Markets Try To Shake Off Risk Aversion Sentiment

Notes/Observations

• Markets try to rebound from risk aversion sentiment. Delta variant of the coronavirus now the dominant strain worldwide and concerns it could stymie the global recovery.

Asia

• Japan Jun National CPI Y/Y: 0.2% v 0.2%e; CPI Ex-fresh food (core) Y/Y: 0.2% v 0.2%e.
• RBA July Minutes reiterates stance that Board remained committed to maintaining highly supportive monetary conditions and that central scenario was that conditions for a rate hike would not be met before 2024. Needed to have flexibility to adjust weekly bond purchases.
• China PBoC Monthly Loan Prime Rate Setting (LPR) left both the 1-year and 5-year rates unchanged for its 15th straight month of steady LPR settings.

Coronavirus

• Total global cases 191.7M (+0.3% d/d); total deaths: 4.11M (+0.2% d/d).
• Canada to begin allowing fully vaccinated US visitors into the country for non-essential travel beginning Aug 9th.
• U.S. raises travel alert for UK as Covid surge marred ‘Freedom Day’.
• Thailand Cabinet extended its the State of Emergency through September.

Europe

• Incoming BOE MPC member Mann testified that the UK recovery was more fragile than it appeared; Did not see inflation becoming a spiral and should not be premature on tightening.

Americas

• President Biden stated that data showed that most of price increases were expected and were expected to be temporary.
• Sen GOP Leader McConnell comments on Biden’s infrastructure bills that we needed to see the bill before we decide whether or not to vote for it.”.
• US Senate Majority Leader Schumer (D-NY) noted there would be a procedural vote on infrastructure on Tues, July 20th. He stressed that Wednesday was not a deadline.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

• Indices [Stoxx600 +0.55% at 446.76, FTSE +0.66% at 6,889.75, DAX +0.45% at 15,201.80, CAC-40 +0.81% at 6,346.78, IBEX-35 +0.55% at 8,348.00, FTSE MIB +0.22% at 24,018.50 , SMI +0.66% at 11,940.63, S&P 500 Futures +0.50%].
• Market Focal Points/Key Themes: European indices open higher across the board and stayed in the green as the session progressed; better performing sectors include financials and consumer discretionary; while industrials and materials among underperformering sectors; Apollo confirms is in discussion with Fortress to participate int its bid for Morrison’s; Schneider electric to complete acquisition of iGE+XAO; earnings expected in the upcoming US session include KeyCorp, Halliburton, Travelers, and Philip Morris.

Equities

• Consumer discretionary: EasyJet [EZJ.UK} +2% (trading update), Electrolux [ELUXB.SE] -10% (earnings), Remy Cointreau [RCO.FR] -2% (earnings).
• Financials: UBS [UBSG.CH] +4% (earnings).
• Industrials: Alstom [ALO.FR] +3% (earnings), Alfa Laval [ALFA.SE] +6% (earnings), Volvo [VOLVA.SE] -4% (earnings).
• Technology: Wise [WISE.UK] +1% (trading update).

Speakers

• ECB Q2 Lending Survey: Banks reported moderately higher demand for corporate loans. Credit standards broadly unchanged following significant net tightening in 2020.
• Ireland Fin Min Donahoe reiterated stance that country cannot be a part of the current OECD global minimum corporate tax agreement as it lacks clarity.
• Poland Central Bank Gov Glapinski reiterated stance that would be unreasonable to raise interest rates at this time but could begin normalization in future quarters.
• India said to seek Parliamentary approval for INR1.87T in new spending.
• Singapore govt tightened virus restrictions; effective July 22nd through Aug 18th that would ban gatherings of more than two people and stop restaurant dining. To keep supermarkets open and review restrictions in two weeks. Govt to unveil new support package in coming days.
• China Finance Ministry official stated that it would guide local govt to reasonably set pace on special bond issuance in H2. Domestic economic recovery and rising producer prices helped to increase H1 fiscal revenue growth. It cautioned that revenue growth to significantly slowdown in H2.
• Iran govt spokesperson: Pact to revive nuclear deal was incompatible with law.

Currencies/ Fixed income

• Initial safe-haven flows slipped as the EU session progressed as markets try to rebound from risk aversion sentiment.
• EUR/USD remained below the 1.18 level. Focus remained on upcoming ECB meeting on Thursday that to incorporate the ECB’s new framework into its policy guidance.
• GBP/USD tested 5-month lows at 1.3630 area after several BOE members waned on premature tightening over the past 24 hours. Dealers’ thus scaled back monetary policy tightening expectations as a results couple with rising virus infections in the country.
• USD/JPY tested 109.40 for 8-week lows as risk-off sentiment continued to percolate amid renewed concerns about the Covid-19 pandemic.

Economic data

• (CH) Swiss Jun Trade Balance (CHF): 5.5B v 4.9B prior; Real Exports M/M: -3.0% v +1.9% prior; Real Imports M/M: -2.7% v -1.4% prior; Watch Exports Y/Y: 71.0% v 174.4% prior.
• (DE) Germany Jun PPI M/M: 1.3% v 1.2%e; Y/Y: 8.5% v 8.6%e.
• (CZ) Czech Jun PPI Industrial M/M: 0.8% v 0.7%e; Y/Y: 6.1% v 5.9%e.
• (ZA) South Africa May Leading Indicator: 128.8 v 125.8 prior.
• (TW) Taiwan Jun Export Orders Y/Y: 31.1% v 30.0%e.
• (EU) Euro Zone May Current Account Balance (seasonally Adj): €11.7B v €22.1B prior.
• (PL) Poland Jun Sold Industrial Output M/M: 4.0% v 4.3%e; Y/Y: 18.4% v 18.0%e.
• (PL) Poland Jun PPI M/M: 0.7% v 0.4%e; Y/Y: 7.0% v 6.7%e.
• (IT) Italy May Current Account Balance: €3.9B v €6.7B prior.
• (GR) Greece May Current Account Balance: -€1.4B v -€2.1B prior.
• (PT) Portugal May Current Account Balance: -€1.0B v -€0.6B prior.
• (HK) Hong Kong Jun Unemployment Rate: 5.5% v 5.8%e.

Fixed income issuance

• (IN) India sold total INR170B vs. INR170B indicated in 3-month, 6-month and 12-month bills.
• (UK) DMO sold £1.25B in 1.625% Oct 2071 Gilts; Avg Yield: 0.861% v 1.153% prior; bid-to-cover: 2.51x v 2.26x prior; Tail: 0.2bps v 0.3bps prior.

Looking Ahead

• 05:15 (CH) Switzerland to sell 3-month Bills.
• 05:25 (EU) Daily ECB Liquidity Stats.
• 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.
• 05:30 (DE) Germany to sell €3.0B in 0.25% Nov 2028 Bunds.
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).
• 05:30 (ZA) South Africa to sell combined ZAR3.9B in 2030, 2032 and 2035 bonds.
• 06:30 (EU) ESM to sell €1.5B in 6-month bills.
• 06:45 (US) Daily Libor Fixing.
• 08:00 (UK) Daily Baltic Dry Bulk Index.
• 08:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).
• 08:30 (US) Jun Housing Starts: 1.590Me v 1.572M prior; Building Permits: 1.700Me v 1.683M prior (revised from 1.681M).
• 08:30 (US) Jun Philadelphia Fed Non-Manufacturing Index: No est v 59.6 prior.
• 08:30 (CA) Canada Jun Teranet House Price Index M/M: No est v 2.8% prior; Y/Y: No est v 13.7% prior; HPI Index: No est v 269.07 prior.
• 08:55 (US) Weekly Redbook LFL Sales data.
• 09:00 (EU) Weekly ECB Forex Reserves.
• 09:45 (UK) BOE to buy £1.147B in APF Gilt purchase operation (20+ years).
• 10:00 (MX) Mexico Weekly International Reserve data.
• 16:30 (US) Weekly API Oil Inventories.
• 17:00 (KR) South Korea Jun PPI Y/Y: No est v 6.4% prior.
• 19:50 (JP) Japan Jun Trade Balance: +¥484.4Be v -¥189.4B prior (revised from -¥187.1B); Adjusted Trade Balance: ¥17.5Be v ¥43.1B prior ; Exports Y/Y: 46.2%e v 49.6% prior; Imports Y/Y: 28.3%e v 27.9% prior.
• 20:00 (KR) South Korea 20-day into July Exports Y/Y: No est v 29.5% prior; Imports Y/Y: No est v 29.1% prior.
• 20:30 (AU) Australia Jun Leading Index M/M: No est v -0.1% prior.
• 21:30 (AU) Australia Jun Preliminary Retail Sales M/M: -0.6%e v +0.4% prior.
• 23:00 (NZ) New Zealand Jun Credit Card Spending M/M: No est v 8.5% prior; Y/Y: No est v 27.2% prior.
• 23:00 (CN) China to sell 1-year and 10-year Bonds.
• 23:30 (TH) Thailand Jun Customs Trade Balance: $0.6Be v $0.8B prior; Exports Y/Y: 38.0%e v 41.6% prior; Imports Y/Y: 50.0%e v 63.5% prior.
• 23:30 (JP) Japan to sell 3-Month Bills.