Bank of England likely to keep policy steady with focus on the vote. Markets ponder whether chief economist Haldane will move into the hawkish camp.

European PMI Services mixed but remain in expansion territory (beats: UK, France, Italy; Misses: Germany, Spain, Russia; In-line: Euro Zone

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India PMI Services contracted at the fastest pace in nearly 4 years following implementation of Goods and Service Tax (GST)



Australia Jun Trade Balance (AUD): 0.9B v 1.8Be

China July Caixin PMI Services: 51.5 v 51.6 prior

S&P: There is more risk to Australia’s AAA sovereign rating than in the past

Japan PM Abe reshuffles Cabinet (as expected). Suga keeps Chief Cabinet Sec positon while Aso stays as Fin Min and Deputy PM. 13 out of 19 positions went to people with prior Cabinet experience. Five of whom remain in the same posts. Six newcomers were brought in


Russia PM Medvedev: Trump signing new sanctions was tantamount to full-scale trade war; means an end to hopes for better ties with Trump administration

EU’s Juncker: broadly satisfied that changes made to the U.S. Russia sanctions bill will protect European interests. Ready to retaliate if the US sanctions against Russia affect European companies


Brazil Lower House Votes against proceeding with charges against President Temer

Feds Williams (moderate non-voter): reiterates expected to take 4-year to trim Fed balance sheet to reasonable size

Fed’s Rosengren (moderate, non-voter): Tighter labor markets trump inflation softness, which justify Fed plans to keep raising rates

Fed’s Mester (hawkish, non-voter): Fed’s anticipated path of rate increases is appropriate. Three rate hikes per year is appropriate to avoid overheating and reach-for-yield

Economic Calendar

(IE) Ireland July Services PMI: 58.3 v 57.6 prior (59th month of expansion); Composite PMI: 57.0 v 58.0 prior

(IN India July Services PMI: 45.9 v 53.1 prior (1st contraction in 7 months); Composite PMI: 46.0 v 52.7 prior

(RU) Russia July Services PMI: 52.6 v 55.0e (18th month of expansion); Composite PMI: 53.4 v 54.8 prior

(SE) Sweden July PMI Services: 59.0 v 57.3 prior

(TR) Turkey July CPI M/M: 0.2% v 0.2%e; Y/Y: 9.8% v 9.9%e; CPI Core Index Y/Y: 9.6% v 9.1%e

(ZA) South Africa July PMI Services: 50.1 v 49.0 prior (moves back into expansion)

(ES) Spain July Services PMI: 57.6 v 58.5e (45th month of expansion); Composite PMI: 56.7 v 57.8e

(IT) Italy July Services PMI: 56.3 v 54.1e 14th month of expansion; Composite PMI: 56.2 v 54.9e

(FR) France July Final Services PMI: 56.0 v 55.9e (confirms 14th month of expansion); Composite PMI: 55.6 v 55.7e

(DE) Germany Services July Final Services PMI: 53.1 v 53.5e (confirms 49th month of expansion but lowest since Sept); Composite PMI: 54.7 v 55.1e

(EU) Euro Zone July Final Services PMI: 55.4 v 55.4e (confirms 49th month of expansion); Composite PMI: 55.7 v 55.8e

FAO World Food Price Index: 179.1 v 175.2 prior; M/M: 2.3% v 1.4% prior (highest levelsince Jan 2015)

(UK) July Services PMI: 53.8v 53.6e (12th month of expansion); Composite PMI: 54.1 v 53.8e

(EU) Euro Zone Jun Retail Sales M/M: 0.5% v 0.0%e; Y/Y: 3.1% v 2.5%e

Fixed Income Issuance:

(ES) Spain Debt Agency (Tesoro) sold total €3.54B vs. €3.0-4.0B indicated range in 2022, 2026 and 2041 Bonds

Sold €1.74B in 0.4% Apr 2022 SPGB; Avg yield: 0.233% v 0.337% prior; Bid-to-cover: 1.60x v 2.26x prior

Sold €1.03B in 5.90% 2026 SPGB; Avg Yield 1.267% v 1.370% prior; Bid-to-cover: 1.86x v 1.71x prior

Sold €780M in 4.70% July 2041 SPGB; Avg Yield: 2.545% v 2.666% prior; Bid-to-cover: 1.40x v 1.47x prior

(ES) Spain Debt Agency (Tesoro) sold €580M vs. €250-750M indicated arnge in 0.3% Nov 2021 Inflation-Linked bonds; (SPGBei;Bonoei) bond; Real Yield: -0.927% v -0.674% prior; Bid-to-cover: x v 1.83x prior (Mar 2nd 2017)

(FR) France Debt Agency (AFT) sold total €6.498 vs. €5.5-6.5B indicated range in 2025, 2027 and 2048 Oats

Sold €1.521B in 6.0% Oct 2025 Oats; avg yield: 0.39% v 0.39% prior; Bid-to-cover: 1.76x v 1.83x prior

Sold €3.598B in 1.00% May 2027 Oats; Avg Yield: 0.75% v 0.72% prior; Bid-to-cover: 2.15x v 1.76x prior

Sold €1.379B in 2.00% May 2048 Oats; Avg Yield 1.79% v 1.87% prior, Bid-to-cover 1.57x v 1.53x prior



Indices [Stoxx50 -0.3% at 3,447, FTSE -0.1% at 7,402, DAX -0.4% at 12,135, CAC-40 -0.1% at 5,103, IBEX-35 -0.6% at 10,452, FTSE MIB +0.3% at 21,615, SMI +0.1% at 9,128, S&P 500 Futures -0.1%]

Market Focal Points/Key Themes: European stocks open lower in line with Asia, and continued to move lower as the session progressed; energy stocks weighed on by oil price; gold underperforming putting pressure on materials stocks; focus on major risk events coming up, including rate decisions and tomorrow’s NFP numbers; among US companies reporting today: Aetna, Avon and Kellogg


Consumer discretionary: Next PLC NXT.UK +7.0% (earnings), Bic BB.FR +7 0% (earnings)

Materials: Tenaris TEN.IT -4.3% (earnings)

Industrials: BMW BMW.DE +0.4% (earnings), Siemens SIE.DE -3.0% (earnings), Rheinmetall RHM.DE +1.5% (earnings), Fraport FRA.DE -2.9% (earnings)

Financials: Unicredit UCG.IT +4.3a% (earnings), Aviva AV.UK +0.7% (earnings)

Telecom: Deutsche Telekom DTE.DE +0.6% (earnings), Inmarsat ISAT.UK -4.6% (earnings)

Healthcare: Merck KGaA MRK.DE +0.6% (earnings) – Energy: Neste NES1V.FI -7.8% (earnings)


ECB Economic Bulletin reiterated Draghi post rate press conference that incoming data pointed to solid and broad-based recovery while underlying price pressures remained subdued. Substantial degree of stimulus was still needed

ECB lowered its emergency liquidity assistance (ELA) cap for Greece banks from €40.5B to €38.9B

Italy Fin Min Podoan: Budget law to focus on jobs and investment – Norway Fin Min Jensen: Seeing a natural cooling of housing market

Turkey Dep PM Simsek: TRY currency (Lira) has attained relative stability. Inflation to decline to under 7% in 2018

Turkey Presidential advisor Gedikli: Central Bank might cut interest rates at its 1st meeting in 2018

China PBoC said to be considering a widening of the yuan’s trading band from the current 2% level after a major Communist party meeting this year, (**Note: last widened back in Mar 2014)

Taiwan Central Bank (CBC) June Minutes: Decision was unanimous to keep policy steady. One member: No urgency to raise interest rate. Forecasted 2017 GDP growth at 2.1%

Japan PM Abe commented following his Cabinet reshuffle and stressed that he would prioritize the economy and sought to increase the speed of Abenomics


FX markets relatively quiet with focus on BOE rate decision. USD Index trying to pull away from 15-month lows attributed to political turmoil gripping Washington and by largely uninspiring US economic data. Dealers noted that greenback benefitted from some profit-taking from shorts ahead of the release of USS payroll data on Friday.

EUR/USD consolidated after hitting 2-1/2 year highs on Wed. The pair euro has drawn support from expectations that the ECB Bank would eventually begin phasing out its easy policy

GBP/USD firmer ahead of BOE with pair trading testing 1.3270 area. GBP aided by a beat in its PMI services data. BOE seen keeping its policy steady amid political and Brexit uncertainty with the vote seen at 6-2 (**Note: only 8 members voting this time around. Hogg’s replacement has been announced (Ramsden) but he would not join the MPC until September ). One of the three dissenters at the last meeting (Forbes) term ended and her replacement (Tenreyro) is widely expected to vote with the majority. Members McCafferty and Saunders were again expected to dissent calling for a 25bps rate hike. There was some risk that Haldane voted with the hawks, which would leave the vote 5-.

RUB currency (Ruble) maintained its soft tone as it weakened for a 6th straight session. President Donald Trump signed into law Russian sanctions

Fixed Income

Bund futures trades at 162.79 down 7 ticks in lackluster trading with the days range 18 ticks wide. Support remains at 162.56 followed by 162.08, while resistance stands at 16.03 then 163.30.

Gilt futures trades slightly higher at 125.98 ahead of the Bank of England rate decision. UK services PMI came in slightly higher then expectations marking the 12th straight month of expansion.

Thursday’s liquidity reportshowed Wednesday’s excess liquidity fell to €1.736T down €6B from €1.742T prior. Use of the marginal lending facility rose to €253M from €70 prior.

Corporate issuance saw $5.5B come to market via 4 issuers bringing weekly issuance above $20B. General Motors $3B 4 part offering accounted for the bulk of the issuance, as more companies exit the earnings blackout period.

Looking Ahead

05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds (3-tranches)

05:30 (PL) Poland to sell Bonds (switch auction)

06:00 (IE) Ireland July Live Register Monthly Change: No est v -4.8K prior; Level: No est v 259.2K prior

06:45 (US) Daily Libor Fixing

07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.25% and maintain Asset Purchase Target (APT) at –

07:00 (UK) Bank of England (BOE) July Minutes

07:00 (UK) Bank of England (BOE) Quarterly Inflation Report (QIR)

07:00 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to raise Repurchase Rate by 25bps to 0.25%

07:00 (UR) Ukraine Central Bank Interest Rate Decision: Expected to leave Interest Rates unchanged at 12.50%

07:00 (ZA) South Africa Jun Electricity Production Y/Y: No est v 4.6% prior; Electricity Consumption Y/Y: No est v 3.4% prior

07:30 (US) July Challenger Job Cuts: No est v 31.1K prior; Y/Y: No est v -19.3% prior

07:30 (UK) Bank of England (BOE) Gov Carney Quarterly Inflation Report press conference

08:00 (US) Fed Summits holds an event, "ATARC Federal Cloud & Data

08:00 (UK) Baltic Dry Bulk Index

08:30 (US) Initial Jobless Claims: 243Ke v 244K prior; Continuing Claims: 1.96Me v 1.964M prior

08:30 (UK) Weekly USDA Net Export Sales

09:00 (RU) Russia Gold and Forex Reserve w/e July 28th: No est v $414.7B prior

09:00 (BR) Brazil July Services PMI: No est v 47.4 prior; Composite PMI: No est v 48.5 prior

09:00 (MX) Mexico July Consumer Confidence Index: 86.9e v 87.2 prior

09:45 (US) July Final Markit Services PMI: 54.2e v 54.2 prelim; Composite PMI: No est v 54.2 prelim

10:00 (US) July ISM Non-Manufacturing Composite: 56.9e v 57.4 prior

10:00 (US) Jun Factory Orders: +3.0%e v -0.8% prior; Factory Orders Ex-Transportation: No est v -0.3% prior

10:00 (US) Jun Final Durable Goods Orders: 0.0%e v 6.5 prelim; Durables Ex Transportation: No est v 0.2% prelim; Capital Goods Orders (Non-defense/ex-aircraft): No est v -0.1 prelim; Capital Goods Shipment (Non-defense/ex-aircraft): No est v 0.2% prelim; Durables Ex-Defense: No est v 6.7 prelim

10:30 (US) Weekly EIA Natural Gas Inventories – 11:00 (BR) Brazil to sell Fixed Rate 2023 and 2027 Bonds – 11:00 (BR) Brazil to sell LTN 2018, 2019 and 2021 Bills


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