Notes/Observations
- Focus turns to US Q2 Advance GDP data in the session and its impact on next week’s Fed decision; growth expected to decline from Q1 levels
- ECB Survey lowered its revised down inflation by 0.1% across also horizon period (through 2021)
Asia:
- Some BOJ officials said to express doubt over the potency of stronger guidance as they saw little to be gained from reinforcing their interest rate pledge at next week’s meeting. BOJ members would accept a change if pressed on the matter but worry it reinforced how little firepower the BOJ has
Europe/Mideast:
- ECB Policymakers said to see a deposit rate cut in September as almost certain with more govt bond purchases likely. Still needed to be convinced about tiering system and QE comprising of equity and banking-sector bonds seen as a non-starter
- EU Brexit negotiator Barnier told UK officials that elimination of Brexit backstop was unacceptable and that PM Johnson’s first speech was combative
- UK Govt Spokesman stated that PM Johnson told Juncker the Withdrawal Agreement (WA) had been rejected 3 times by Parliament and would not pass in its current form. If an agreement was to be reached, the backstop must be abolished
Americas:
- House of Representatives passed the 2-year budget deal that suspends the debt ceiling (as expected) despite despite GOP dissent as 100 House Republicans voted ‘no’. Bill now goes to the Senate
Energy:
- US Govt official stated that was aware of projectile launched by Iran earlier in the week (Wed). Shabaab-3 missile did not pose a threat to shipping or US bases in area but intelligence assessment was the launch was that its part of Iran’s efforts to improve the range and accuracy
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
- Indices [Stoxx600 +0.10% at 389.92, FTSE +0.19% at 7,503.44, DAX +0.14% at 12,379.42, CAC-40 +0.18% at 5,588.27, IBEX-35 -0.79% at 9,216.25, FTSE MIB -0.53% at 21,786.50, SMI +0.81% at 9,957.50, S&P 500 Futures +0.20%]
Market Focal Points/Key Themes:
- European Indices trade mostly higher after a mixed session in Asia and higher US futures as earnings continue to take center stage.
- Shares of Vodafone outperform this morning, trading over 7% higher following their Q1 update and announcement of creation of a separate towers company and possible future IPO. Vivendi gains overs 4.5% after a top and bottom line beat, with Suez, Nestle, EDF among other notable names gaining on earnings.
- Meanwhile fashion name Kering underperforms after weaker Q2 growth, Michelin declines on earnings and affirmed outlook on declining car production, while Signify is another notable decliner as the company’s comparable sales missed forecasts. Other notable decliners include Eni, Carrefour, and Renault.
- In other news Anglo American declines over 5% as investor Volcan Investments to sell 24.7M shares in placing; Shield Therapeutics gains over 50% on FDA approval of Feraccru, while in the US notable overnight earnings include Amazon which trades slightly lower in the premarket on Eps miss, while
- Alphabet trades over 7% higher after strong Rev and EPS beat. Starbucks, Intel and T-Mobile other other names gaining on earnings in the premarket.
- Looking ahead notable earners include Twitter, McDonald’s, Abbvie and Colgate-Palmolive among others.
Equities
- Consumer discretionary: Kering [KER.FR] -6.5% (earnings), Michelin [ML.FR] -3% (earnings), Carrefour [CA.FR] -5.5% (earnings), Vivendi [VIV.FR] +5.5% (earnings), Mothercare [MTC.UK] -11.5% (trading update), Nestle [NESN.CH] +2% (earnings)
- Energy: Eni [ENI.IT] -1% (earnings), EDF [EDF.FR] +3% (earnings)
- Healthcare: Bayer [BAYN.DE] +1.5% (US judge cuts verdict sum), Shield Therapeutics [STX.UK] +61% (FDA approval)
- Industrials: Renault [RNO.FR] -1% (earnings; outlook cut), Pearson [PSON.UK] +5.5% (earnings; raises outlook)
- Technology: Signify [LIGHT.NL] -5% (earnings)
- Telecom: Vodafone [VOD.UK] +7.5% (earnings)
Speakers
- ECB Survey of Professional Forecasters cut its inflation view for the horizon period by 0.1% across the board. Now saw 2019 EU Harmonized inflation at 1.3%, 1.4% and 1.5% for 2019-21 period. ECB cut its Euro zone long term inflation expectations (2022) from 1.8% to 1.7%
- Italy Dep PM Salvini (League) reiterated view that the domestic economy needed a strong fiscal shock. f Fin Min Tria said there was no room for tax cut in 2020 budget then one of them had a problem
- Italy Dep PM Di Maio (5-Star): Have not seen funding for proposed flat tax at this time; country needs to reduce its tax burden
- US ambassador to UK Woody Johnson: US President Trump keen to negotiate trade deal with UK
- South Africa Central Bank (SARB) Gov Kganyago noted that callsl for looser monetary policy was not surprising given the country’s constrained growth environment
- Turkey President Erdogan: S-400 aircraft to be operative by April 2020; reiterated view that hope US act with good sense on the issue. Interest Rate cut by CBRT was not enough and its needed to continue with gradual rate cuts
- China Foreign Ministry Spokeswoman Hua Chunying reiterated support for Hong Kong govt
Currencies/ Fixed Income
- EUR/USD was slightly softer in quiet trade after ECB’s fresh commitment to embark on more monetary stimulus measures. On Thursday. Dealers had noted Draghi’s stark warning that the economic outlook in the euro-area was “getting worse and worse” and would likely underscored by official GDP data next week. The pair could not sustain any downward momentum yesterday as Draghi’s statement was viewed as dovish, but markets had expected clearer dovish tones. The release of ECB SPF Survey showed the decline inflation expectations from the ECB target in the coming years and that more stimuli was forthcoming in Sept.
- GBP/USD was softer and back towards the bottom end of the recent July trading range as concerned lingered that the UK would leave EU without a deal after EU officials reiterated that the current agreement wasn’t open for renegotiation. PM Johnson had stated numerous time since taken office this week that the Irish backstop must go. The current 2-year low in the pair stands at 1.2377 area.
Economic Data
- (SG) Singapore Jun Industrial Production M/M: +1.2% v -0.8%e; Y/Y:-6.9% v -8.5%e
- (DE) Germany Jun Import Price Index M/M: -1.4% v -0.7%e; Y/Y: -2.0% v -1.3%e
- (DE) Denmark Jun Retail Sales M/M: +0.5% v -0.3% prior; Y/Y: -1.1% v -0.7% prior
- (FR) France July Consumer Confidence: 102 v 102e
- (FR) France Jun PPI M/M: -0.5% v -0.4% prior; Y/Y: 0.2% v 0.7% prior
- (ES) Spain May Total Mortgage Lending Y/Y: +18.8% v -2.5% prior; House Mortgage Approvals Y/Y: +11.2% v -0.1% prior
- (CN) Weekly Shanghai copper inventories (SHFE): 149.2K v 154.5K tons prior
- (SE) Sweden Jun Retail Sales M/M: 1.0% v 1.0%e; Y/Y: 3.8% v 3.5%e
- (SE) Sweden Jun Trade Balance (SEK): 2.9B v 7.9B prior
- (RU) Russia Narrow Money Supply w/e July 19th (RUB):10.55 T v 10.53T prior
- (IT) Italy July Consumer Confidence Index: 113.4 v 109.6e; Manufacturing Confidence: 100.1 v 100.5e; Economic Sentiment: 101.2 v 99.3 prior
- (IT) Italy Jun Hourly Wages M/M: 0.1% v 0.0% prior; Y/Y: 0.7% v 1.4% prior
Fixed Income Issuance
- (IN) India sold total INR170B vs. INR170B indicated in 2021, 2026, 2031, 2039 and 2059 bonds
Looking Ahead
- 05:30 (PL) Poland to sell Bonds
- 05:30 (ZA) South Africa to sell ZAR760M in I/ L bonds
- 06:00 (IE) Ireland Jun Retail Sales Volume M/M: No est v 0.0% prior; Y/Y: No est v 1.4% prior
- 06:00 (UK) DMO sells £6.0B in 1-month, 3-month and 6-month bills
- 06:30 (RU) Russia Central Bank (CBR) Interest Rate Decision: expected to cut the Key 1-Week Auction Rate by 25bps to 7.25%
- 07:00 (MX) Mexico Jun Trade Balance: $0.4Be v $1.0B prior
- 07:00 (MX) Mexico IGAE Economic Activity Index (Monthly GDP) M/M: -0.3%e v +0.1% prior; Y/Y: -0.8%e v -1.4% prior
- 07:00 (BR) Brazil July FGV Construction Costs M/M: 0.8%e v 0.4% prior
- 07:30 (IN) India Weekly Forex Reserves w/e July 19th: No est v $428.8B prior
- 08:00 (UK) Daily Baltic Dry Bulk Index
- 08:00 (ES) Spain Debt Agency (Tesoro) announces upcoming issuance
- 08:30 (US) Q2 Advance GDP Annualized Q/Q: 1.8%e v 3.1% prior; Personal Consumption: 4.0%e v 0.9% prior
- 08:30 (US) Q2 Advance GDP Price Index: 2.0%e v 0.9% prior; Core PCE 2.0%e v 1.2% prior
- 09:30 (BR) Brazil Jun Total Outstanding Loans (BRL): No est v 3.287T prior; M/M: 0.9%e v 0.6% prior; Personal Loan Default Rate: 4.8%e v 4.8% prior
- 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Finland; S&P on Finland; Canada Rating Agency DBRS on Netherlands; EFSF
- 11:00 (CO) Colombia Central Bank Interest Rate Decision: Expected to leave Overnight Lending Rate unchanged at 4.25%
- 13:00 (US) Weekly Baker Hughes Rig Count
