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Weak Chinese Retail Sales Data Highlights Concerns Of A Possible 2nd Wave Of Covid-19

Notes/Observations

  • ECB likely to adopt a wait-and-see approach and refrain from implementing any further measures
  • Plethora of Chinese data during Asia session; weak retail sales data getting the attention as consumers seemed extremely guarded and likely still feared a second wave of Covid-19 outbreak

Asia:

  • New Zealand Q2 CPI registered its first decline since Dec 2015 (Q/Q: -0.5% v -0.6%e; Y/Y: 1.5% v 1.4%e)
  • Bank of Korea (BOK) left 7-Day Repo Rate unchanged at 0.50% (as expected); Press conference highlighted concerns that economy weaker than expected and recovery of exports could be delayed
  • Australia July Consumer Inflation Expectation Survey: 3.2% v 3.3% prior
  • Australia Jun Employment Change: +210.8K v +102.0Ke (largely the result of people moving back into the labor force); Unemployment Rate: 7.4% v 7.2%e
  • Australia PM Morrison: stated that expected to see impact of coronavirus job restrictions in July job dats
  • China Q2 GDP Q/Q: 11.5% v 9.6%e v -9.8% prior; Y/Y: 3.2% v 2.2%e
  • China Jun Industrial Production Y/Y: 4.8% v 4.8%e
  • China Jun Retail Sales Y/Y: -1.8% v +0.5%e
  • China Jun Surveyed Jobless Rate: 5.7% v 5.9%e
  • China Stats Bureau Liu Aihua: China economic recovery under pressure; Global economy faces great difficulties in restarting

Coronavirus:

  • Total global cases 13,516,656 (+1.7% d/d); total deaths: 583.5K (+1.0% d/d)
  • UK’s Telegraph: Oxford scientists may have a ‘breakthrough’ on COVID-19 vaccine; drug triggers response that may offer ‘double defense’ against the virus

Europe:

IMF Chief Georgieva reiterates view that monetary policy should remain accommodative where there were output gaps and inflation was below target. Debt levels are of significant concern, problems if there is withdrawal of significant support

Americas:

  • US said to consider travel ban on China Communist party, but Trump might ultimately reject possible travel ban; tells aides he did not want to escalate tensions – WSJ poll showed Joe Biden extending lead over President Trump to 51% vs 40% (prior saw a 7 point lead)- President Trump appointed Bill Stepien as his new campaign manager

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -0.89% at 370.52, FTSE -0.84% at 6,240.05, DAX -0.81% at 12,826.55, CAC-40 -1.02% at 5,057.05, IBEX-35 -0.56% at 7,446.00, FTSE MIB -0.35% at 20,210.50, SMI -0.81% at 10,375.00, S&P 500 Futures -0.84%]
  • Market Focal Points/Key Themes: European indices open lower across the board and continued into the red as the session progressed; energy and financials among better performing sectors; consumer discretionary sector leading to the downside; press reports Astrazeneca’s collaborative vaccine with Oxford showing positive results; EU review of EssilorLuxottica’s acquisition of GrandVision delayed; earnings expected in upcoming US session include Johnson & Johnson, Bank of America and Abbott Laboratories

Equities

  • Consumer discretionary: DIA [DIA.ES] +6% (sales), Heineken [HEIA.NL] -2.5% (outlook), Richemont [CFR.CH] -5% (sales), Experian [EXPN.UK] -1% (trading update), Hays [HAS.UK] -4% (sales), GVC Holdings [GVC.UK] -5% (trading update; CEO to step down)
  • Healthcare: AstraZeneca [AZN.UK] -1% (speculation on vaccine)
  • Industrials: Alstom [ALO.FR] +1.5% (earnings)
  • Telecom: Telenor [TEL.NO] -3% (earnings)

Speakers

  • ECB’s Lagarde said to pause regarding any additional need for more stimulus; to assess incoming data
  • BOE Credit Survey: Defaults expected to rise in both household and corporate loans in Q3
  • UK DMO updated its Bond Issuance Plan and now saw a minimum April-Nov issuance at ÂŁ385B (**Insight: DMO increases bond sale plan by another ÂŁ110B
  • Indonesia Central Bank Gov Warjiyo pre-rate decision press conference noted that the global economic recovery was taking longer than expected, hampered by rising Covid-19 cases. Rising geo-political tensions between US-China was increasing financial market uncertainty. Domestic economy contracted in Q2 with a recovery seen beginning in July. Vowed to continue to work to keep inflation within the 2-4% range
  • China Foreign Ministry spokesperson Hua Chunying reiterated stance that hoped that US-China 1- Phase trade deal would be implemented but added US bullying was not good for mutual trust and cooperation

Currencies/Fixed Income

  • USD was slightly firmer after several sessions of losses. Dealers cited weak China retail sales data as the key release during Asia and highlighted that consumers seemed extremely guarded and likely still feared a second wave of Covid-19 outbreak.
  • EUR/USD hovered around the 1.14 level in dull trading. Focus was on the upcoming ECB meeting. Dealers believed that the ECB would likely to adopt a wait-and-see approach and refrain from implementing any further measures

Economic Data

  • (NL) Netherlands Jun Unemployment Rate: 4.3% v 3.6% prior
  • (EU) EU27 Jun New Car Registrations: -22.3% v -52.3% prior
  • (UK) Jun Jobless Claims Change: -28.1K v +566.4K prior; Claimant Count Rate: 7.3% v 7.8% prior
  • (UK) May Average Weekly Earnings M/M: -0.5%e v +1.0% prior; Weekly Earnings (ex-bonus) 3M/Y: +0.5%e v 1.7% prior
  • (UK) May ILO Unemployment Rate: 4.2%e v 3.9% prior; Employment Change 3M/3M: -275Ke v 6K prio
  • (FR) France Jun Final CPI M/M: +0.1% v -0.1%e; Y/Y: 0.2% v 0.1%e; CPI Ex-Tobacco Index: 104.0 v 103.9e
  • (FR) France Jun Final CPI EU Harmonized M/M: +0.1% v -0.1%e; Y/Y: 0.2% v 0.1%e
  • (ID) Indonesia Central Bank (BI) cut 7-Day Reverse Repo Rate by 25bps to 4.00% (as expected)
  • (IT) Italy May Total Trade Balance: +€5.6B v -€1.1B prior; Trade Balance EU:+€1.5B v -€1.0B prior
  • (TR) Turkey Jun Central Gov’t Budget Balance (TRY): -19.4B v -17.3B prior
  • (EU) Euro Zone May Trade Balance (Seasonally Adj): €8.0B v €4.5Be; Trade Balance NSA (unadj): €9.4B v €2.9B prior

Fixed Income Issuance

  • (ES) Spain Debt Agency (Tesoro) sold total €5.971B vs.€5.0-6.0B indicated range in 2025, 2029, 2035 and 2050 Bonds
  • Sold €1.53B in 0.0% Jan 2025 SGPB bonds; Avg Yield: -0.194% v -0.153 prior; Bid-to-cover: 2.48x v 1.79xprior
  • Sold €921M in 0.60% Oct 2029 SPGB; Avg Yield: 0.279% v 0.438% prior, bid-to-cover: 2.69x v 1.48x prior
  • Sold €1.42B in 1.85% July 2035 bonds; Avg Yield: 0.694% v -0.945% prior, bid-to-cover: 2.02x v 2.43x prior
  • Sold €2.10B 1.00% Oct 2050 SPGB Avg Yield: 1.205% v 1.673% prior; bid-to-cover: 1.42x v 1.17x prior
  • (FR) France Debt Agency (AFT) sold total €10.836B vs. €9.5-11.0B indicated range in 2024, 2026 and 2027 bonds (4 tranches)
  • Sold €2.739B in 0.00% Mar 2024 Oat; Avg Yield: -0.58% v -0.36% prior; Bid-to-cover: 2.25x v 2.36x prior
  • Sold €4.307B in 0.00% Feb 2026 Oat; Avg Yield: -0.45% v -0.40% prior; bid-to-cover: 2.12x v 2.48x prior
  • Sold €1.990B in 3.50% Apr 2026 Oat; Avg Yield: -0.47% v -0.17% prior; Bid-to-cover: 2.41x v 2.71x prior
  • Sold €1.800B in 2.75% Oct 2027 Oat; Avg yield: -0.38% v -0.05% prior, Bid-to-cover: 2.25x v 1.28x prior
  • (IE) Ireland Debt Agency (NTMA) sold €750M vs. €750M indicated in 6-month bills; Avg Yield: -0.510% v -0.430% prior; Bid-to-cover: 3.00x v 4.95x prior

Looking Ahead

  • 05:30 (ZA) South Africa May PPI M/M: -0.8%e v -0.7% prior; Y/Y: -0.1%e v +1.2% prior
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds
  • 05:30 (IE) Ireland Debt Agency (NTMA) to sell Bills
  • 05:50 (FR) France Debt Agency (AFT) to sell €0.5-1.0B in inflation-linked 2026, 2029 and 2047 bonds (Oatei)
  • 06:00 (IL) Israel Q1 Final GDP Annualized (3rd reading): No est v -6.8% prelim
  • 06:00 (CZ) Czech to sell CZK10.0B in 3-month Bills
  • 06:00 (RO) Romania to sell RON600M in 6-month bills
  • 06:00 (RO) Romania to sell RON500M in 3.65% 2025 Bonds
  • 06:45 (US) Daily Libor Fixing
  • 07:45 (EU) ECB Interest Rate Decision: Expected to leave Key Rates unchanged; Expected to leave Main 7-Day Refinancing Rate unchanged at 0.00%; Expected to leave Marginal Lending Facility unchanged at 0.25%; Expected to leave Deposit Facility Rate unchanged at -0.50%
  • 07:45 (UK) BOE to buy ÂŁ1.15B in APF Gilt purchase operation (3-7 years)
  • 08:00 (PL) Poland Jun CPI Core M/M: +0.7%e v -0.1% prior; Y/Y: 4.1%e v 3.8% prior
  • 08:00 (PL) Poland Central Bank Jun Minutes (2 decisions ago)
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:30 (US) Jun Advance Retail Sales M/M: 5.0%e v 17.7% prior; Retail Sales (ex-auto) M/M: 5.0%e v 12.4% prior; Retail Sales (ex-auto/gas): 5.0%e v 12.4% prior; Retail Sales (Control Group): 4.0%e v 11.0% prior
  • 08:30 (US) July Philadelphia Fed Business Outlook: 20.0e v 27.5 prior
  • 08:30 (US) Initial Jobless Claims: 1.25Me v 1.314M prior; Continuing Claims: 17.5Me v 18.062M prior
  • 08:30 (CA) Canada May Int’l Securities Transactions (CAD): No est v 49.0B prior
  • 08:30 (CA) Canada Jun ADP Payroll Data
  • 08:30 (US) Weekly USDA Net Export Sales
  • 08:30 (EU) ECB chief Lagarde post rate decision press conference
  • 08:45 (UK) BOE to buy ÂŁ1.15B in APF Gilt purchase operation (7-20 years)
  • 09:00 (RU) Russia Gold and Forex Reserve w/e July 10th: No est v $569.8B prior
  • 09:45 (UK) BOE to buy ÂŁ1.15B in APF Gilt purchase operation (20+ years)
  • 10:00 (US) May Business Inventories: -2.3%e v -1.3% prior
  • 10:00 (US) July NAHB Housing Market Index: 61e v 58 prior
  • 10:30 (US) Weekly EIA Natural Gas Inventories
  • 11:00 (US) Fed’s Evans participates in Rocky Mountain Economic Summit
  • 11:30 (US) Treasury to sell 4-week and 8-week Bills
  • 12:00 (CA) Canada to sell 15-Year Bonds
  • 12:00 (RU) Russia Jun Industrial Production Y/Y: -7.2%e v -9.6% prior
  • 12:00 (RU) Russia Jun PPI M/M: +2.6%e v +2.8% prior; Y/Y: -11.4%e v -14.1% prior
  • 16:00 (US) May Net Long-term TIC Flows: No est v -$128.4B prior; Total Net TIC Flows: No est v $125.3B prior
  • 18:30 (NZ) New Zealand Jun Manufacturing PMI: No est v 39.7 prior
  • 20:30 (SG) Singapore Jun non-Oil Domestic Exports M/M: -4.6%e v -4.5% prior; Y/Y: +8.0%e v -4.5% prior
  • 21:10 (JP) BOJ Outright Bond Purchase operation for1~3 Years; 3~5 Years and 5~10 Years and 25 Years~ maturities
  • 23:00 (CN) China to sell 3-month and 6-month bills
  • 23:30 (JP) Japan to sell 3-Month Bills
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