid-Week Testimony On Possible Rate Moves

Notes/Observations

• Euro Zone data remains on soft footing (session saw Germany Industrial Production, miss; France Industrial Confidence miss and Euro Zone Investor Confidence miss)
• Turkey fires it central bank chief after President was frustrated by lack of rate cuts
• Greece’s centre-right New Democracy party led by Kyriakos Mitsotakis has regained power
• Focus turns to Fed Chair Powell’s mid-week testimony following better Jun jobs report

Asia:

• China Jun Forex Reserves hit $3.12T to rise to highest level since Apr 2018 as gold holding rose for the 8th straight month
• China Jun retail car sales 1.8M units, +4.9% y/y (first rise in 13 months)

Europe/Mideast:

• Turkey Central Bank Gov Cetinkaya removed from office. Deputy Gov Murat Uysal appointed as the new Governor
• Greece election results saw the: Center right opposition party New Democracy (ND) secure power (as speculated)
• UK Lawmakers from ruling Conservatives and opposition Labour both indicated they are looking for ways to prevent the next PM from doing a no deal Brexit\. Tory MP Grieve said to be planning to amend a Bill today that would ensure the House was sitting in Oct so that the next PM could not suspend parliament to get a no deal Brexit through
• ECB’s Villeroy (France) reiterated Council stance that would act as necessary to support the Euro Area economy
• Deutsche Bank to cut18k jobs by 2022; to focus on serving its European companies and retail banking clients. To report Q2 loss of €2.8B and suspend 2019 an 2020 dividends

Energy:

• Iran official confirmed it will scale back commitment to the 2015 nuclear deal with world powers and would continue reducing its commitments every 60 days, unless signatories of the pact moved to protect it from US sanctions;

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 -0.07% at 389.82, FTSE -0.05% at 7,549.53, DAX -0.20% at 12,542.54, CAC-40 -0.18% at 5,583.68, IBEX-35 -0.25% at 9,312.00, FTSE MIB +0.01% at 21,987.50, SMI -0.08% at 9,971.50, S&P 500 Futures -0.15%]

Market Focal Points/Key Themes:

• European Indices trade slightly lower across the board, following a mixed session in Asia and lower US Index futures.
• On the corporate front shares of Deutsche Bank reverse early gains after confirming their restructuring plan, in which they will exit the Global Equities and significantly reduce its Corporate and Investment Banking risk weighted assets.
• Sodexo is a notable decliner after subdued guidance following higher Revenues for the first 9 Months of the year; Bam Groep also sharply declines after cutting full year margin guidance, while Wastec, Photo-me and Fuchs Petrolub are among other declines on earnings.
• Meanwhile TGS-NOPEC gains after Revenue which came ahead of forecasts, SPectrum gains after guiding Q2 Rev ahead of consensus, while Xaar and Exmar also gain on earnings.
• In other news SIF Holdings gain sharply after an order win, while Lundin Petroleum gains following Equinor’s divestiture of 16% holding for a direct interest of 2.6% in the Johan Sverdrup field and a cash consideration of ~$650M.
• Looking ahead notable earners include AZZ Inc.

Equities

• Consumer discretionary: IAG [IAG.UK] -1% (fee on data theft), Sodexo [SW.FR] -3% (earnings)
• Consumer staples: Imperial Brands [IMB.UK] +2.5% (share buyback), Scottish Salmon [SSC.NO] +13% (strategic options)
• Energy: Fuchs Petrolub [FPE.DE] -3% (profit warning)
• Financials: Deutsche Bank [DBK.DE] -1% (radical transformation program; job cuts)
• Industrials: Koninklijke BAM Groep [BAMNB.NL] -20.5% (profit warning), Washtec [WSU.DE] -16% (prelim earnings; profit warning), Pirelli [PIRC.IT] +4% (analyst action)
• Technology: Xaar [XAR.UK] +2% (trading update)

Speakers

• EU official stated ahead of a Eurogroup meeting that Greece might not meet its 2019 budget target as spending measures adopted by previous Greek govt might not meet its target. European countries were working on an European candidate to replace Largarde at the IMF
• South Korea President Moon urged Japan to withdraw export curbs; concerned over production setbacks from curbs. Added that Japan export curbs had political purpose and could not rule out countermeasures
• Iran Foreign Ministry spokesperson: Next step in reducing commitments under nuclear deal within 60 days would be within the framework but 3rd phase to be stronger. To only discuss issues included in current nuclear treaty ant not take part in any negotiations for a new deal
• China Foreign Ministry spokesperson Geng Shuang: Iran nuclear issue should be resolved diplomatically

Currencies/ Fixed Income

• Main highlight for markets will likely be Fed Chair Powell’s testimony before the House Financial Services Committee (Wednesday) and the Senate (Thursday) on monetary policy and the state of the US economy.
• Turkey TRY currency (lira) was approx 2% weaker against the Euro and USD after President Erdogan dismissed the central bank governor Cetinkaya. Erdogan was said to be frustrated that the central bank has kept its benchmark interest rate at 24% since last September

Economic Data

• (DE) Germany May Industrial Production M/M: 0.3% v 0.4%e; Y/Y: -3.7% v -3.2%e
• (DE) Germany May Current Account Balance: €16.5B v €12.6Be; Trade Balance: €20.6B v €17.0Be; Exports M/M: 1.1% v 0.9%e; Imports M/M: -0.5% v +0.3%e
• (RO) Romania Q1 Final GDP (3rd reading): Q/Q: 1.3% v 1.3%e; Y/Y: 5.0% v 5.0%e
• (FI) Finland May Preliminary Trade Balance: €0.0B v -€0.3B prior
• (FR) Bank of France Jun Industrial (Business) Sentiment: 95 v 99e
• (CZ) Czech May Industrial Output Y/Y: 3.2% v 1.1%e; Construction Output Y/Y: 0.2% v 8.9% prior
• (CZ) Czech May National Trade Balance (CZK): 24.4B v 11.3Be
• (CH) Swiss Weekly Total Sight Deposits (CHF): 579.0B v 579.3B prior; Domestic Sight Deposits: 476.1B v 466.7B prior
• (TW) Taiwan Jun Trade Balance: $3.9B v $4.5Be; Exports Y/Y: +0.5% v -4.8%e; Imports Y/Y: +6.6% v -1.5%e
• (EU) Euro Zone July Sentix Investor Confidence: -5.8 v +0.1e (lowest since Nov 2014)

Fixed Income Issuance

• (SI) Slovenia to sell €250M in 1.1875% 2029 bond; guidance seen +10bps to mid-swaps

Looking Ahead

• (EU) European Finance Ministers (Eurogroup) meets (ECB’s Draghi in attendance)
• (IT) Italy Debt Agency (Tesoro) announces upcoming BTP bond auction for Thursday, July 11th
• (IE) Ireland Debt Agency (NTMA) announces upcoming auction for Thursday, July 11th
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 05:30 (DE) Germany to sell €2.0B in 6-month BuBills
• 06:00 (TR) Turkey to sell Bonds
• 06:45 (US) Daily Libor Fixing
• 07:00 (IL) Israel to sell 2022, 2023, 2028 and 2047 bonds
• 07:00 (MX) Mexico Jun Vehicle Production: No est v 349.6K prior; Vehicle Exports: No est v 304.9K prior
• 07:00 (BR) Brazil Jun FGV Inflation IGP-DI M/M: 0.8%e v 0.4% prior; Y/Y: 6.2%e v 6.9% prior
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 08:00 (CL) Chile Jun CPI M/M: 0.0%e v 0.6% prior; Y/Y: 2.2%e v 2.3% prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:30 (CL) Chile Jun Trade Balance: $0.6Be v $0.4B prior; Total Exports: $5.6Be v $6.4B prior; Total Imports: 5.0Be v 6.0B prior; Copper Exports: No est v $3.1B prior
• 08:30 (CL) Chile Jun International Reserves: No est v $38.2B prior
• 09:00 (FR) France Debt Agency (AFT) to sell combined €B in 3-month, 6-month and 12-month Bills
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: expected to leave Base Rate unchanged at 0.25%
• 09:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
• 15:00 (US) May Consumer Credit: $17.0Be v $17.5B prior