Notes/Observations
Stronger German regional CPI data add to bets of ECB tapering
Bond yields soar, EUR/USD hits new 1 year highs
Banking names outperform on reflation hopes and positive sympathy from US stress test results
European business and consumer optimism rises to the highest levels since before the financial crisis
Overnight
Asia:
Japan retail sales fall for the first time in 5 months and falls short of estimates
New Zealand June ANZ Business confidence rises to 8 month high
Europe:
German regional inflation data comes in stronger pushing German Yields to new multi month highs. Euro pushes above 1.14 marking new 1 year highs.
Eurozone Economic sentiment indicator reaches 10 year high, whilst German GFK consumer confidence post new 16 year high.
BoE Haldane reiterates hawkish stance, noting that the BoE needs to seriously look at raising rates
Americas:
Fed did not object to the capital plans of all 34 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). Capital One is the only bank that will need to resubmit within six months, although its plan was not entirely rejected.
Brazil President Temer said to name Raquel Dodge as new top prosecutor; Temer’s residence subsequently attacked (Temer not inside)
Brendan Carr expected to be nominated to a position at the FCC by President Trump as soon as today
Economic Data
(DE) GERMANY JUN CPI SAXONY M/M: 0.2% V -0.1% PRIOR; Y/Y: 1.7% V 1.6% PRIOR
(DE) GERMANY JUN CPI NORTH RHINE WESTPHALIA M/M: 0.1% V -0.2% PRIOR; Y/Y: +1.6% V 1.6% PRIOR
(DE) GERMANY JULY GFK CONSUMER CONFIDENCE: 10.6 V 10.4E (highest since 2001)
(UK) MAY NET CONSUMER CREDIT: £1.7B V £1.4BE; NET LENDING: £3.5B V £2.6BE
(UK) MAY MORTGAGE APPROVALS: 65.2K V 64.0KE
(UK) May M4 Money Supply M/M: -0.1% v 1.2% prior; Y/Y: 6.7% v 8.2% prior
(DE) Germany Jun CPI Brandenburg M/M: 0.2 v -0.1% prior; Y/Y: 1.5% v 1.4% prior
(DE) Germany Jun CPI Bavaria M/M: 0.1% v -0.1% prior; Y/Y: 1.4% v 1.4% prior
(DE) Germany Jun CPI Baden Wuerttemberg M/M: 0.1% v -0.1% prior; Y/Y: 1.6% v 1.5% prior
(DE) Germany Jun CPI Hesse M/M: 0.1% v 0.0% prior; Y/Y: 1.9% v 1.7% prior
(ES) SPAIN JUN PRELIMINARY CPI M/M: 0.0% V 0.0%E; Y/Y: 1.5% V 1.6%E
(EU) EURO ZONE JUN BUSINESS CLIMATE INDICATOR: 1.15 V 0.94E, FINAL CONSUMER CONFIDENCE -1.3 V -1.3E
(ES) Spain Apr Total Mortgage Lending Y/Y: -11.4% v 23.1% prior; House Mortgage Approvals Y/Y: -8.8% v 20.2% prior
(SE) Sweden May Retail Sales M/M: 0.4% v 0.2%e; Y/Y: 2.4% v 1.9%e
Fixed Income Issuance:
Non seen
SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM
Equities
Indices [Stoxx50 -0.1% at 3,534, FTSE +0.6% at 7,431, DAX +0.1% at 12,657, CAC-40 -0.3% at 5,234, IBEX-35 –0.1% at 10,686, FTSE MIB -0.2% at 21,014, SMI -0.4% at 9,035, S&P 500 Futures +0.1%]
Market Focal Points/Key Themes: European stocks opened higher, but turned around as the session advanced; risk sentiment improved after clarification on ECB’s Draghi comments; financials supported following US stress test results; oil continues to support energy stocks; materials higher on the back of better base and precious metals; technology also outperforming; attention turning to tomorrow’s NFP release; upcoming US earnings include GreenBrier, Rite Aid and Walgreens
Equities
Consumer discretionary [Hennes & Mauritz HMB.SE -1.0% (earnings), JD Sports JD.UK -9.7% (trading update)]
Healthcare [Paion PA8.DE -6.2% (drug update)]
Financials [Prelios PRS.IT -4.7% (receives offer), Flow Traders FLOW.NL -6.6% (analyst action)]
Industrials [DS Smith SMDS.UK +6.6% (earnings, acquisition), Gesco GSC1.DE 3.4% (prelim Q1), OCI OCI.NL +6.3% (rejects offer), Babckock BAB.UK +1.3% (contract award), John Wood Group WG.UK -2.9% (trading update)]
Technology [Logitech International LOGN.CH -0.4% (dividend hike)]
Speakers
(JP) BoJ’s Harada: Monetary policy does not raise risk of a yield spike; Does not see any need to ease at this point, current monetary policy is sufficiently bold
(UK) BOE’s Haldane (chief economist): BOE needs to serious look at raising rates, is happy with where they are now
Currencies
EURUSD soars to new one year highs following stronger inflation data out of Germany. Dealers note upside target of 1.1453.
GBPUSD approaches 1.30 continuing momentum following BoE Carney hawkish comments yesterday which saw 100 pip move higher. Dealers not resistance just ahead of 1.30, with a move lower seeing suppoer at 1.2950.
Fixed Income
Bund futures trade at 162.86 down 59 ticks taking out yesterday lows on stronger regional German inflation data, with the Draghi inspired downtrend continuing with downside support seen at 162.39 then 161.90.
Thursday’s liquidity report showed Wednesday’s excess liquidity rose to €1.634T a rise of €16B from €1.618T prior. Use of the marginal lending facility fell to €100M from €192M prior.
Corporate issuance saw $1.8B come to market in a quiet session with Baidu’s $1.5B 2 part offering accounting for the bulk if the issuance. Issuance for the remainder of the week is expected to remain slow as we approach US July 4th Holidays.
Looking Ahead
05:30 (ZA) South Africa May PPI M/M: 0.5%e v 0.3% prior; Y/Y: 4.9%e v 4.6% prior
07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave Repurchase Rate unchanged at 0.05%
07:00 (BR) Brazil Jun FGV Inflation IGPM M/M: -0.6%e v -0.9% prior; Y/Y: -0.8%e v +1.6% prior
08:00 (DE) Germany Jun Preliminary CPI M/M: +0.1%e v -0.2% prior; Y/Y: 1.5%e v 1.5% prior
08:00 (DE) Germany Jun Preliminary CPI EU Harmonized M/M: 0.0%e v -0.2% prior; Y/Y: 1.3%e v 1.4% prior
08:15 (UK) Baltic Dry Bulk Index
08:30 (US) Q1 Final GDP Annualized (3rd reading) Q/Q: 1.2%e v 1.2% prelim; Personal Consumption: 0.6%e v 0.6% prelim
08:30 (US) Q1 Final GDP Price Index: 2.2%e v 2.2% prelim; Core PCE Q/Q: No est v 2.1% prior
08:30 (US) Initial Jobless Claims: No est v 241K prior; Continuing Claims: No est v 1.944M prior
08:30 (US) Weekly USDA Net Export Sales
09:00 (RU) Russia Gold and Forex Reserve w/e Jun 23rd: No est v $406.4B prior
10:30 (US) Weekly EIA Natural Gas Inventories
15:00 (AR) Argentina May Industrial Production Y/Y: No est v -2.3% prior, Construction Activity Y/Y: No est v 10.5% prior
