Recovery Hopes Continue To Aid Risk-On Appetite

Notes/Observations

• Germany May Factory Orders rebound but come in below expectations
• UK Jun Construction PMI moved back into expansion
• Risk-on appetite continued. Chinese markets have best trading session in 5 years amplified by bullish local press with gains attributed to stock market reforms and excess global liquidity

Asia:

• Renewed speculation that China was not likely to meet its energy-related purchase targets under the trade deal with the US

Coronavirus:

• Total Global Cases 11,419,638 (+5.3% vs. Fri); Total deaths 533.8K (+2.5% vs. Fri)
• Australia states New South Wales and Victoria will close border beginning Tuesday citing rising coronavirus cases in Victoria

Europe:

• ECB chief Lagarde said economic crisis caused by coronavirus will lead to a deep shift in the global economy, expects disinflation as crisis impacts economy
• ECB Villeroy (France) stated that the domestic economic recovery was going at least as well as expected and perhaps a little better; Bank of France was due to issue updated GDP growth est on Tuesday
• BoE Gov Bailey letter said to reiterate that negative interest rates were one of the potential tools under active review if more stimulus is needed, warned lenders of the challenges related to negative rates
• Germany Econ Min Altmaier saw economic recovery from Oct 2020
• Italy govt said to consider measures to support auto and tourism industries
• Chancellor of the Exchequer (Fin Min) Sunak said to considering targeted measures to help the economy recover from coronavirus. Plan said to have been drawn up to raise the property tax threshold from £125K to as much as £500K for up to a year from autumn
• Resolution Foundation (think tank) said to have had recent talks with the UK Treasury about its ideas, are aimed at kickstarting economic recovery by triggering a highly targeted surge in spending. Under the plans the vouchers could only be spent in certain sectors, such as hospitality and “face to face” retail, as opposed to online

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equitie

• Indices [Stoxx600 +1.26% at 370.04, FTSE +1.84% at 6,270.03, DAX +1.42% at 12,704.30, CAC-40 +1.46% at 5,080.01, IBEX-35 +2.28% at 7,571.00, FTSE MIB +1.64% at 20,049.50, SMI +0.85% at 10,211.66, S&P 500 Futures +1.11%]
• Market Focal Points/Key Themes: European indices open higher across the board and remained bid as the session progressed; all sectors in the green, lead by financials; underperforming sectors include health care and consumer discretionary; SABIC CEO dismisses that Clariant may enter merger that dilutes SABIC stake; Gerresheimer trading higher on CEO interview over weekend seeing increased demand for packaging of covid vaccine; events expected in the upcoming US session include monthly Baker Hughes rig count and Berkshire Hathaway earnings

Equities

• Consumer discretionary:boohoo.com [BOO.UK] -9% (responds to press reports)
• Financials: Crest Nicholson [CRST.UK] +7% (UK in Min comments)
• Healthcare: Gerresheimer [GXI.DE] +3% (CEO comments)
• Industrials: Rolls-Royce [RR.UK] +5% (reviews options for balance sheet), Daimler [DAI.DE] +3% (German factory orders), Kvaerner [KVAER.NO] +22% (order intake)
• Technology: Wirecard [WDI.DE] -10% (press report on losses)

Speakers

• EU trade Chief Hogan: Some progress in EU China investment talks
• BOJ expected to roughly maintain its view the economy will gradually recover later this year
• Japan Economy Min Nishimura commented after a committee meeting on the epidemic that the country’s medical system isn’t currently overwhelmed by the coronavirus but the number of older and middle-aged patients was increasing. Young people still accounted for most new virus cases
• Taiwan Central Bank: FX stability is important for the economy
• Indonesia Central Bank and Govt said to have reached an agreement on deficit financing
• China Foreign Ministry spokesperson: Hope to continue talks with India for de-escalation of border situation. Canada was interfering in China’s domestic affairs and would bear the consequences

Currencies/ Fixed Income

• USD was on soft footing as market participants continued to look past various coronavirus hotspots and focus on recovery hopes. Far east equity markets led the risk-on charge with the Shanghai Composite closed higher by almost 6%. Dealers noted of a front-page editorial in the state-run China Securities Journal on Monday that talked up the prospect of a healthy ‘bull’ market.
• EUR/USD probed the 1.13 handle to test the upper end of its recent range. German Bundesbank said to formally decide later in July to take the lead of German Finance Ministry and Parliament and would continue to keep buying sovereign bonds from Aug
• GBP/USD was fractionally lower and off earlier highs. UK-EU trade deal talks ended a day early last Thursday as both sides continued to disagree on key issues. The pound did test above 1.25 on reports that Chancellor of the Exchequer (Fin Min) Sunak would considering targeted measures to help the economy recover from coronavirus

Economic Data

• (DE) Germany May Factory Orders M/M: 10.4% v 15.4%e ; Y/Y: -29.3% v -24.0%e
• (ES) Spain May Industrial Output NSA Y/Y: -27.8% v -13.6%e Industrial Output SA Y/Y: -24.5% v -18.3%e ; Industrial Production M/M: 14.7% v 16.9%e
• (HU) Hungary May Retail Sales Y/Y: -2.1% v -3.6%e
• (DE) Germany Jun Construction PMI: 41.3 v 40.1 prior
• (CH) Swiss weekly Total Sight Deposits (CHF): 687.0B v 683.0B prior; Domestic Sight Deposits: 605.9B v 602.5B prior
• (UK) Jun New Car Registrations Y/Y: -34.9% v -89.0% prior
• (TW) Taiwan Jun Foreign Reserves: $488.7B v $484.5B prior
• (EU) Euro Zone July Sentix Investor Confidence: 18.2 v -10.4e
• (UK) Jun Construction PMI: 55.3 v 46.0e (1st expansion in 5 months and highest since July 2018)
• (EU) Euro Zone May Retail Sales M/M: 17.8% v 15.0%e ; Y/Y: -5.1% v -6.5%e
• (IS) Iceland Jun Preliminary Trade Balance (ISK): -12.5BB v +1.8B prior

Fixed Income Issuance

• None seen

Looking Ahead

• 05:30 (DE) Germany to sell €4.0B in 6-month Bubills
• 05:30 (NL) Netherlands Debt Agency (DSTA) to sell 2.0-4.0B in 3-month and 9-month Bills
• 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays)
• 06:00 (IE) Ireland May Industrial Production M/M: No est v -7.4% prior; Y/Y: No est v 4.7% prior
• 06:00 (RO) Romania to sell 4% 2023 Bonds Bonds
• 06:00 (IL) Israel to sell 2023, 2025, 2030, 2037 and 2045 Bonds (6 tranches)
• 06:45 (US) Daily Libor Fixing
• 07:00 (MX) Mexico Apr Gross Fixed Investment: -27.8%e v -11.0% prior
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:25 (BR) Brazil Central Bank Weekly Economists Survey
• 07:30 (TR) Turkey Jun Real Effective Exchange Rate (REER): No est v 68.60 prior
• 08:00 (UK) Daily Baltic Dry Bulk Index
• 08:00 (ES) Spain Debt Agency (Tesoro) announcement of size on upcoming issuance
• 08:50 (FR) France Debt Agency (AFT) to sell €7.8-9.0B in 3-month, 6-month and 12-month bills (# tranches)
• 09:00 (IS) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
• 09:45 (US) Jun Final Markit Services PMI: 47.0e v 46.7 prelim; Composite PMI: No est v 46.8 prelim
• 09:45 (EU) ECB weekly QE bond buying update
• 10:00 (US) Jun ISM Non-Manufacturing Index: 50.0e v 45.4 prior
• 10:30 (CA) Bank of Canada (BoC) Q2 Overall Business Outlook Survey: No est v -0.7 prior; Future Sales Survey: No est v 22 prior
• 11:30 (US) Treasury to sell 13-week and 26-week bills
• 16:00 (US) Weekly Crop Progress Report
• 18:00 (NZ) New Zealand Q4 Business Confidence: No est v prior -40 prior; Adj Business Confidence: No est v -35 prior; Domestic Trading Index: No est v -11 prior
• 18:30 (AU) (AU) Australia Jun AiG Performance of Services Index: No est v 31.6 prior
• 19:00 (KR) South Korea May Current Account Balance: No est v -$3.1B prior; Balance of Goods (BOP): No est v $0.8B v $6.7B prior
• 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 93.0 prior
• 19:30 (JP) Japan May Labor Cash Earnings Y/Y -0.9%e v -0.7%e (revised from -0.65); Real Cash Earnings Y/Y: -0.8%e v -0.8% prior (revised from -0.7%)
• 19:30 (JP) Japan May Household Spending Y/Y: -11.8%e v -11.1% prior
• 19:50 (JP) Japan Jun Official Reserve Assets: No est v $1.38T prior
• 21:00 (PH) Philippines Jun CPI Y/Y: 2.2%e v 2.1% prior
• 23:00 (ID) Indonesia Jun Foreign Reserves: No est v $130.5B prior
• 23:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month bills
• 23:30 (CN) China to sell CNY70B in 10-year Upsized Bonds
• 23:35 (JP) Japan to sell 30-Year JGB Bonds