Notes/Observations

Bonds market selloff resumes yields approaching last weeks high

Emerging market currencies continues to sell off

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M&S shares slide following its Q1 update, drags down retail names

PBoC resumes open market operation

Overnight

Asia:

PBoC resumed open market operations after 12 consecutive skips,this was speculated in the press ahead of the announcement given that the government and policy banks needed to sell at least CNY483B in bonds this week

Australian New home loans fell short of expectations, whilst Jun NAB Business confidence came in ahead of of the prior month.

A Magnitude 6.8 earthquake reported off southern coast of South Island New Zealand

Sunac China hlds acquired 76 hotels from Wanda Group for CNY33.6B, project stakes for CNY29.6B (total deal value CNY63.2B)

Europe:

European indices give back ground from earlier highs, as Bond Yields continue to advance

In latest German Poll Merkel’s CDU/CSU takes 17 point lead over the Social Democrat Party

UK BRC LFL sales came in at 1.2% ahead of consensus

Americas

(US) Fed’s Williams (moderate, non-voter) spoke overnight saying US fiscal policy is on an unsustainable path; reasonable view to expect one more rate hike this year

Economic Data

(IT) Italy May Industrial Production M/M: 0.7% V 0.5%E; Y/Y: 2.8% V -6.6% prior, Industrial Production WDA Y/Y: 2.8% V 2.0%e

Fixed Income Issuance:

(NL) NETHERLANDS DEBT AGENCY (DSTA) SELLS €985M VS. €0.75-1.25B INDICATED RANGE IN 2.75% 2047 DSL BONDS; AVG YIELD: 1.420% V 1.145% PRIOR

(ES) Spain Debt Agency (Tesoro) sells total €4.56B vs. €4.0-5.0B indicated range in 6-month and 12-month Bills

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

Indices [Stoxx50 flat at 3,477, FTSE -0.6% at 7,324, DAX +0.2% at 12,472, CAC-40 flat at 5,168, IBEX-35 -0.2% at 10,491, FTSE MIB +0.4% at 21,268, SMI -0.5% at 8,894, S&P futures flat]

Market Focal Points/Key Themes: European stocks opened higher but turned around as the session progressed; trading moving on inertia due to little major news; crude prices drag down energy stocks and related; Total CEO says sees diminishing demand for oil due to Paris Accord; Hapag-Lloyd benefiting frin TUI divesting interest in accelerated bookbuilding deal after being buoyed by consolidation in the sea transport industry; Almirall continues to fall after ratings agencies downgrade; attention turning to Fed Chair Yellen’s comments in Congress tomorrow; upcoming US earnings include Pepsico, Merus and AAR

Equities

Consumer discretionary [Marks & Spencer MKS.UK -3.3% (earnings), Pearson PSON.UK -6.4% (asset sale), Rational RAA.DE +1.6% (raises outlook), Grafton GFTU.UK +2.9% (earnings)]

Consumer staples [Refresco Gerber RFRG.NL -2.6% (does not get better offer)]

Financials [Banca Carige CRGI.IT +3.5% (potential takeover), Randstad RAND.NL -2.5% (analyst action)]

Healthcare [Almirall ALM.ES -6.2% (analyst action)]

Industrials [Hapag-Lloyd HLAG.DE +7.3% (third party placement)]

Technology [Wirecard WDI.DE +1.6% (outlook)]

Speakers

EU’s Dombrovskis: Expects adoption of plan on non-performing loans to happen today

Currencies

GBPUSD trades higher this morning snapping the recent down trend and reclaiming 1.29 as EURGBP breaks below 0.8830. Dealers not 1.2940-50 the next area of resistance.

EURUSD trades below

Fixed Income

Bund futures trade at 160.58 down 38 ticks and back towards last week’s lows. Resistance lies near the 161.50 level followed by 162.10. A break of the 160.00 support level could see lows target 159.25 followed by 157.50.

Gilt futures trade at 125.13 lower by 21 ticks ahead of Thursday’s 2056 linker syndication Price finds key support at the 124.42 support level. An acceleration lower could test the 122.88 region. Resistance remains the noted 126.00 region, followed by 126.72.

Monday’s liquidity report showed Friday’s excess liquidity rose to €1.667T a gain of €2.4B from €1.6646T prior. Use of the marginal lending facility rose to €153M from €148M prior.

Corporate issuance saw $11.69B come to market via 8 issuers headlines by Intesa Sanpaolo $2.5B 2-part senior unsecured offering and Nissan Motor $1.75B 4-part senior unsecured medium-term notes

Looking Ahead

05.30 (UK) Weekly John Lewis LFL sales data

06:00 (US) Jun NFIB Small Business Optimism: 104.4e v 104.5 prior

06:00 (IE) Ireland May Property Prices M/M: No est v 1.1% prior; Y/Y: No est v 10.5% prior

07:00 (ZA) South Africa May Manufacturing Production M/M: 0.5%e v 2.3% prior; Y/Y: -3.3%e v -4.1% prior

07:00 (BR) Brazil July IGP-M Inflation (1st Preview): -0.7%e v -0.6% prior

07:30 (CL) Chile Central Bank Economist Survey

07:45 (US) Weekly Goldman Economist Chain Store Sales

08:00 (PL) Poland Jun Final CPI M/M: No est v -0.2% prelim; Y/Y: No est 1.5% prelim

08:00 (BR) Brazil CONAB report

08:15 (UK) Baltic Dry Bulk Index

08:15 (CA) Canada Jun Annualized Housing Starts: 200.0Ke v 194.6K prior

08:55 (US) Weekly Redbook Sales

09:00 (EU) Weekly ECB Forex Reserves: € v € prior

09:00 (RU) Russia Q2 Preliminary Current Account: $0.3Be v $23.3B prior

10:00 (US) May JOLTS Job Openings: No est v 6.044M prior

10:00 (US) May Wholesale Inventories M/M: 0.3%e v 0.3% prelim, Wholesale Trade Sales M/M: No est v -0.4% prior

12:00 (US) DOE Short-Term Crude Outlook

12:00 (IS) Iceland Jun International Reserves (ISK): No est v 643B prior

15:00 (AR) Argentina Jun National CPI M/M: No est v 1.3% prior

16:30 (US) Weekly API Oil Inventories

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