Notes/Observations
- UK Tory Party leadership race expected to be announced in session; Boris Johnson widely tipped to beat Jeremy Hunt with just over 3 months to the Brexit deadline; wave of Tory resignations expected which would raise the risk of a no-deal exit
- Singapore CPI data opened the door for MAS to begin easing measures
Asia:
- China conducted MLF Operations (both targeted and outright MLF). Conducted CNY297.7B IN 1-year Targeted Medium-Term Lending Facility at 3.15% (3rd use of facility) and offered CNY200B in 1-year Medium-Term Lending Facility at 3.3% for net drain of CNY164.3B
- RBA Assistant Gov Kent: AUD currency (Aussy) would be even higher if it were not for RBA rate cut; Australia was a long way away from using any unconventional policy
- Reserve Bank of New Zealand (RBNZ): Looking at unconventional policy strategies, unconventional policy work was at a “very early stage”
Europe/Mideast:
- EU Senior Trade Official Weyand: not much movement yet on talks with US over lowering industrial tariffs
Americas:
- President Trump: Debt ceiling deal has been reached. Agreement would restore the government’s ability to borrow to pay its bills past next year’s elections and build upon recent large budget gains for both the Pentagon and domestic agencies.
- President Trump agreed to a “timely” licensing decision for sales to Huawei after meeting with US tech giant CEOs
- Fed board nominee Judy Shelton calls for a 50 bps rate cut at the July Fed meeting
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.64% at 390.24, FTSE +0.72% at 7,568.70, DAX +1.21% at 12,438.40, CAC-40 +0.45% at 5,591.81, IBEX-35 +0.84% at 9,240.60, FTSE MIB +0.85% at 21,920.50, SMI +0.42% at 9,964.50, S&P 500 Futures +0.23%]
Market Focal Points/Key Themes:
- European Indices trade higher across the board tracking higher Equity markets in Asia and higher US index futures, as optimism continues after upbeat earnings out of Europe as well as a Debt ceiling agreement being reached in the US.
- On a busy morning for corporate earnings, shares of Swiss banking giant UBS trades over 2% higher following an earnings beat, with Spanish Banking name Santander also higher as earnings came ahead of forecasts. Randstad, Faurecia, AMS, Lindt & Spurengli, Continental and Logitech are other notable gainers on earnings.
- Meanwhile Jungheinrich declines sharply after the company lowered its guidance, while Duerr is another notable decliner as the company reported prelim earnings and Revenue miss as well as cutting its margin outlook. Elsewhere, Motorpoint Group, Swedol, McColl’s Retail are among other notable decliners on earnings.
- In other news Daimler trades sharply higher as BAIC Motor acquires a 5% stake; AMS has decided to re-evaluate a potential transaction with OSRAM Licht AG, with both shares trading up on the news, while UK Supermarkets trade under pressure after Kantar Supermarket data.
- Looking ahead notable earners include United Technologies, Jetblue, Lockheed Martin and Autonation among others.
Equities
- Consumer discretionary: Hermes [RMS.FR] -1% (sales), Edenred [EDEN.FR] +1% (earnings), Tesco [TSCO.UK] -3% (Kantar data)
- Energy: Norsk Hydro [NHY.NO] +4% (earnings)
- Financials: UBS [UBSG.CH] +1.5% (earnings), Santander [SAN.ES] +2.5% (earnings)
Healthcare:
- Industrials: Continental [CON.DE] +4% (profit warning), Daimler [DAI.DE] +3% (BAIC takes stake), BMW [BMW.DE] +4% (analyst action), Faurecia [EO.FR] +8% (earnings)
- Technology: AMS [AMS.CH] +9% (earnings; Osram offer), Logitech [LOGN.CH] +6.5% (earnings)
- Materials: Jungheinrich [JUN3.DE] -9%, Kion Group [KGX.DE] -4% (Jungheinrich outlook cut), Asetek [ASETEK.NO] -16% (profit warning)
Speakers
- BOE’s Saunders stated that a no deal Brexit would push the GBP currency (Sterling) lower. Reiterated MPC stance that not bound by forecasts implying rate hikes
- Euro Area Lending Survey: Q2 credit standards for both corporate and consumer loans tightened in quarter which reflected concerns over economic outlook; demand rose all loan categories
- South Africa Fin Min Mboweni: State utility Eskom was currently not financially sustainable; govt working to address the situation
- Japan Cabinet Office (Govt) July Monthly Economic Report: Maintained its overall assessment that domestic economy was recovering at a moderate pace while exports and production remained weak
- Japan Econ Min Motegi reiterated govt stance that domestic economy was gradually recovering despite some weaknesses
- China PBOC Gov Yi Gang: current interest rates appropriate and to be based upon domestic situation
Currencies/ Fixed Income
- USD: The US Dollar Index trades higher today after yesterday Fed board nominee Judy Shelton calls for a 50bp cut. The market is currently calling 5% for a cut this large with the majority calling for a 25bp cut later this month.
- EUR: The Euro continued to face headwinds ahead of Thursday’s ECB meeting. Some analysts have called for another change in forward guidance with rates holding steady at current level until the end of 2020 (another 6-month delay). Dealers also expected Draghi would likely to hint at future rate cuts and a re-launching of the QE before his term ends in Oct. EUR/USD holding below the 1.12 level.
- GBP: The Cable was softer as the UK Conservative Party would likely select Boris Johnson as its leader and hence next PM of UK. The incoming government would be politically committed to seeing the UK leave the EU by the Oct 31st deadline. Analysts note that without there being sufficient common ground between the incoming UK government and EU27 on changes to the Withdrawal Agreement or backstop during negotiations in the autumn to reach an agreement it would leave Parliament as the check to a no deal outcome at the end of October. GBP/USD lower by 0.3% at 1.2440 area.
- ZAR: Currency (Rand) weakened after the South African Fin warned that the govt borrowings might be dramatically increased due to lower tax revenues and bailout of the State utility Eskom. USD/ZAR higher by 0.6% as the pair approached the 13.94 level.
Economic Data
- (FI) Finland Jun Unemployment Rate: 6.2% v 8.8% prior
- (DK) Denmark July Consumer Confidence: 2.9 v 5.8 prior
- (NO) Norway Q2 Industrial Confidence: 5.6 v 6.8 prior
- (ZA) South Africa May Leading Indicator: 103.9 v 105.5 prior
- (TR) Turkey July Consumer Confidence: 56.5 v 57.6 prior
- (TW) Taiwan Jun Industrial Production Y/Y: -0.4% v -0.2%e
- (ES) Spain May Trade Balance: -€2.1B v -€1.6B prior
- (PL) Poland Jun Unemployment Rate: 5.3% v 5.3%e
- (PL) Poland Jun Construction Output Y/Y: -0.7% v +3.5%e
Fixed Income Issuance
- (ID) Indonesia sold total IDR8.0T vs. IDR6.0T target in 6-month Islamic Bills; 2-year, 4-year, 7-year and 15-year Sukuk Bonds
Looking Ahead
- (NG) Nigeria Central Bank Interest Rate Decision: Expected to leave Interest Rate unchanged at 13.50%
- 05:30 (UK) Weekly John Lewis LFL Sales data
- 05:30 (UK) Results of Conservative party Leadership vote
- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
- 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
- 05:30 (UK) DMO to sell £2.75B of 0.875% 2029 Gilts
- 06:00 (UK) July CBI Industrial Trends Total Orders: -15e v -15 prior; Selling Prices: No est v 4 prior; Business Optimism: -20e v -13prior
- 07:45 (US) (US) Goldman Economist Chain Store Sales w/ July 20th
- 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave the Base Rate unchanged at 0.90%; Leave Overnight Deposit Rate unchanged at -0.05%
- 08:00 (BR) Brazil Mid-July IBGE Inflation IPCA-15 M/M: 0.1%e v 0.1% prior; Y/Y: 3.3%e v 3.8% prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (RU) Russia announces upcoming OFZ Bond issuance
- 08:55 (US) Weekly Redbook LFL Sales data
- 09:00 (US) May FHFA House Price Index M/M: 0.3%e v 0.4% prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:00 (HU) Hungary Central Bank (MNB) Gov post rate decision statement
- 10:00 (US) July Richmond Fed Manufacturing Index: 5e v 3 prior
- 10:00 (US) Jun Existing Home Sales: 5.33Me v 5.34M prior
- 10:00 (EU) Euro Zone July Advance Consumer Confidence: -7.2e v -7.2 prior
- 10:00 (MX) Mexico weekly International Reserve data
- 11:30 (IT) Italy Debt Agency (Tesoro) announcement on upcoming Inflation-linked (BTPei) and CTZ auctiosn for July 26th
- 13:00 (US) Treasury to sell 2-Year Notes
- 16:30 (US) Weekly API Oil Inventories
