Notes/Observations
- Current environment remained supportive for bonds with low inflation and dovish central bank speak
- No surprises in EU inflation data (both UK and EU Jun readings in-line with consensus)
Asia:
- US and Japan said to consider possible ‘small’ trade agreement by Sept; the agreement could involve agriculture and auto
- Fitch affirmed Japan sovereign rating at A; Outlook stable
Europe/Mideast:
- Germany’s Ursula Von Der Leyen confirmed as EU Commission President with 383 votes (needed 374 votes to be confirmed)
- UK PM candidate Johnson looking to hold early general elections while Corbyn is Labour party leader as he was viewed as vulnerable
Americas:
- President Trump: could impose tariffs on another $325B of China goods if we wanted to. A lot of progress had been made with Iran; we want to help and work with Iran and we’re not looking for regime change
- Fed Chair Powell: factors holding down neutral rates were likely to persist; business investment had slowed notably. Inflation pressures remained muted; economic growth appeared to have moderated in Q2
- Fed Evans (dove, voter): given the nervousness I think that a little more accommodation would be appropriate; we should only do what was necessary, but at the moment it seems like a little more was necessary. Believed 50 bps of accommodation before the end of the year should help lift inflation; the low inflation situation by itself justified two 25 bps cuts this year
- May Net Long-term Tic Flow data saw China Total holding of US Treasuries: fall for the 3rd straight month to a 2-year low ($1.110T v $1.113T prior)
Energy:
- Weekly API Oil Inventories: Crude: -1.4M v -8.1M prior
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.06% at 389.32, FTSE -0.08% at 7,571.05, DAX -0.07% at 12,422.46, CAC-40 -0.08% at 5,609.64, IBEX-35 -0.34% at 9,345.25, FTSE MIB -0.02% at 22,199.50, SMI +0.97% at 9,946.50, S&P 500 Futures +0.16%]
Market Focal Points/Key Themes:
- European Indices trade mixed this morning following a mostly lower open after a mostly lower session in Asia and higher US Equity futures.
- On a busier morning for corporate earnings ASML in the Netherlands trades over 4% higher after earnings and strong Q4 guidance, as Q3 guidance missed forecasts. Swatch is another notable gainer with Operating profits which beat forecasts and Revenue which missed, but a generally positive outlook is helping lift the stock. Meanwhile Ericsson declines sharply following earnings and higher costs leading to operating margins which missed forecasts. Handelsbanken also declines following a decline in profits and Revenues.
- Other notable earnings related gainers include Swedish Orphan Biovtrum, Mycronic, Dialog Semi and Assa Abloy, while Finnair, TomTom, Oriola are some of the notable decliners.
- In other news Leonteq gains after shareholder Raiffeisen is to maintain its stake; urrican Energy declines as holder places 110M shares in secondary, while Burberry shares continue to advance despite and analyst downgrade.
- Looking ahead notable earners include Banking names Bank of America, USB and PNC Bank as well as Abbot Labs and Progressive among others.
Equities
- Consumer discretionary: Swatch [UHR.CH] +4.5% (earnings; outlook), Tomtom [TOM2.NL] -2.5% (earnings), Finnair [FIA1S.FI] -12% (earnings), GVC Holdings [GVC.UK] +1% (trading update)
- Materials: Fresnillo [FRES.UK] -1% (production outlook cut), Johnson Matthey [JMAT.UK] -3.5% (trading update)
- Financials: Swedbank [SWEDA.SE] -5% (earnings), Saga [SAGA.UK] +4% (stake)
- Industrials: Brenntag [BNR.DE] -1.5% (outlook cut)
- Technology: ASML [ASML.NL] +3% (earnings), Dialog Semiconductor [DLG.DE] +3.5% (positive profit alert), Mycronic [MYCR.SE] +5% (earnings)
- Telecom: Ericsson [ERICB.SE] -4% (earnings)
Speakers
- ECB’s Coeure (France):Reiterates Council view that will act in event of adverse contingencies with all available tools to ensure inflation moves toward target
- BOE’s Hauser: Balance sheet might be halved in size once QE was unwound. Reiterated stance that rates likely to be slightly higher and more variable to bank rate as BOE reduced reserves
- Various G7 Ministers and Central Bankers commented from ist meeting in France
- France Fin Min Le Maire: Hoped G7 made a decision on minimum corporate tax but conceded its would be hard to create consensus on issue
- BOJ Gov Kuroda: Global economy was basically expanding moderately but had various downside risks. Reiterated BOJ stance that would consider additional easing if price momentum was lost. Japan’s economy was expanding moderately (in-line with its assessment)
Currencies/ Fixed Income
- USD: The USD was significantly stronger yesterday as Fed Chair Powell noted that highlighted the growing importance of global developments in monetary policy in a recent speech in Paris. Levels to the upside are in the region of 97.2.
- EUR: The Euro was weaker against the USD as the pair bounced off the 1.12 handle. If we significantly break and close below this level the next level to the downside is in the region of 1.112
- GBP: The cable continued to probe 2-year lows around the 1.24 level. Dealers noted that the pair had further room to fall as economic data worsen and the chances of a no-deal Brexit rose. Current environment remained supportive for bonds with low inflation and dovish central bank speak. Key European core and periphery bonds were softer by 2-3bps in session. The next level to the downside is in the region of the 1.21 handle.
Economic Data
- (EU) EU27 Jun New Car Registrations: -7.8% v +0.1% prior (biggest decline since Dec)
- (CZ) Czech Jun PPI Industrial M/M: -0.7% v -0.1%e; Y/Y: 2.5% v 3.3%e
- (AT) Austria Jun CPI M/M: 0.1% v 0.2% prior; Y/Y: 1.6% v 1.7% prior
- (PL) Poland Jun Employment M/M: 0.2% v 0.1%e; Y/Y: 2.8% v 2.6%e
- (PL) Poland Jun Average Gross Wages M/M: 0.9% v 2.5%e; Y/Y: 5.3% v 7.1%e
- (IT) Italy May Industrial Sales M/M: +1.6% v -1.1% prior; Y/Y: +0.3% v -0.8% prior
- (IT) Italy May Industrial Orders M/M: +2.5% v -0.2% prior; Y/Y: -2.5% v -2.2% prior
- (UK) Jun CPI M/M: 0.0% v 0.0%e; Y/Y: 2.0% v 2.0%e; CPI Core Y/Y: 1.8% v 1.8%e; CPIH Y/Y: 1.9% v 1.9%e
- (UK) Jun RPI M/M: 0.1% v 0.1%e; Y/Y: 2.9% v 2.9%e; RPI-X (ex-mortgage/Interest Payment) Y/Y: 2.9% v 2.9%e; Retail Price Index: 289.6 v 289.6e
- (UK) Jun PPI Input M/M: -1.4% v -0.5%e; Y/Y: -0.3% v +0.3%e
- (UK) Jun PPI Output M/M: -0.1% v +0.1%e; Y/Y: 1.6% v 1.7%e
- (UK) Jun PPI Output Core M/M: 0.1% v 0.1%e; Y/Y: 1.7% v 1.7%e
- (UK) May ONS House Price Index Y/Y: 1.2% v 1.3%e
- (EU) Euro Zone Jun Final CPI Y/Y: % v 1.2%e; CPI Core Y/Y: % v 1.1%e;
CPI M/M: % v 0.1%e - (EU) Euro Zone May Construction Output M/M: -0.3% v -1.7% prior; Y/Y: 2.0% v 3.1% prior
Fixed Income Issuance
- (DK) Denmark sold total DKK1.98B in 2022 and 2029 bonds
- (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills
Looking Ahead
- (IL) Israel July 12-month CPI Forecast: No est v 1.3% prior
- (PT) Portugal May Current Account Balance: no est v €0.0B prior
- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays)
- 05:30 (DE) Germany to sell €1.0B in 1.25% Aug 2048 Bonds
- 05:30 (PT) Portugal Debt Office (IGCP) to sell €1.0-1.5B in 6-month and 12-month bills
- 06:00 (PT) Portugal Jun PPI M/M: No est v 0.3% prior; Y/Y: No est v 0.9% prior
- 07:00 (US) MBA Mortgage Applications w/e July 12th: No est v -2.4%% prior
- 07:00 (ZA) South Africa May Retail Sales M/M: 0.5%e v 0.8% prior; Y/Y: 1.7%e v 2.4% prior
- 07:00 (UK) Weekly PM Question time in House
- 07:00 (RU) Russia OFZ bonds auction
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:30 (US) Jun Housing Starts: 1.260Me v 1.269M prior; Building Permits: 1.300Me v 1.299M prior (revised from 1.294M prior
- 08:30 (CA) Canada Jun CPI M/M: -0.3%e v +0.4% prior; Y/Y: 2.0%e v 2.4% prior; CPI Core- Median Y/Y: 2.1%e v 2.1%; CPI Core- Common Y/Y: 1.8%e v 1.8% prior; CPI Core- Trim Y/Y: 2.2%e v 2.3% prior; Consumer Price Index: 136.4e v 136.6 prior
- 08:30 (CA) Canada May Manufacturing Sales M/M: +2.0%e v -0.6% prior
- 09:00 (RU) Russia Jun Unemployment Rate: 4.5%e v 4.5% prior; Real Wages Y/Y: 2.9%e v 2.8% prior
- 09:00 (RU) Russia Jun Real Retail Sales Y/Y: 1.0%e v 1.4% prior
- 10:30 (US) Weekly DOE Oil Inventories
- 14:00 (US) Fed Beige Book
- (CO) Colombia Jun Consumer Confidence Index: -1.5e v -5.0 prior
